Australia’s largest freight rail operator Aurizon has flagged more job cuts as it deals with a growth slowdown in China.
The company, formerly known as QR National, made a net profit of $447 million in the year to June 30, marking a one per cent increase from the previous year’s $441 million.
Still, Aurizon chief executive Lance Hockridge has earmarked $230 million in potential job cuts and asset sales during the next two years, following 921 voluntary redundancies during the past financial year.
“Job cuts are going to be an important component but it’s very broad ranging,” he told reporters on Monday, adding potentially affected corporate support and operations staff would be informed this week.
But Mr Hockridge said while Aurizon was operating in a “subdued growth environment”, concerns about a China slowdown hitting the mining sector were overstated.
“Even the most modest levels of growth translate into very large absolute numbers,” he said.
Morningstar equities analyst Ross MacMillan said a more modest seven per cent growth pace in China would still be a hurdle to Aurizon’s goal of raising earnings.
“The business is really entering a low-growth environment,” he said.
Aurizon paid out $96 million in voluntary redundancies in 2012/13 but it estimated the program would generate an annual benefit of $85 million to $90 million.
Another $11 million was spent on repairs after ex-tropical cyclone Oswald damaged the Blackwater and Moura rail line in January.
More optimistically, Aurizon forecast iron ore volumes in Western Australia growing by 21 per cent in fiscal 2014, following an 82 per cent tonnage increase in fiscal 2013.
The WA iron ore haulage business makes up 10 to 15 per cent Aurizon’s earnings, Mr Hockridge said.
“Yes, it is our intention to grow from there.”
Coal haulage volumes are expected to rise by five per cent during this financial year, following a four per cent rise in fiscal 2013.
The Goonyella to Abbot Point Expansion in Queensland’s Bowen Basin is also expected to drive revenue growth and higher coal revenues.
“We believe there will be continuing growth, albeit modest, in the northern Bowen Basin and that in turn will drive the demand for further port capacity,” Mr Hockridge said.
“Unless we have the rail capacity, there’s no point having the port capacity.”
Underlying profit, which excludes one-off costs, was up 16 per cent to $487 million in fiscal 2013.
Aurizon achieved statutory earnings before interest and tax (EBIT) of $685 million, up 16 per cent.
Underlying EBIT was $754 million, up 29 per cent.