Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — H1 2019 Earnings Presentation
84 slides from Aurizon's earnings presentation, Feb 11, 2019
Slide 1: 1HFY2019 Results
1HFY2019 Results Andrew Harding – MD & CEO Pam Bains – CFO & Group Executive Strategy 11 February 2019
Slide 2: Disclaimer
1HFY2019 RESULTS Disclaimer NO RELIANCE ON THIS DOCUMENT NO OFFER OF SECURITIES This document was prepared by Aurizon Holdings Limited (ACN 146 335 622) (referred to Nothing in this presentation should be construed as a recommendation of or an offer to sell or a as “Aurizon” which includes its relat
Slide 3: Performance Overview
1HFY2019 RESULTS Performance Overview Andrew Harding Managing Director & CEO
Slide 4: Safety performance
1HFY2019 RESULTS PERFORMANCE OVERVIEW Safety performance Continuous focus on safety priorities had resulted in an encouraging improvement in results over the last six months TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR)1 Incidents per million person-hours worked 10.33 -9% 9.88 9.75 8.92 8.43 7.12 F
Slide 5: Update on key priorities
1HFY2019 RESULTS PERFORMANCE OVERVIEW Update on key priorities Progress has been made on key priorities PRIORITY › UT5 Final Decision (FD) issued 6 December 2018 Engagement continues with all stakeholders › Operational Efficiency Improvement Precision Railroading in execution Key technology programs
Slide 6: FY2019 Half Year highlights
1HFY2019 RESULTS PERFORMANCE OVERVIEW FY2019 Half Year highlights1 Non-Network result in line with expectations given loss of Cliffs in Bulk and maintenance activities in Coal. Network result reflects the UT5FD, including partial true up from FY2018 FINANCIAL RESULTS CASHFLOW › Underlying EBIT down
Slide 7: Coal update
1HFY2019 RESULTS PERFORMANCE OVERVIEW Coal update Operating in a positive demand environment, Coal is investing in fleet for capability today and future volume growth › Maintenance investment in FY2019 and fleet reliability program delivers performance improvements and supports expected future volum
Slide 8: Bulk update
1HFY2019 RESULTS PERFORMANCE OVERVIEW Bulk update After positive results, focus remains on the turnaround plan and growth opportunities CUSTOMER UPDATE GROWTH OPPORTUNITIES › Linfox › Three key growth priorities: Linehaul (hook and pull) commercial agreement in Queensland 1 Growth within existing op
Slide 9: Network update
1HFY2019 RESULTS PERFORMANCE OVERVIEW Network update Resolution of UT5 remains a work in progress › Engagement continues with all stakeholders › QCA issued UT5FD1 on 6 December 2018 › Compared to UT5DD: › MAR increased ~$230m to $4.123bn over four years › WACC increased from 5.41% to 5.70% › All def
Slide 10: Operational efficiency improvements
1HFY2019 RESULTS FINANCIAL PERFORMANCE Operational efficiency improvements Work continues with targeted investments in technology, focussing on precision operations, reducing footprint and support costs RESTRUCTURE PRECISION SUPPORT RAILROADING AREAS › Focus on improving schedules and › On track to
Slide 11: Enterprise Agreement update
1HFY2019 RESULTS PERFORMANCE OVERVIEW Enterprise Agreement update Two EAs completed and two EAs approved in employee ballots - bargaining continuing on remaining EAs for Queensland employees WHAT DOES SUCCESS LOOK LIKE EAs that enable each Flexible, simple and business unit to achieve its responsive
Slide 12: Intermodal update
1HFY2019 RESULTS PERFORMANCE OVERVIEW Intermodal update Queensland Intermodal (QIM) transferred to Linfox January 2019, sale of Acacia Ridge remains subject to court proceedings INTERMODAL › Intermodal Interstate closed in line with plan in December 2017 removing ~$50m of EBIT losses INTERSTATE › Tr
