On July 21, 2016, Aurizon Holdings Ltd (ASX: AZJ) surged 2.2% with the release of its market update. The key aspects of the updates entail:
Written off the investment in Aquila: The company reported for further pre-tax impairments of $73 million for investment in Aquila Resources and $29 million for rolling stock over the impairment charges of $426 million (pre-tax) included in the first half accounts.
The Aquila related impairment provides for all known exposures such as Aquila’s contractual obligations in respect of electricity and port access arrangements. As of now, Aurizon has no remaining financial exposure to Aquila. On the other hand, the rolling stock impairments are said to be recognised to align national fleet requirements with forecast future demand.
FY16 underlying EBIT to be at the upper end of the guidance: The company expects that the underlying earnings before interest & tax (EBIT) for FY2016 is about $871 million compared to guidance of $845 - $885 million, subject to audit. Above-rail volumes were stable during the fourth quarter given the tough and volatile market with lower growth conditions.
AZJ’s above-rail coal tonnages for FY2016 were of the order of 206.8 million tonnes which is within the guidance of 204-209 million tonnes. The company reported for record below-rail coal tonnages for FY2016 of 225.9 million tonnes.
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Result for the quarter and full year (Source: Company Reports)
Improving service delivery via transformation efforts that include 300 job cuts: Under the transformation efforts, the company has proposed for reduction of approximately 120 leadership positions in Operations, which represents approximately 20% of management roles. This is expected to flatten the leadership structure while improving service delivery and ensuring accountability at the regional level. The re-aligning of resources is being tried to be balanced with forecast demand wherein the proposals include train crewing and yard operations, maintenance depots, and Network infrastructure production and maintenance. Proposed reductions total approximately 180 roles. The company is also trying to limit the number of direct reports to the MD&CEO with consolidation of the Enterprise Services and Human Resources functions, and Business Development & Strategy and Commercial & Marketing functions. AZJ is also targeting further reductions in cost base while putting efforts towards asset and labour productivity.
FY16 results are said to be officially released on August 15, 2016.
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