Aurizon FY24 Earnings Call Highlights

Aurizon (ASX: AZJ) shares are trading at levels not seen since April 2023 after its FY24 earnings and FY25 outlook fell short of market expectations.

FY24 Earnings Highlights

• EBITDA up 14% to $1.62 billion

• Net profit after tax up 11% to $406 million

• Free cash flow up 123% to $661 million

• Full-year dividend up 13% to 17 cents per share

• On-market buy-back of up to $150 million

• FY25 EBITDA guidance of $1.66 billion to $1.74 billion

To add some perspective, the net profit after tax and full-year dividend figures were 5.1% and 2.2% below Macquarie estimates (25-Jul). The FY25 guidance was also a 4.4% miss at the midpoint.

From a divisional perspective:

• Coal (32.5% of Group EBITDA) reported 16% earnings growth and a 2% increased in haulage volumes

• Bulk (14.1% of Group EBITDA) reported 7% earnings growth but a 2% drop in rail tonnes hauled

• Network (57.4% of Group EBITDA) reported 14% earnings growth and a 1% increase in tonnages

Earnings Call Highlights

FY24 performance: "The results today see us land well within guidance, which was given some 13 months ago at Investor Day in Darwin. The $200 million uplift in earnings saw contributions from Network, Coal and Bulk." – CEO Andrew Harding

Coal volumes: "Coal volumes increased by 2%, driven by both the recovery in railings and contract growth." – CEO Andrew Harding

Commodity market outlook: "India is expected to be the largest driver of coking-coal demand over the coming decades. Although, it is recognised that global consumption of thermal coal will reduce the decades ahead, it is not the driver of Australian export volume ... 99% of Australian thermal coal export volume is destined for Asia, where the average age of coal-fired plants is just 14 years. This is against an expected life of 40 years." – CEO Andrew Harding

Dividend and shareholder returns: "The strength of our cash flows and reduced gearing allows us to increase the dividend payout ratio to 80% and to also announce a $150 million buyback." – CEO Andrew Harding

Analyst Q&A Highlights

Jakob Cakarnis from Jarden re Bulk Central business EBITDA target: "We didn't achieve the $100 million in FY '24, and that's predominantly due to the later-than-expected production coming to fruition with Northern Iron ... But we are very much looking forward to celebrating that milestone in FY '25 as those volumes come into the mix for Bulk Central's results." – Executive Anna Dartnell

Justin Barratt from CLSA about buybacks vs. dividend decision: "It is consistent with where we've been coming from in paying down debt and our overall history of returning cash to shareholders when we don't have a more value creative use for it to assume that a move like that is, to some degree, something that we would be saying is longer-term than not." – CEO Andrew Harding

Matt Ryan from Barrenjoey about coal yields: "Look, over the last few years, we've seen the market for coal haulage services stabilised, along with prices. We don't have any further material research in our pipeline, but we – but the market does remain dynamic and competitive." – Executive Edward McKeiver

Anthony Moulder from Jefferies about bulk volumes: "The thing that we always remind ourselves in the volume space with Bulk is as we transition to some of the lower volume, higher value products, you're obviously going to see that change in the results ... So I think that pure volume metrics aren't necessarily going to be the measure of our success going forward." – Executive Anna Dartnell

Ian Myles from Macquarie about returning to 2017-2020 level of earnings via productivity: "Certainly, I believe with our track record for transformation and investment in technology and the recruitment and training we've done, we can get back to levels of productivity ... TrainGuard's a great example, where we've seen an 11% year-on-year uplift in productivity over train crew and the fact that they did NTKs per driver in the Coal South system. So, we have less drivers in ending FY24 than we had in FY23, moving more volume."

This article was generated with the support of AI and reviewed by an editor.