Slide 13: 1HFY2019 Financial Performance
1HFY2019 RESULTS 1HFY2019 Financial Performance Pam Bains CFO & Group Executive Strategy
Slide 14: Key financial highlights
1HFY2019 RESULTS FINANCIAL PERFORMANCE Key financial highlights1 EBIT result impacted by UT5FD true up in Network and the Cliffs contract cessation in Bulk › Revenue reflects Aurizon’s decision to $m 1HFY2019 1HFY2018 Var account for the UT5FD, including the acceleration of the total FY2018 true up,
Slide 15: Coal
1HFY2019 RESULTS FINANCIAL PERFORMANCE Coal Earnings in line with expectations, with increased maintenance and ramp up in growth activities $m 1HFY2019 1HFY2018 Variance Revenue Above rail 617 603 2% › Volumes – down 1%, NSW & SEQ flat with CQCN down 2%, impacted by PIA and weather events Track acce
Slide 16: Bulk
1HFY2019 RESULTS FINANCIAL PERFORMANCE Bulk EBIT impacted by cessation of Cliffs contract. Mt Gibson haul ceased January 2019 ~$5m EBIT impact 2H Net impact Cliffs cessation – reflects the impact of the $m 1HFY2019 1HFY2018 Variance cessation of Cliffs in June 2018, larger impact 2H Revenue 260 308
Slide 17: Network
1HFY2019 RESULTS FINANCIAL PERFORMANCE Network EBIT performance reflects the UT5FD, including $30m impact of true up from FY2018 with a further $30m to be recognised 2HFY2019. RAB rollover estimated value $5.7bn1 Revenue $m 1HFY2019 1HFY2018 Variance › $30m recognised in 1H in relation to FY2018 Tra
Slide 18: Intermodal
1HFY2019 RESULTS FINANCIAL PERFORMANCE Intermodal Following the transfer of Queensland Intermodal, Acacia Ridge terminal is the main asset that now remains in the discontinued segment › Improved EBIT position with the closure of $m 1HFY2019 1HFY2018 Variance Intermodal Interstate in December 2017 wh
Slide 19: Capital expenditure
1HFY2019 RESULTS FINANCIAL PERFORMANCE Capital expenditure FY2019 capital expenditure mix change with Network decrease offset by increase in Coal to support fleet reliability and growth CAPITAL EXPENDITURE1 FY2016 – FY2019 ($M) › Capital expenditure guidance for FY2019 remains $480m – $520m 703 › Gr
Slide 20: Cashflow and shareholder returns
1HFY2019 RESULTS FINANCIAL PERFORMANCE Cashflow and shareholder returns FCF benefited from termination payment from Cliffs. Dividends continue to be paid at 100% of underlying NPAT FREE CASH FLOW ($M) SHAREHOLDER RETURNS ($M) +8% 406 387 371 356 345 76 273 279 223 261 280 63 183 -3 1H15 1H16 1H17 1H
Slide 21: Funding update
1HFY2019 RESULTS FINANCIAL PERFORMANCE Funding update Work is underway to determine the optimal legal and capital structure for the Group KEY DEBT METRICS 1HFY2019 1HFY2018 LEGAL & CAPITAL STRUCTURE REVIEW › Current legal structure is a legacy of the IPO and limits Weighted average 4.8 5.1 flexibili
Slide 22: Outlook & Key Takeaways
1HFY2019 RESULTS Outlook & Key Takeaways Andrew Harding Managing Director & CEO
Slide 23: FY2019 outlook
1HFY2019 RESULTS OUTLOOK & KEY TAKEAWAYS FY2019 outlook Non-Network EBIT guidance confirmed at $390m - $430m EBIT $m 1HFY2019 RESULT GUIDANCE Non-Network 217 390 - 430 Network 203 n/a Group (ex redundancy) 420 n/a Redundancy costs (14) n/a Group 406 n/a KEY ASSUMPTIONS › Coal – 2H volumes higher wit
Slide 24: Key takeaways
1HFY2019 RESULTS OUTLOOK & KEY TAKEAWAYS Key takeaways Continue to deliver on promises, focus remains on executing against the strategic framework to position Aurizon for long term earnings growth Focus on shareholder returns – maintained payout ratio at 100% of underlying NPAT UT5 – Engagement cont
