Aurizon Reports 2.6 Percent Volume Increase, Maintains EBITDA and Dividend Targets

Volume Growth Across Key Segments

Aurizon Holdings (ASX:AZJ) has reported a 2.6% increase in network volumes to 173.5 million tonnes for the ten months ending April 2026, driven by modest growth in coal and robust gains in bulk freight. Coal volumes rose 0.8% to 158.4 million tonnes despite adverse weather impacting mine production in Central Queensland during the March quarter. Bulk volumes surged 6.7%, reaching 48.4 million tonnes, supported by higher grain shipments and the commencement of the BHP Copper South Australia contract, partially offset by third-party track outages in Queensland and South Australia.

Containerised freight volumes also showed strength, with twenty-foot equivalent units (TEUs) increasing 13.2% to 194,000, reflecting growth from both new and existing customers, although this was somewhat tempered by track outages in the March quarter. This volume momentum builds on Aurizon’s earlier half-year performance where underlying EBITDA rose 9% to $891 million, supported by similar volume and yield trends underlying EBITDA rose 9 percent.

Fuel Supply Stability and Cost Timing Challenges

Despite global volatility in diesel markets, Aurizon’s diesel supply chain remained uninterrupted following proactive measures taken by its incident management team in March. Diesel consumption primarily supports bulk and containerised freight haulage and about half of coal haulage, with the remainder powered by electric traction.

The company’s diesel expenses are linked to international benchmark pricing, with most customer contracts featuring monthly fuel adjustment mechanisms that align cost recovery with price fluctuations. However, a minority of contracts, mainly in the bulk segment, use quarterly adjustments, creating a timing mismatch between incurring higher fuel costs and recovering them. Aurizon estimates this timing difference will impose a temporary negative EBITDA impact of approximately $10 million in FY2026, which is expected to reverse as fuel prices adjust downward in subsequent quarters.

Reaffirmed FY2026 Financial Guidance and Capex Outlook

Despite the fuel cost timing headwind, Aurizon reaffirmed its FY2026 guidance, targeting group underlying EBITDA between $1.68 billion and $1.75 billion, consistent with previous forecasts. The full-year dividend is also maintained at 22 to 23 cents per share. Capital expenditure guidance remains unchanged, with non-growth capex forecast at $580 million to $600 million, including approximately $30 million allocated to transformation initiatives, and growth capex at $100 million to $150 million.

Segment outlooks anticipate higher EBITDA compared to FY2025 across the board. The network segment expects gains from increased regulatory revenue, offset partially by rising direct costs. Coal’s EBITDA growth is driven by volume increases and stable unit costs, though a lower full-year yield is anticipated due to customer and corridor mix changes. Bulk benefits from increased grain volumes and the non-recurrence of prior provisions, while the other segment sees improved container freight contributions offsetting last year’s legal settlements.

This update follows Aurizon’s submission of a ten-year Network Access Undertaking with the Queensland Competition Authority, which aims to secure long-term revenue certainty and operational incentives for the Central Queensland Coal Network, effective from July 2027 ten-year Network Access Undertaking. The company’s ability to maintain stable earnings amid evolving regulatory and operational challenges will be critical to watch as FY2026 progresses.