Why Did Aurizon’s Bulk Segment Drag FY2025 EBITDA Down Despite Network Gains?

FY2025 Financial Performance

Aurizon Holdings Limited closed the 2025 financial year with underlying EBITDA of $1.576 billion, a 3% decrease from the prior year. The decline was primarily driven by a 26% drop in the Bulk segment’s earnings, reflecting the cessation of a rail maintenance contract, lower grain volumes in South Australia, and increased doubtful debt provisions. These headwinds were partially offset by a 3% increase in Network segment EBITDA, supported by higher regulated revenue, and stable Coal segment earnings despite rising operating costs.

Statutory net profit after tax (NPAT) fell sharply by 25% to $303 million, impacted by significant items including a $57 million goodwill impairment in the Bulk cash-generating unit and $23 million in transformation costs related to workforce redundancies. Despite these challenges, Aurizon maintained a disciplined capital management approach, declaring a fully franked final dividend of 6.5 cents per share, representing an 80% payout ratio of underlying NPAT.

Operational Highlights and Segment Analysis

The Network segment’s EBITDA rose by $26 million to $956 million, driven by a 3% increase in track access revenue due to a higher weighted average cost of capital and maintenance allowances. However, volumes were slightly below regulatory forecasts, leading to an under-recovery of allowable revenue to be recouped in FY2027. Coal segment volumes grew 2% to 192.2 million tonnes, with revenue benefits from higher volumes and price indexation offsetting increased operating costs and a slight decline in fuel revenue.

Bulk’s EBITDA contraction to $169 million was notable, with operating costs rising 11% largely due to higher labour expenses and doubtful debts. The segment did secure new long-term contracts, including a 15-year integrated logistics solution with BHP’s Copper South Australia operations and extensions with Minara and KML in Western Australia, signaling potential for future growth.

Capital Management and Debt Profile

Aurizon completed a $300 million on-market share buy-back during FY2025 and announced a further $150 million buy-back, underscoring confidence in its capital position. The company also undertook significant refinancing and new debt issuance, including a $500 million inaugural subordinated notes issue, resulting in an increase in gearing to 56.2%. Despite this, Aurizon maintained solid credit ratings (BBB+/Baa1) and extended its average senior debt maturity to 4.9 years, reflecting prudent financial management.

Outlook for FY2026

Looking ahead, Aurizon expects underlying EBITDA to rise to between $1.68 billion and $1.75 billion, driven by anticipated growth across all segments. The company projects full-year dividends of 19 to 20 cents per share and plans sustaining capital expenditure of $610 million to $660 million, alongside growth capital of $100 million to $150 million. Key assumptions include higher regulated revenue in the Network segment, volume-driven gains in Coal, and a recovery in Bulk earnings as provisions normalize and grain volumes increase.

Regulatory developments remain a focal point, with ongoing negotiations with the Queensland Competition Authority on a Draft Amending Access Undertaking to take effect post-2027. Aurizon’s ability to navigate these regulatory frameworks will be critical to sustaining its growth trajectory.