Tuesday 24th Oct, 2017

Aurizon drops on ASX after impairments announced

Aurizon double stacked intermodal train Photo: Aurizon
Aurizon double stacked intermodal train Photo: Aurizon

Shares in ASX-listed bulk and freight rail operator Aurizon have endured a 5% drop in price over the last month, as the company announced a number of impairments ahead of its annual report.

Aurizon hit a low of $4.92 earlier this week, down from an opening price of $5.35 a share on the first day of July trading.

The price drop has come as the rail operator announced impairments of $606 million for its intermodal and bulk divisions, due to underperformance and difficult market conditions.

The Queensland-based rail operator said it will write-down the carrying values of its Bulk East Cash Generating Unit (CGU) by $164 million, and its Bulk Western Australia CGU by $362 million as part of its FY17 results on August 14.

Managing director Andrew Harding called the $526 million bulk impairment “disappointing,” but said the business would be able to succeed if “disciplined action” was taken.

“Bulk is well-positioned to leverage Aurizon’s core capabilities in operating bulk supply chains yet is failing to deliver on its potential for customers and shareholders,” he said.

“We have quality assets and highly capable employees, and core businesses that have a strong customer base. Our job is to drive continuous performance improvement in the business for the benefit of customers, for shareholders and the communities in which we operate.”

The head of the operator’s bulk division has reportedly moved to Perth to address issues in the division.

Aurizon also announced roughly $80 million in impairments and redundancy costs as a result of its traincrew operations in Queensland.

The total $606 million in impairments announced after the market closed on July 26, will bring Aurizon’s full-year impairments and transformation costs to $927 million.

That will exceed the unaudited FY17 underlying earnings before interest and tax of $836 million, also signalled on Wednesday.

The EBIT figure was in line with guidance of $800-$850 million provided in April.

Aurizon has seen declines in above rail volumes between FY16 and FY17 in its coal, iron ore, and freight businesses. It has seen a 9% growth in intermodal containers, however.