Aurizon Holdings Ltd. (ASX:AZJ) entered FY2027 with greater long-term visibility across part of its Queensland coal haulage portfolio after securing a new performance-based agreement with BHP Mitsubishi Alliance. The agreement complements higher FY2026 underlying earnings, increased dividends and improved leverage, although future performance continues to depend on coal volumes, regulatory outcomes, operating costs and execution across Aurizon’s expanding freight operations.

What the Company Does

Aurizon is a rail-based freight transport Business operating across Australia. Its activities include coal haulage, bulk Commodity transport, containerised freight and rail infrastructure operations.

The company also owns and operates the Central Queensland Coal Network, which connects major coal-producing regions with export terminals. This gives Aurizon exposure to both contracted freight operations and regulated infrastructure earnings.

BMA Contract Extends Coal Revenue Visibility

Aurizon’s new BMA agreement covers rail haulage from five metallurgical coal operations in Queensland’s Bowen Basin: Goonyella Riverside, Broadmeadow, Peak Downs, Saraji and Caval Ridge.

The performance-based contract becomes effective on 1 July 2028 and replaces the existing 2015 agreement.

It provides annual Volume flexibility of up to 37 million tonnes and can operate for up to 12 years, subject to agreed performance and extension provisions.

Aurizon indicated that BMA represents close to one-quarter of the coal tonnes it hauls in Queensland, making the recontracting strategically relevant to its Central Queensland operations.

Coal Recontracting Extends Beyond BMA

The BMA agreement forms part of a wider recontracting program. Since July 2025, Aurizon has recontracted more than one-quarter of its coal portfolio.

More than 60 million tonnes of annual contracted volume has been renewed, including agreements with major Central Queensland customers.

These contracts have pushed a proportion of Aurizon’s coal contract expiries into the middle and later years of the 2030s, increasing longer-term contractual visibility.

However, FY2027 contracted coal volume stands at 211 million tonnes, down 20 million tonnes from the prior year, partly because of the previously announced loss of a Hunter Valley contract and reductions in contracted capacity by some customers.

FY2026 Earnings Increase

Underlying revenue and other income increased 6% to A$4,194 million in FY2026 from A$3,952 million.

Underlying EBITDA rose 9% to A$1,724 million, while underlying NPAT increased 24% to A$433 million. Underlying Earnings Per Share increased 29% to 25.2 cents.

Statutory NPAT was A$362 million, compared with A$303 million in FY2025.

The Bulk business recorded a 38% increase in underlying EBITDA, while Network and Coal EBITDA increased 8% and 2%, respectively.

Capital Returns Increase

Aurizon declared total FY2026 dividends of 23.0 cents per share, up 46% from 15.7 cents in FY2025.

The final Dividend was 10.5 cents per share and 90% franked.

Aurizon also completed its A$250 million on-market share buyback during FY2026. Underlying free Cash Flow increased 11% to A$573 million, supporting Capital returns during the period.

Net Debt remained around A$5.2 billion, while the net debt-to-EBITDA ratio improved to 3.0 times from 3.3 times as earnings increased.

Containerised Freight Continues to Expand

Aurizon continued developing its containerised freight business during FY2026, with containerised freight TEUs increasing 25% compared with the prior year on the measure reported for the business unit.

The company also entered vehicle logistics through agreements covering domestic and international transport requirements.

Containerised Freight remains in a development phase, with Aurizon expecting the operation to reach EBITDA break-even during FY2027.

Achieving that target would reduce the earnings drag from the business while providing another freight stream alongside coal and bulk commodities.

UT5+ Remains an Important Regulatory Process

Aurizon Network’s proposed UT5+ access undertaking is intended to apply for ten years from 1 July 2027 to 30 June 2037.

A draft regulatory decision was published in June 2026. Aurizon said the draft considered the material components of the proposed undertaking appropriate, including the weighted average Cost of Capital methodology, accelerated Depreciation profile and proposed throughput payment.

FY2027 Guidance Sets the Next Benchmark

Aurizon expects FY2027 underlying EBITDA of A$1,725 million to A$1,775 million.

Full-year dividends are expected to be between 23.0 and 24.0 cents per share. Non-growth Capital Expenditure is expected at A$590 million to A$660 million, while growth capital expenditure is forecast at A$70 million to A$120 million.

Network EBITDA is expected to increase, while Coal EBITDA is expected to decline because of reduced contracted volumes and yield. Bulk EBITDA is expected to rise, supported by customer growth and the non-recurrence of certain prior-year costs.

Key Risks and Areas to Watch

Coal haulage remains exposed to mine production, export-market Demand and customer utilisation despite the longer contract profile.

The BMA contract does not commence until July 2028, while its maximum 12-year duration depends on performance and extension provisions.

Regulatory outcomes also remain important for Network earnings as the UT5+ process progresses. Aurizon must additionally manage its A$5.2 billion net debt position while funding capital expenditure and distributions.

Execution in Containerised Freight, delivery of cost initiatives and changes in contracted coal volumes will also influence operating performance during FY2027.