Slide 25: Contact and Further Information
Contact and Further Information Chris Vagg Kath Clapham Head of Investor Relations & Manager Investor Relations Group Treasurer +61 7 3019 9044 +61 7 3019 9030
Slide 26: Additional Information
1HFY2019 RESULTS Additional Information Group Information Coal Bulk Network Capital Expenditure
Slide 27: Aurizon's rail haulage operations
1HFY2019 RESULTS ADDITIONAL INFORMATION Aurizon’s rail haulage operations KEY OPERATIONAL STATISTICS COMMODITIES Coal, iron ore and bulk freight ROLLINGSTOCK 500+ active locomotives OPERATIONAL FOOTPRINT More than 160 operational sites PEOPLE More than 4,500 operational full-time employees WAGONS 13
Slide 28: Aurizon's vision, purpose and values
1HFY2019 RESULTS ADDITIONAL INFORMATION Aurizon’s vision, purpose and values Focussed on customers and recognises its important role in both regional Australia and global supply chains VISION PURPOSE Achievement of vision represents: The first Growing choice for regional • #1 in the market bulk Aust
Slide 29: Strategic levers required to fulfil Aurizon's vision
1HFY2019 RESULTS ADDITIONAL INFORMATION Strategic levers required to fulfil Aurizon’s vision Execution against the three strategic levers is aimed at driving differentiation, competitive advantage and sustainable performance STRATEGIC LEVERS Delivering a cost effective Labour and asset Improving the
Slide 30: Enterprise Agreements
1HFY2019 RESULTS ADDITIONAL INFORMATION Enterprise Agreements # OF EMPLOYEES ENTERPRISE AGREEMENT STATUS & DURATION WAGE OUTCOMES COVERED (approx.) 1.0% pa increasing to WA Rollingstock Maintenance 100 Complete – 4 year term 1.75% pa over life of agreement 2.1% pa increasing to Queensland Staff 900
Slide 31: Capital allocation framework
1HFY2019 RESULTS ADDITIONAL INFORMATION Capital allocation framework Operating Sustaining Dividends Surplus capital Cash flow & (payout range returns 70-100%) (e.g. Buy-backs) & Transformation Net borrowings Capital Growth capital (at ~40% targeted (only where it gearing) maximises shareholder value
Slide 32: Additional Information: Group
1HFY2019 RESULTS Additional Information Group
Slide 33: Financial highlights (underlying)
1HFY2019 RESULTS ADDITIONAL INFORMATION Financial highlights1 (underlying) $m 1HFY2019 1HFY2018 Variance 2HFY2018 Revenue 1,455 1,565 (7%) 1,547 Operating costs (784) (821) 5% (826) EBITDA 672 744 (10%) 722 EBIT 406 485 (16%) 455 NPAT 227 282 (19%) 261 EPS (cps) 11.4 13.9 (18%) 13.1 Interim dividend
Slide 34: EBIT by business unit (underlying)
1HFY2019 RESULTS ADDITIONAL INFORMATION EBIT by business unit (underlying) $m 1HFY2019 1HFY2018 Variance 2HFY2018 Coal 210 223 (5%) 206 Bulk 14 20 (29%) 30 Network 203 249 (18%) 232 Other (21) (6) (269%) (13) EBIT1 406 485 (16%) 455 1. Continuing Operations 34
Slide 35: Group operating highlights
1HFY2019 RESULTS ADDITIONAL INFORMATION Group operating highlights1 $m 1HFY2019 1HFY2018 Variance 2HFY2018 Above Rail2 Revenue / NTK ($/’000 NTK) 38.4 37.6 2% 38.6 Labour Costs3 / Revenue 25.5% 23.8% (1.7ppt) 24.9% NTK / FTE (MNTK) 13.2 13.4 (1%) 12.8 EBITDA Margin – Underlying 46.2% 47.5% (1.3ppt)
Slide 36: Other profit and loss (underlying)
1HFY2019 RESULTS ADDITIONAL INFORMATION Other profit and loss (underlying) $m 1HFY2019 1HFY2018 Variance 2HFY2018 Revenue 41 41 - 50 Operating costs (58) (42) (37%) (58) EBITDA (17) (1) nm (8) Depreciation and amortisation (4) (5) (20%) (5) EBIT (21) (6) (250%) (13) 36
Slide 37: Quarterly above rail tonnes – December quarter 2018
