Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — FY2011 Earnings Presentation
36 slides from Aurizon's earnings presentation, Aug 29, 2011
Slide 1: Full Year Results FY2011
Full Year Results Lance Hockridge FY2011 Managing Director and CEO Deborah O’Toole Executive Vice President and CFO 29 August 2011
Slide 2: Important Notice
IMPORTANT NOTICE Reliance on third party information This Presentation was prepared by QR National Limited (ACN 146 335 622) (“QR National”). This Presentation may contain information that has been derived from publicly available sources that have not been independently verified. No representation o
Slide 3: Agenda
AGENDA Company update Lance Hockridge, Managing Director and CEO Financial Overview Deb O’Toole, Executive Vice President and CFO Questions and Answers 3
Slide 4: Inaugural Result Demonstrates Delivery and Momentum
INAUGURAL RESULT DEMONSTRATES DELIVERY AND MOMENTUM Revenue of $3.3bn - up 11% on FY10 Underlying EBIT of $367m - up 35% on FY10 EARNINGS INCREASE Volumes of 243.1mt in FY11 - down 7% on FY10 Statutory EBIT of $205m - $72m loss in FY10 Flood impacted coal volumes resulting in a reduction o
Slide 5: FY11 - Delivering on Transformation and Growth
FY11- DELIVERING ON TRANSFORMATION AND GROWTH Strategy Execution Transformation Transformation Safety 50% reduction in LTIFR - safety performance Commercial outcomes VR Program fully implemented - 660 people departed Customer service Revenue quality uplift in coal Performance improvement 29%
Slide 6: Performance Metrics Trending in the Right Direction
PERFORMANCE METRICS TRENDING IN THE RIGHT DIRECTION QR National Group Operating metric FY10 FY11 Commentary Revenue / NTK 46.3 55.1 (A$/000 NTK) Increased EBITDA margin by 200 bps due to: Labour Costs / Revenue 33% 33% Improved revenue quality underpinning growth NTK/employee(3) (MNTK) 6.8 6.6 i
Slide 7: Safety – Lead Indicator for Performance
SAFETY – LEAD INDICATOR FOR PERFORMANCE Safety is QR National’s core value and highest priority Achieved 50% improvement in LTIFR to 3.08 Achieved first LTI free month on record MTIFR decreased by 26% to 18.26 SPAD rate decreased by 20% to 1.66 Improvements reflect: changing culture
Slide 8: Focus on Productivity & Service
FOCUS ON PRODUCTIVITY & SERVICE CQCN CQCN Payloads Payloads (tonnes) (tonnes) New operating model established in Capricornia and Goonyella Central Queensland coal systems Payloads have increased 5% in Goonyella and 6% in Blackwater since February 2010 Improved alignment between above and below
Slide 9: Hunter Valley Out-performance
HUNTER VALLEY OUT-PERFORMANCE QR National Coal – NSW Volumes /Market share 58% increase in volumes railed in FY11 to 30mt Volume (LHS), Market share (RHS) 50 30 in export plus domestic 45 22 25 40 Effectively implementing strategy with 35 18 20 30 cornerstone customers BHP, Yancoal and 14 14 25
Slide 10: Diversification Through Iron Ore Growth
DIVERSIFICATION THROUGH IRON ORE GROWTH Significant progress made in securing iron ore 30 contracts in the Mid West and Yilgarn regions of WA New agreements will underpin volumes of 30mta 25 Iron Ore contracts includes: Karara Mining Ltd: 10mta for ten years 20 - starting 2012 Mt Gibson Iron
Slide 11: GAPE – On Schedule & On Budget
GAPE – ON SCHEDULE & ON BUDGET One of the largest rail infrastructure projects in the Company’s history - $1.1bn Increasing capacity through Goonyella and Newlands system to Port of Abbott Point by 33mta GAPE Project includes: Construction of the Northern Missing Link – 74kms A major upgra
Slide 12: Financial Overview
Financial Overview QR NATIONAL.
Slide 13: A Solid Outcome
A SOLID OUTCOME Financial Key Metrics Revenue ($m) 3,294 +11% Revenue / NTK (A$/000 NTK) 55.1 +19% Underlying EBITDA ($m) 813 +17% Labour Costs / Revenue 33% - Underlying EBIT ($m) 367 +35% NTK/employee(3) (MNTK) 6.6 (3%) Statutory NPAT ($m) 350 >100% Opex(1) / NTK (A$/000 NTK) 48.9 (16%) Volumes (m
Slide 14: Growth Continues to Accelerate
GROWTH CONTINUES TO ACCELERATE Coal Volumes Revenue mt $m 218.81 198.4 184.1 186.7 181.6 Underlying EBITDA Underlying EBIT $m $m 14 1. Full year expectations without flood and cyclone
Slide 15: A Significant Lift Against Prior Year
A SIGNIFICANT LIFT AGAINST PRIOR YEAR Flood impact and reduced mine outputs impact on volumes Revenue quality uplift from contract renewals, incentives and performance bonuses Forward investment in maintenance and capital to underpin growth Lower Network tonnages are offset by take or pay re
Slide 16: Impact of Flood and Cyclone Offset by Transformation Upside
THE IMPACT OF THE FLOOD AND CYCLONE OFFSET BY TRANSFORMATION UPSIDE Of the $187m flood and cyclone impact an estimated $65m is recoverable in future years $47m revenue cap FY13 $18 - $22m deficit tonnage charges FY12 Revenue quality upside – improvements due to newly negotiated contracts inc
Slide 17: One-off Items Totalled $162m
ONE-OFF ITEMS TOTALLED $162M FY10 FY11 Comments Statutory EBIT (72) 205 FY11 one-off items include: $99m IPO related transaction costs. IPO related transaction costs 34 99 $63m Voluntary Redundancy Scheme Voluntary Redundancy Scheme - 63 $290m one-off tax benefit on privatisation Impairment ex
Slide 18: Capital Breakdown FY11
CAPITAL BREAKDOWN FY11 Growth capital spend of $3.5bn over the QRN capital expenditure* ($m) past 4 years* FY11 breakdown: GAPE $460m Blackwater electrification $86m Other Network projects $135m New Coal rollingstock $352m Iron Ore $105m Other $202m Variation to offer document assu
Slide 19: Continued Investment of Operating Cash Flows to Fund Future Growth
CONTINUED INVESTMENT OF OPERATING CASH FLOWS TO FUND FUTURE GROWTH FY11 FY11 Comments Underlying cash flow statement Statutory Underlying Investment of operating cash flows to Operating activities fund future growth EBITDA 652 813 Interest costs include the payment of Other changes in working ca
Slide 20: $2.2bn of Available Debt Facilities to Support Capital Expansion
$2.2BN OF AVAILABLE DEBT FACILITIES TO SUPPORT CAPITAL EXPANSION Balance sheet FY10 FY11 Comments Working capital 383 (11) QTC borrowings under government ownership converted to capital Property, plant and equipment 7,384 8,276 contribution Net debt (4,258) (686) $3bn syndicated facility establi
Slide 21: Business Review
Business Review €£D aR NATIONAL.
