Why Did Aurizon’s EBITDA Slip 3% Despite $150m Buy-Back and Debt Issuance?

FY2025 Financial Performance

Aurizon Holdings Limited has released its FY2025 full-year results, revealing a modest contraction in earnings amid a complex operating environment. The company’s underlying EBITDA declined by 3% to $1.576 billion, while underlying net profit after tax (NPAT) dropped 14% to $348 million. These results reflect a combination of regulatory revenue adjustments, volume variances, and cost pressures.

The statutory NPAT fell more sharply by 25%, influenced by significant items including legal settlements and transformation costs. Free cash flow also decreased by 22%, impacted by lower operating cash flows and growth capital expenditure.

Operational Highlights and Cost Management

Coal volumes were slightly down by 1%, while bulk and containerised freight segments showed some resilience with modest volume growth. Aurizon achieved $60 million in annualised cost savings through labour reductions and external spend efficiencies, with around 200 full-time equivalent positions reduced. These savings are expected to fully benefit the company from July 2025 onwards.

Operating costs rose due to higher maintenance, labour escalation, and increased doubtful debt provisions, partially offsetting revenue gains from price indexation and contract renewals. The company continues to focus on operational efficiency and productivity improvements, including investments in technology and decarbonisation initiatives.

Capital Management and Balance Sheet Strengthening

In a strategic move to optimise capital structure, Aurizon successfully priced $500 million in subordinated notes with equity credit, maturing in 2055 with a call option in 2030. The proceeds will be used primarily for debt repayment and general corporate purposes. This issuance was well received by Moody’s and Standard & Poor’s, maintaining Aurizon’s credit ratings at BBB+/Baa1.

Additionally, the company completed a $300 million on-market buy-back during FY2025 and announced a further $150 million buy-back program, signalling confidence in its cash flow generation and commitment to shareholder returns. The final dividend declared is 6.5 cents per share, fully franked, representing an 80% payout ratio of underlying NPAT.

Regulatory Environment and Outlook

Aurizon’s results were influenced by regulatory revenue deferrals estimated at around $50 million, primarily due to volume-related under-recoveries and maintenance overspend compared with regulatory assumptions. This deferred revenue is expected to be recovered by FY2027 through the revenue cap mechanism overseen by the Queensland Competition Authority.

Looking ahead, Aurizon expects FY2026 underlying EBITDA to increase across all segments, supported by volume growth, regulatory revenue adjustments, and the non-recurrence of certain provisions. Capital expenditure is forecast between $610 million and $660 million, including $100 million to $150 million in growth capital, reflecting ongoing investments in infrastructure and logistics capabilities.

The company also highlighted contract extensions with major customers such as BHP and ongoing development of containerised freight solutions, including new terminal operations and land-bridging services, positioning Aurizon for long-term growth in Australia’s freight and logistics sector.