1HFY2019 RESULTS ADDITIONAL INFORMATION Quarterly above rail tonnes – December quarter 2018 Quarter Dec-17 Year Financial Variance Quarter Ending vs. to date Dec-18 Dec-17 Mar-18 Jun-18 Sept-18 Dec-18 % Dec-18 Dec-17 % Coal volumes (mt) CQCN 38.1 35.8 38.9 38.0 38.4 1% 76.4 77.8 (2%) NSW & SEQ 14.8
Slide 38: Balance sheet summary
1HFY2019 RESULTS ADDITIONAL INFORMATION Balance sheet summary $m 31 December 2018 30 June 2018 Assets classified as held for sale1 60.6 108.0 Other current assets 586.0 698.2 Property, plant & equipment 8,621.2 8,659.9 Other non-current assets 363.0 315.7 Total assets 9,630.8 9,781.8 Liabilities cla
Slide 39: Reconciliation of borrowings
1HFY2019 RESULTS ADDITIONAL INFORMATION Reconciliation of borrowings $m Commentary Total debt including working capital facility 3,293.8 › Non-current debt on a Cash basis Reconciliation to Financial Statements Add/(less): › Transaction costs directly attributable to borrowings are Capitalised trans
Slide 40: Significant items
1HFY2019 RESULTS ADDITIONAL INFORMATION Significant items This table represents items classified as significant and excluded from underlying earnings $m 1HFY2019 1HFY2018 Variance 2HFY2018 Continuing operations - - - 25 Bulk Contract Exit – termination payment - - - 66 Bulk Contract Exit – costs - -
Slide 41: Material items to note
1HFY2019 RESULTS ADDITIONAL INFORMATION Material items to note › Table represents items that are included $m 1HFY2019 1HFY2018 Variance in Underlying EBIT for the continuing operations Redundancy expense (14) (15) 1 › This table is designed to assist investors to ‘normalise’ underlying earnings Long
Slide 42: Redundancy cost breakdown
1HFY2019 RESULTS ADDITIONAL INFORMATION Redundancy cost breakdown Redundancy › Redundancy costs since IPO have been included in Redundancy costs underlying EBIT as well as classified as a significant Year costs/(benefits) included in underlying item classified as EBIT ($m) Significant items ($m) › A
Slide 43: Dividend history
1HFY2019 RESULTS ADDITIONAL INFORMATION Dividend history Amount per share Payment Date Franking Payout Ratio (cents) FY2019 Final FY2019 Interim 25 March 2019 11.4 70% 100%1 FY2019 Total Dividend FY2018 Final 24 September 2018 13.1 60% 100%1 FY2018 Interim 26 March 2018 14.0 50% 100%1 FY2018 Total D
Slide 44: Additional Information: Coal
1HFY2019 RESULTS Additional Information Coal
Slide 45: Coal snapshot
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal snapshot As at 31 December 2018 107 329 236km average haul million tonnes active locos length 76 8618 22.6km/hr average services active wagons velocity per day TONNES HAULAGE BREAKDOWN Thermal Coal CQCN 28% Metallurgical Coal NSW/SEQ 47% 53% 72% 45
Slide 46: Coal operations - CQCN
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal operations - CQCN 46
Slide 47: Coal operations – NSW & South East Queensland (SEQ)
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal operations – NSW & South East Queensland (SEQ) 47
Slide 48: Coal strategic levers
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal strategic levers Priorities are focussed on the Optimise and Excel levers to improve cost competitiveness, asset utilisation and delivery performance Asset Precision Customer Existing Supply chain Portfolio Cost Asset utilisation Adjacencies Utilisation o
Slide 49: Coal profit and loss (underlying)
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal profit and loss (underlying) $m 1HFY2019 1HFY2018 Variance 2HFY2018 Tonnes (m) 106.5 107.8 (1%) 104.6 Above Rail 617 603 2% 604 Track Access 271 320 (15%) 279 Other - 4 nm 3 Total Revenue 888 927 (4%) 886 Operating Costs (583) (614) 5% (588) EBITDA 305 31
