Logistics, Ports & Terminals, Mining and Heavy Industries

Cost cutting pays off for bulk rail operators

Pacific National class 92 locomotives hauling a coal train over a rail bridge crossing the Hunter River at Singleton, NSW. Photo: Creative Commons / Bluedawe.

Aurizon and Pacific National, Australia’s two largest bulk rail businesses, both substantially increased earnings in 2014/15, despite drops in revenue.

Both operators are dealing with tough conditions for their major clients: coal miners and exporters. But both companies, reporting annual figures this week, cited cost cutting programs as the key to the successful growth to their profits.

Aurizon announced a 139% increase in statutory net profit after tax (NPAT), to $604m in 2014/15. Earnings before interest and tax (EBIT) was $970m, up 14% year-on-year. This was despite a 1% drop in revenue.

Pacific National meanwhile recorded a 2.3% decline in revenue to $2.43bn, but recorded a significant EBIT increase, with earnings lifting 16.6% to $597m. NPAT for Pacific National’s parent business, Asciano (which also includes the Patrick terminals and logistics, and bulk and auto divisions), was up 41.4% to $359.6m (statutory) in 2014/15.

Lance Hockridge and John Mullen, chief executives of Aurizon and Asciano, respectively, both pointed to cost reduction programs as the key to their successful results in the face of declining revenues.

“We understand the current market challenges but likewise we’re committed to a strategy of transformation and long-term growth,” Hockridge said.

“We’ve hauled 6% more in above rail tonnages with 13% less people and 17% less locomotives, and delivered major growth projects on time and on budget.”

Mullen, meanwhile, had this to say about Pacific National’s 16.6% EBIT rise: “The result reflects a very strong focus on [Pacific National’s] business improvement program which generated $105.9m in benefits across the division as well as general cost reduction programs in light of soft conditions in some parts of the business.”

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