Aurizon Holdings Limited (ASX: AZJ) plunges on ASX

Affirmed FY18 EBIT Guidance in the range of $900 Mn to$ 960 Mn: Aurizon Holdings Limited (ASX: AZJ) released an investor presentation to the market and provided its business strategy and operational update for FY18. With this, the share price plunged 3.2 per cent on June 27, 2018.

According to the release, there are a number of matters which are expected to impact the FY19 earnings such as regulatory uncertainty regarding Australian Competition and Consumer Commission (ACCC) approval of the sale of the Acacia Ridge Terminal and Intermodal Queensland (total consideration for the two transactions is $220 Mn). If the transactions are not approved then the Intermodal Queensland business will be closed, with closure costs likely to be incurred in FY2019. Similarly, discontinuance of Cliffs iron ore mine operation in June 2018, and the suspension of the Mt Gibson iron ore contract as expected in mid of FY19 will have a consolidated EBIT impact in the order of $50 Mn in FY19.

To mitigate the certain challenges in FY19, the company provides a strategy in action platform that includes the completion of a three-year transformation target expected to deliver $380 Mn (FY2016-2018), including benefits of almost 28% improvement in labour productivity, renewal of the leadership team, and reduced headcount and management layers.

Moreover, the company also disclosed about the range of initiatives to drive further improvement of the business such as coal train performance initiatives across the Central Queensland Coal Network which are targeted to deliver more than $50 Mn in operating benefits by FY2021, further reduction and restructuring of corporate and support costs, and renegotiation of enterprise agreements during the next 12 months. Through this process, the group will be seeking changes that improve efficiency, competitiveness, and responsiveness to market changes and customer needs.

As part of the Investor Day presentation, the Company confirmed FY18 guidance for EBIT ($900-$960 Mn) and above-rail coal volumes (210-220Mt). The execution of a Freight Review including the decision to divest the Intermodal business and implement a turnaround plan for the Bulk business was among other highlights.

The management believed that the new strategic framework will provide further growth momentum in driving value for the shareholders.

The stock is trading at $ 4.28, near its 52-week low levels with the market capitalization of $8.8 Bn.


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