Slide 50: Coal financial and operating metrics
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal financial and operating metrics 1HFY2019 1HFY2018 Variance 2HFY2018 Tonnes (m) 106.5 107.8 (1%) 104.6 NTKs (bn) 25.1 25.8 (3%) 24.6 Operating Ratio 76.3% 76.0% (0.3ppt) 76.7% Above Rail Revenue /NTK ($/’000 NTK) 24.6 23.4 5% 24.6 Opex (excl access)/NTK ($
Slide 51: Coal haulage tonnes (mt) by system
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal haulage tonnes (mt) by system 1HFY2019 1HFY2018 Variance 2HFY2018 CQCN Newlands 9.9 9.8 1% 10.6 Goonyella 30.4 31.8 (4%) 30.6 Blackwater 29.1 30.4 (4%) 28.1 Moura 7.0 5.8 21% 5.4 Total CQCN 76.4 77.8 (2%) 74.7 NSW & SEQ West Moreton 3.8 3.9 (3%) 3.7 Hunte
Slide 52: Coal contract portfolio
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal contract portfolio AURIZON COAL CONTRACT VOLUME EXPIRY BY YEAR (MTPA – AS AT 30 JUNE 2018) 60 45 Million tonnes per annum 30 15 0 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 Notes: › This represents the contracted tonnes as at 30 June 2018
Slide 53: Coal contract portfolio
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal contract portfolio ANNUALISED FORECAST COAL CONTRACTED COAL CONTRACT PORTFOLIO EXPIRY PROFILE VOLUMES (MTPA)1 (AS AT 30 JUNE 2018) 252 244 229 0 - 3 years 69 73 18% 63 15% >3 - 7 years 68% 166 175 179 >7 years FY2018a FY2019f FY2020f NSW & SEQ CQCN 1. Thi
Slide 54: Australian export coal demand
1HFY2019 RESULTS ADDITIONAL INFORMATION Australian export coal demand The fundamentals of metallurgical and thermal coal remain strong, driven by steel and energy demand growth in Asia, supporting growth in Australian exports of ~2% pa over the next decade INDIA: CRUDE STEEL PRODUCTION (MT)1 +41% Me
Slide 55: Australia FY2018 coal supply summary
1HFY2019 RESULTS ADDITIONAL INFORMATION Australia FY2018 coal supply summary Coal Production Domestic Consumption Export All Coal Export (By Destination) All Coal Export (By Port) 118mt 157mt 448mt 66mt 382mt 89mt 120mt 31% 48mt 47mt 48mt 41% 67mt 23% 32mt 31% State Split State Split State Split 28m
Slide 56: Coal market | Australia
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal market | Australia AUSTRALIA: METALLURGICAL COAL EXPORT AUSTRALIA: THERMAL COAL EXPORT 250 $300 250 $150 Hard Coking Coal Price (USD/t) Thermal Coal Price (USD/t) 200 200 million tonnes million tonnes $200 $100 150 150 100 100 $100 $50 50 50 103 108 91 90
Slide 57: Coal price | Coal capital and exploration expenditure
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal price | Coal capital and exploration expenditure HARD COKING COAL SPOT PRICE (US$/t FOB) THERMAL COAL SPOT PRICE (US$/t FOB) $300 $150 $250 $223 $103 $200 $100 $150 $100 $50 $50 $0 $0 Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- J
Slide 58: Coal demand | Metallurgical coal
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal demand | Metallurgical coal MAJOR COKING (METALLURGICAL) COAL EXPORT MAJOR COKING (METALLURGICAL) COAL IMPORT NATIONS: 2017 NATIONS (AND SOURCE): 2017 177mt 79mt 57mt 50mt 7% 13% 7% 36mt 6% 8% 50mt 17% 82% 11% 29mt 26mt 23mt 44% 69% 13mt 53% 26% 43% Austr
Slide 59: Coal demand | Thermal coal
1HFY2019 RESULTS ADDITIONAL INFORMATION Coal demand | Thermal coal MAJOR STEAM (THERMAL) COAL EXPORT NATIONS: MAJOR STEAM (THERMAL) COAL IMPORT NATIONS 2017 (AND IMPORT SOURCE): 2017 389mt 219mt 161mt 155mt 9% 132mt 202mt 21% 24% 10% 158mt 17% 69mt 58% 83mt 70mt 56% 25% 61% 14% 43% 22% 36% 29% Indon
