Aurizon dividends shrink

Company News

by Glenn Dyer

Shareholders of rail group Aurizon (ASX:AZJ) are facing yet another year of reduced dividends, with a lower final and full-year payout as the company grappled with weak earnings at the end of the financial year.

The company reported a substantial 30% slump in underlying net after-tax profit, which stood at $367 million. In comparison, the statutory net after-tax profit experienced a more pronounced decline of 37%, settling at $324 million compared to the previous fiscal year, FY2022.

Although revenue exhibited a 14% increase to just over $3.5 billion, underlying group EBITDA saw a dip of 3%, landing at $1.428 billion.

A final dividend of 8.0 cents per share, 60% franked, was declared by the Board of Directors, reflecting a payout ratio of 75% of the underlying net after-tax profit. Consequently, the full-year dividend contracted to 15.0 cents per share, a reduction from the 21.4 cents paid out in the 2021-22 period.

The company's operations were hampered by wet weather across parts of Queensland and NSW, particularly in coal mining and export regions like the Hunter Valley and Newcastle throughout the year leading up to June.

Aurizon's CEO, Andrew Harding, characterized 2022-23 as a challenging operational period, attributing the difficulties to prolonged wet weather that substantially impacted both volumes and earnings. He expressed optimism for the future, citing an uptick in Coal (2%) and Network (9%) volumes during the June quarter, which bolstered confidence in an improved outlook for FY2024.

Harding explained, "We are also anticipating increased activity for the Bulk and Containerized Freight businesses, as investments that we are making in new rolling stock, terminal, and port equipment are progressively commissioned to support growth with new and existing contracts for our customers."

He further detailed the initiatives and investments Aurizon implemented during FY2023 to support national expansion and diversification, positioning the company for future revenue and volume growth. Notably, this involved acquiring and integrating the One Rail Australia business and divesting the East Coast Rail. With operations now spanning South Australia (SA) and the Northern Territory, Aurizon boasts a comprehensive national footprint that can be leveraged to bolster the Bulk and Containerized Freight businesses.

Harding outlined growth opportunities in central Australia, particularly with the extensive rail infrastructure and a direct line into the Port of Darwin. Investment in new portside terminal cranes and ample rail corridor capacity positions the company to serve customers effectively while accommodating future growth.

Highlighting the potential in South Australia and the Northern Territory, he noted over 250 projects focused on new-economy commodities in various stages of exploration and pre-production, including copper, magnetite, phosphate, and rare earths, many of which are adjacent to the rail corridor.

For the current financial year, the company anticipates a modest improvement in earnings. Aurizon's projection for Group EBITDA lies in the range of $1,590 million to $1,680 million, signifying an approximately 18% increase at the top end compared to 2022-23.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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