Qube revenue up as Moorebank tenant is finalised

Qube Holdings was able to deliver earnings growth despite challenges in some parts of the business.

According to half-year financial results, underlying revenue for Qube was up 12.9 per cent to $970.1 million – with underlying Net Profit After Tax and Amortisation (NPATA) up 5.1 per cent to $76.3m.

Qube is Australia’s largest integrated provider of import and export logistics services and admitted that the company had reasonable earnings growth despite economic headwinds.

Major contracts signed with Shell Australia and Bluescope Steel helped support medium term growth, as did the completion of the Target warehouse, Import/Export (IMEX) terminal, and commencement of rail operations at Moorebank Logistics Park (MLP) in November last year. 

Commercial and legal negotiations are progressing with a potential major tenant for a material part of Moorebank Precinct West (MPW) and binding agreements are being finalised. It is now expected that the counter party’s board will consider approval of the finalised agreements in the near future.

The unnamed counter party had previously signed the reservation agreement with Qube to secure an area at MLP on MPW. 

Qube board of directors stated that based on the current commercial terms, the area to be leased by this party will be considerably larger and in a different location to that originally contemplated by the reservation agreement and the warehouse construction is likely to commence in calendar 2021, which is earlier than previously expected. 

Based on the extensive negotiations that have taken place, Qube expects that negotiations of the binding agreements will be concluded successfully but are subject to the counter party’s Board approval. 

“The development and lease would represent a key milestone for the MLP project and confirms the significant logistics benefits that the site can offer tenants,” Qube board of directors said in a statement.

Statutory earnings (NPAT) for the period were $51.7m, which was lower than the prior corresponding period’s statutory earnings and Qube’s underlying earnings for the current period.

Qube stated the impact of the new lease accounting standard (AASB 16) that was applied to Qube from 1 July 2019 reduced Qube’s statutory after-tax earnings in the period by around $10.3m, but had no impact on Qube’s underlying earnings or cash flow.

Maurice James, Qube managing director said there has been a steady performance across the Qube group demonstrating again the resilience of our earnings base across our chosen markets. 

“Qube was able to deliver earnings growth despite challenges in some parts of the business including declining motor vehicle and container volumes and the continued effect of the drought,” James said.

Qube has been assessing the potential impact on its FY20 full year results from recent events including the bushfires, adverse weather events across the country in early calendar 2020, as well as the coronavirus. 

“Although these events have not had a material impact on Qube’s first half results, Qube currently expects some weakness in its second half underlying earnings as a result of the above factors that is likely to result in the level of underlying earnings growth in FY20 being lower than previously forecast,” the Qube board of directors said in a statement.

“The uncertainty of these events, in terms of the quantum of their impact on Qube’s earnings and their likely duration, makes forecasting near term earnings inherently uncertain.”

Qube’s board of directors said they believe the company is placed to continue to deliver sustainable, long-term earnings growth from its strategic assets and strong market positions.

 

Aurizon’s revenue rises to $1.53bn

Aurizon Holdings Limited revenue has increased by $73.4 million or five per cent in the 2019/20 first-half earnings before interest and tax.

Australia’s largest rail-based transport business has released a half year report for the period ending 31 December 2019, detailing new growth in the company.

Aurizon stated in the report that the higher revenue is offset by the sale of the rail grinding business.

A spokeswoman from Aurizon said the large sale transaction for the rail grinding business was completed with Loram in October 2019 for $167m with $105m net gain on sale (not included in underlying earnings).

With revenue up five per cent to a total of $1.53 billion, the company’s underlying net profit rose 19 per cent to $268.9m.

The group credited the UT5 Undertaking as a factor that improved revenue. In December last year, Queensland Competition Authority (QCA) approved the agreement that governs access to its rail network. 

Aurizon executives stated that the company’s financial position and performance was partially affected by the closure and sale of Acacia Ridge Intermodal Terminal. 

Two years ago the Australian Competition and Consumer Commission (ACCC) opposed the sale of Acacia Ridge Intermodal Terminal and commenced proceedings against Aurizon and Pacific National in the Federal Court. Aurizon and the proposed new owner of the terminal, Pacific National, both filed notices of cross-appeal that will be heard by the full Federal Court later in February. 

Aurizon executives highlighted its full-year earning guidance to $930 million from $880 million. This figure was noted before assumed impacts from the Australian bushfires and the world health emergency, coronavirus.

The coronavirus has delayed the arrival of 66 rail wagons being made in the epicentre of the disease, Wuhan in China. 

A spokeswoman from Aurizon said an initial order of 66 wagons have already been delivered and the remaining 66 wagons are planned for delivery in February or March.

The first batch of 132 coal wagons have been completed by our supplier. The construction of the second tranche of 132 wagons has been delayed due to a slow down of production in China,” the spokeswoman said.

Operating costs increased $13.9m or 2 per cent, which were identified as due to to increased labour costs.

Aurizon’s network operates the 2,670km CQCN, the largest coal rail network in Australia. 

Aurizon executives stated in the 2019/20 half year report that 58 per cent of the company’s revenue, a total of $887.5m, was from transporting coal from mines in Queensland and NSW to customer ports.

Operational performance across the network  “remained strong” during the first half of the new financial year, according to Aurizon.

Total system availability improved from 81 per cent to 82.2 per cent, and cycle velocity improved 4 per cent.

Aurizon’s executives said the focus has been on the trial and implementation of schedule adherence in the Blackwater system in QLD.

Compared to the previous half, the network delivered an average reduction in turnaround time of 1.2 hours per service and both on-time arrival to mine and to port increased.

Aurizon’s executives said the network is now working with operators to improve the current scheduling process by realigning maintenance constraints to unlock capacity and optimising the weekly Intermediate Train Plan to avoid pathing contests between operators. The report stated that system throughput is expected to increase, in the third quarter of this year.