Asciano has delivered a strong result with underlying EPS up 39% and the final dividend up 56%, however, its Rail and Terminals Logistics division experienced significant weakness.
Asciano has reported a 41.2% increase in statutory net profit after tax (NPAT) to S340m compared with the previous corresponding period (pcp) on a 10.6% increase in underlying revenue (net of coal access) to $3.6bn. Statutory NPAT included material items (loss) of $8.1m after tax (compared to a $9.2m material item (loss) in FY12). Underlying NPAT increased 39.2% to $348.1m.
The result was driven by strong volume growth in Pacific National (PN) Coal following the commencement of new contracts in Queensland and organic volume growth from some existing coal haulage contracts in the HunterValley. In addition, there was strong growth in the Bulk & Automotive Port Services (BAPS) businesses driven by new contracts, growth in volumes at some regional bulk ports, a seven-month contribution from 100% ownership of C3 Limited and further growth in car storage volumes.
Asciano CEO and managing director John Mullen said: "Trading conditions in the 2013 financial year were extremely challenging for both Pacific National Rail and Terminals & Logistics. A soft first quarter flowed into a reasonable beginning to the second quarter peak season, however, both intermodal and container port volumes succumbed to the general malaise in the domestic economy which accelerated through the third quarter. PN Rail volumes in particular remain weak going into the new financial year.
"PN Rail reported a 2.8% increase in revenue to $1.4bn driven by a 0.7% increase in intermodal revenue and an 8.3% increase in revenue from Bulk Rail driven by new export grain services and a full period impact of the magnetite contract with Glencore. The Division reported a 2.0% increase in underlying EBIT to $216.8m.
"PN Rail's capital expenditure over the period increased 23% to $174m reflecting investment in new rolling stock, the commencement of the upgrade of its capital city rail terminals and the scheduled maintenance program currently underway on the PN Rail fleet. While remaining above its cost of capital, ROCE declined from 15.5% to 15.2% impacted by the additional costs associated with the underutilisation of committed capacity in the Bulk Rail division in 1H FY13 and the soft intermodal volumes in 2H FY13.
"Terminals & Logistics reported a 6.4% decline in revenue to $731.5m driven primarily by a 1.4% decline in container lifts and a 6.1 decline in Logistics revenue. Removing the impact of one-off items in FY125, revenue declined 4.2%. Underlying EBIT after deducting one off items declined 4.5% to $155.1m. Whilst a weak domestic economy has driven the soft volume growth in both terminals and logistics activity, the impact of this on the business has been exacerbated by volatility in volumes caused by the shifts in shipping line consortia over the period. In light of these issues and given the high fixed-cost nature of the business and negotiated wage and lease increases, the management team did an excellent job reducing total operating costs by 4.4%. Capital expenditure over the period increased 103.3% to $152.1m, reflecting the investment in new cranes and other equipment across the four terminals and the redevelopment of Port Botany.
Based on the contribution expected from new contracts and current customer commitments, Asciano expects to report further growth in EBIT in FY14, albeit at a slower growth rate than reported in FY13, with the growth rate skewed to 2H FY14. The growth rate in Net Profit Before Tax (NPBT) is expected to continue to benefit from lower funding costs. As previously disclosed the Company expects to incur a material item of approximately $14m after tax associated with the costs of the redevelopment of Port Botany in FY14.
Mr Mullen said: "We expect further growth in PN Coal and Bulk & Automotive Ports Service, however, the ongoing weakness in domestic activity is expected to result in subdued volume growth in terminals and logistics and intermodal."