Slide 60: Australia coal competitiveness
1HFY2019 RESULTS ADDITIONAL INFORMATION Australia coal competitiveness METALLURGICAL COAL CASH COSTS (US$/t, CFR INDIA, 2018) THERMAL COAL CASH COSTS (US$/t, CFR JAPAN, 2018) $180 $80 $160 $70 $140 $120 $60 US$/t US$/t $100 $161 $50 $71 $128 $63 $63 $64 $80 $59 $109 $96 $40 $60 $75 $40 $30 Russia Au
Slide 61: Additional Information: Bulk
1HFY2019 RESULTS Additional Information Bulk
Slide 62: Bulk snapshot
1HFY2019 RESULTS ADDITIONAL INFORMATION Bulk snapshot As at 31 December 2018 24 146 61 average services million tonnes active locos per day 203km 2498 4.8b average haul active wagons NTK1 length HAULAGE BREAKDOWN Bauxite/Alumina 28% Iron Ore 45% Other2 27% 1. Net tonnes per kilometre. Payload tonnes
Slide 63: Bulk operations – Queensland
1HFY2019 RESULTS ADDITIONAL INFORMATION Bulk operations – Queensland 63
Slide 64: Bulk operations – Western Australia
1HFY2019 RESULTS ADDITIONAL INFORMATION Bulk operations – Western Australia 64
Slide 65: Bulk strategic levers
1HFY2019 RESULTS ADDITIONAL INFORMATION Bulk strategic levers The plan to optimise the business is in execution. Focus now turns to the Excel and Extend levers to drive the turnaround plan Precision Customer Existing Supply chain Portfolio Cost Service delivery Asset utilisation Adjacencies operatio
Slide 66: Bulk profit and loss (underlying)
1HFY2019 RESULTS ADDITIONAL INFORMATION Bulk profit and loss (underlying) $m 1HFY2019 1HFY2018 Variance 2HFY2018 Tonnes (m) 23.6 28.5 (17%) 26.2 Total Revenue 260 308 (16%) 310 Operating costs (237) (275) 14% (268) EBITDA 23 33 (31%) 42 Depreciation and amortisation (9) (13) 35% (12) EBIT 14 20 (29%
Slide 67: Bulk financial and operating metrics
1HFY2019 RESULTS ADDITIONAL INFORMATION Bulk financial and operating metrics $m 1HFY2019 1HFY2018 Variance 2HFY2018 Tonnes (m) 23.6 28.5 (17%) 26.2 NTKs (bn) 4.8 7.0 (31%) 6.4 Operating Ratio 94.5% 93.5% (1.0ppt) 90.3% Total Revenue / NTK ($000 NTK) 54.1 43.9 23% 48.5 Opex (excl access)/NTK ($/’000
Slide 68: Australia capital and exploration expenditure
1HFY2019 RESULTS ADDITIONAL INFORMATION Australia capital and exploration expenditure CAPITAL EXPENDITURE: METAL ORE MINING^ EXPLORATION EXPENDITURE: SILVER, LEAD, ZINC A$4.0b A$40m +28% A$30m -6% A$2.0b A$20m A$10m A$0.0b A$0m Sep- Mar- Sep- Mar- Sep- Mar- Sep- Sep- Mar- Sep- Mar- Sep- Mar- Sep- 15
Slide 69: Additional Information: Network
1HFY2019 RESULTS Additional Information Network
Slide 70: Central Queensland Coal Network (CQCN)
1HFY2019 RESULTS ADDITIONAL INFORMATION Central Queensland Coal Network (CQCN) CQCN comprises four major coal systems and one connecting system link (GAPE) servicing Queensland’s Bowen Basin coal region Townsville LEGEND PORT OF ABBOT POINT Abbot Point Coal Terminal (APCT) City/town Power Station Bo
Slide 71: Network snapshot
1HFY2019 RESULTS ADDITIONAL INFORMATION Network snapshot As at 31 December 2018 117 40+ three above rail million tonnes mines serviced operators $5.7b five 2670km Regulated Asset export terminals railway track Base1 HAULAGE BREAKDOWN2 1HFY2019 Thermal Coal 32% Metallurgical Coal 68% 1. Estimate at 1
Slide 72: Network strategic levers
1HFY2019 RESULTS ADDITIONAL INFORMATION Network strategic levers Priorities are focussed on the development of a fit for purpose network that creates value and facilitates changing the regulatory environment for the benefit of all Fit for purpose Existing UT5 solution Capability Customer solutions R
Slide 73: UT5 Final Decision summary
