Aurizon Reports 3% Revenue Growth but 4% EBITDA Decline in 1HFY2025

Financial Overview

Aurizon Holdings Limited released its Appendix 4D for the half-year ended 31 December 2024, revealing a nuanced financial performance. Total revenue climbed 3% to $2.023 billion, driven by volume growth and contract rate indexation in the Coal segment and increased regulated revenue in the Network business. However, EBITDA contracted by 4% to $814 million, reflecting rising operating costs and mixed segment results.

The company declared an interim dividend of 9.2 cents per share, 60% franked, representing an 80% payout ratio of underlying net profit after tax (NPAT). Earnings per share slipped slightly to 11.3 cents, and return on invested capital (ROIC) declined by 0.6 percentage points to 8.4%, underscoring margin pressures.

Segment Performance: Coal and Bulk Challenges

The Coal segment saw a 6% increase in volumes to 99.2 million tonnes, with growth concentrated in the Central Queensland Coal Network and New South Wales regions. Despite this, EBITDA fell 7% to $264 million, as the benefits of higher volumes and contract rate indexation were offset by a lower yield due to customer mix and increased operating costs, including higher traincrew and maintenance expenses.

Bulk freight experienced a more pronounced downturn, with EBITDA plunging 25% to $84 million. This decline was driven by lower grain railings in Western and South Australia, the cessation of a rail maintenance contract, and a derailment in Western Australia. While new customer contracts in minerals and iron ore provided some offset, increased doubtful debt provisions and higher operating costs weighed heavily on profitability.

Network Segment and Regulatory Developments

The Network business delivered a modest 2% EBITDA increase to $495 million, buoyed by higher allowable regulated revenue following a final reset weighted average cost of capital (WACC) of 8.51%. Operating costs declined 11%, aided by lower external construction revenue, though maintenance costs rose due to inflationary pressures and targeted corridor drainage programs.

Regulatory updates remain pivotal, with Aurizon Network operating under the 2017 Access Undertaking (UT5) until 2027. The Queensland Competition Authority (QCA) approved final reset values and a Draft Amending Access Undertaking (DAAU) impacting tariffs and infrastructure rebates. The company is actively engaging stakeholders ahead of the next regulatory period, aiming to submit proposals by mid-FY2026.

Capital Management and Outlook

Aurizon maintained its guidance for FY2025 underlying EBITDA between $1.66 billion and $1.74 billion, though expects performance at the lower end of this range. Sustaining capital expenditure is forecast between $640 million and $720 million, including $80 million for transformation initiatives, while growth capex is projected at $125 million to $175 million.

The company’s balance sheet shows a slight increase in gearing to 54.2%, with net debt rising due to bond issuances and acquisitions, including the $26 million purchase of Aurizon Port Services (SA). Liquidity remains robust at $1.34 billion in undrawn facilities and cash.

Operational Highlights and Risks

Operationally, Aurizon is advancing its TrainGuard safety platform, expanding driver-only operations in Central Queensland. Productivity metrics in Coal improved, but attrition of train drivers is expected to impact FY2026. The Bulk business faces headwinds from grain volume volatility and contract disruptions, while Network capacity utilization slightly declined due to infrastructure shutdowns.

Risks include ongoing inflationary cost pressures, potential regulatory changes, and supply chain disruptions. The company’s cautious outlook reflects these uncertainties, balanced by strategic investments and contract extensions.