1HFY2019 RESULTS ADDITIONAL INFORMATION UT5 Final Decision summary AN1 UT5 AN’S RESPONSE QCA UT5DD QCA UT5FD SUBMISSION TO UT5DD Return on Capital (WACC) 1,592 1,289 1,677 1,381 Depreciation (less inflation) 1,141 899 936 1,034 Maintenance cost 921 817 928 739 Operating cost 855 743 867 795 Tax 328
Slide 74: Network profit and loss (underlying)
1HFY2019 RESULTS ADDITIONAL INFORMATION Network profit and loss (underlying) 1HFY2019 1HFY2018 Variance 2HFY2018 $m Tonnes (m) 116.5 116.6 - 113.0 Access Revenue 534 577 (7%) 590 Services and other 23 31 (24%) 21 Total Revenue 557 608 (8%) 611 Operating costs (196) (208) 5% (222) EBITDA 361 400 (10%
Slide 75: Network financial and operating metrics
1HFY2019 RESULTS ADDITIONAL INFORMATION Network financial and operating metrics 1HFY2019 1HFY2018 Variance 2HFY2018 Tonnes (m) 116.5 116.6 - 113.0 NTK (bn) 28.8 29.0 (1%) 27.9 Operating Ratio 63.6% 59.1% (4.5ppt) 62.0% Maintenance/NTK ($/’000 NTK) 2.2 2.0 (10%) 2.4 Opex/NTK ($/’000 NTK) 12.3 12.4 1%
Slide 76: Network volumes (mt)
1HFY2019 RESULTS ADDITIONAL INFORMATION Network volumes1 (mt) 1HFY2019 1HFY2018 Variance 2HFY2018 Newlands 6.5 6.8 (4%) 6.3 Goonyella 62.6 63.9 (2%) 62.6 Blackwater/WIRP 31.8 32.8 (3%) 29.9 Moura 7.0 5.7 23% 5.4 GAPE 8.6 7.4 16% 8.8 Total 116.5 116.6 - 113.0 Average haul length2 (kms) 247.5 248.3 -
Slide 77: Network EBIT scenarios post UT5 Final Decision
1HFY2019 RESULTS FINANCIAL PERFORMANCE Network EBIT scenarios post UT5 Final Decision Network EBIT range for FY2019 is $380m – $485m under various revenue recognition scenarios assuming no volume variance. FY2020 EBIT growth from MAR increase INDICATIVE NETWORK EBIT RANGE FY2018 – FY2019 ($M) Scenar
Slide 78: UT5 Final Decision MAR and known adjustments
1HFY2019 RESULTS ADDITIONAL INFORMATION UT5 Final Decision MAR and known adjustments $m FY2018 FY20193 FY20203 FY20213 UT5 Final Decision MAR (ex GAPE) 874 887 936 908 Estimated MAR (ex GAPE) 9321 887 936 908 Known adjustments: Revenue Cap / Flood Recovery (3) 45 (1) UT5 Estimated MAR True Up (FY201
Slide 79: Network revenue adjustment amounts (revenue cap)
1HFY2019 RESULTS ADDITIONAL INFORMATION Network revenue adjustment amounts (revenue cap) AT2-4 AT5 › Revenue adjustment amounts (RAA) are the Financial Total (diesel tariff) (electric tariff) difference by system between Aurizon’s Total Year $m $m $m Actual AT2-5 Revenue and Allowable AT2-5 1 Revenu
Slide 80: Reconciliation of billed MAR to reported access revenue
1HFY2019 RESULTS ADDITIONAL INFORMATION Reconciliation of billed MAR to reported access revenue FY2018 FY2019 $m Actual Estimate* Billed Access Revenue (AT1 to AT5) (ex. GAPE) 940 887 Approved Adjustments to MAR Flood Claim recoveries1 18 Revenue Cap (ex. GAPE and inclusive of capitalised interest)
Slide 81: Additional Information: Capital Expenditure
1HFY2019 RESULTS Additional Information Capital Expenditure
Slide 82: 1HFY2019 group and business unit capital expenditure
1HFY2019 RESULTS ADDITIONAL INFORMATION 1HFY2019 group and business unit capital expenditure ($m) 223 201 111 63 111 44 28 19 22 16 2 28 19 0 3 0 2 0 1HFY20192 Network Coal Bulk1 Intermodal Corporate2 Non Growth Growth 1. Net of externally funded payments 2. Includes capitalised interest 82
Slide 83: Glossary
1HFY2019 RESULTS ADDITIONAL INFORMATION Glossary Metric Description Access Revenue Amounts received by Aurizon Network for access to the Network infrastructure under all Access Agreements Average haul length NTK/Total tonnes Contract utilisation Total volumes hauled as a percentage of total volumes
Slide 84: Aurizon
% <4 AURIZON.