Slide 22: Performance Metrics
PERFORMANCE METRICS UNDERLYING QR National Group FY10 FY11 Operating metric Divisions Operating metric FY10 FY11 Revenue / NTK Revenue / NTK 37.3 41.4 46.3 55.1 (A$/000 NTK) (A$/000 NTK) Opex(1) / NTK 32.4 37.5 (A$/000 NTK) Labour Costs / Revenue 33% 33% Coal EBITDA Margin 24% 22% NTK/employee(3) (M
Slide 23: QR National Coal
QR NATIONAL COAL UNDERLYING RESULTS FY10 FY11 Key drivers Tonnages (million) 198.4 181.6 Revenue quality uplift from performance based contracts 29% of contracted volumes under NTK (billion) 45.3 40.9 commercial arrangements QLD flood impact - reduce volumes Revenue 1,690.2 1,690.5 hauled NS
Slide 24: QR National Network Services
QR NATIONAL NETWORK SERVICES UNDERLYING RESULTS FY10 FY11 Key drivers Tonnages (million) 186.5 164.0 Flood impacts Revenue cap recovery mechanism NTK (billion) 45.4 40.0 FY13 : ~ $46.5m Protection of access revenue from Revenue 1,059.8 1,181.0 below rail Take or Pay Increased activity in Ser
Slide 25: QR National Freight
QR NATIONAL FREIGHT UNDERLYING RESULTS FY10 FY11 Key drivers Tonnages (million) 63.6 61.5 TSC for regional services generates increased revenue NTK (billion) 18.9 19.0 Intermodal contracts secured and business performance improving Growth in Iron Ore Revenue 1,150.2 1,277.2 Reduction in Grai
Slide 26: Outlook
Outlook
Slide 27: Outlook FY12
OUTLOOK FY12 Downside risks: Softer coal volumes in Queensland with shortfall of 6mt (-18%) in July/August FY12 against FY11 Lack of certainty on when full production from miners will resume Weather will be a significant swing factor Upside opportunities: VR cost outs flowing through C
Slide 28: Leveraged to Global Growth Sectors
LEVERAGED TO GLOBAL GROWTH SECTORS Thermal Coal Metallurgical Coal Iron Ore Global thermal coal imports … Australian Exports of Metallurgical Coal Australian Exports of Iron Ore Million Tonnes Million Tonnes 1,000 220 600 900 +8% +9% +21% 180 500 800 700 400 140 600 500 300 100 400 300 200 60 200 10
Slide 29: Positive Growth Expectations
POSITIVE GROWTH EXPECTATIONS World crude steel production for the 64 countries reporting to the World Steel Association (worldsteel) was 127 million metric tons (mmt) in July - 11.5% higher than July 2010. China’s crude steel production for July 2011 was 59.3 mmt, an increase of 15.5% compared t
Slide 30: Strategic Investments for Growth
STRATEGIC INVESTMENTS FOR GROWTH Committed capital investment in FY12* GAPE QRN capital expenditure* ($m) Blackwater electrification $450m 1,600 WICET 1,339 GSEX140 1,030 New Coal rollingstock $275m Iron Ore Variations to offer document due to change in timing of major coal and iron
Slide 31: New Structure to Underpin Future Performance
NEW STRUCTURE TO UNDERPIN FUTURE PERFORMANCE FROM A LINE OF BUSINESS FOCUS TOWARDS A FUNCTIONAL MODEL Rigid silos Integration and collaboration Internal focus Company-wide focus on customers Efficiency limitations Driving further efficiencies Impeding transformation effort and Will h
Slide 32: Questions
Questions €£D aR NATIONAL.
Slide 33: Additional Slides
Additional Slides QR NATIONAL.
Slide 34: Reconciliation of Statutory, Underlying & Proforma EBIT and NPAT
RECONCILIATION OF STATUTORY, UNDERLYING & PROFORMA EBIT AND NPAT FY11 Offer Document Statutory Underlying Proforma Statutory Underlying Proforma Statutory EBIT 205 205 205 358 358 358 • Transaction related costs - 99 99 - 102 102 • VRS - 63 63 - - - • Timing related revenue - 2009 Revenue Cap - - (2
Slide 35: Reconciliation of Statutory Profit and Loss
RECONCILIATION OF STATUTORY PROFIT AND LOSS FY10 FY11 Underlying Significant Statutory Underlying Significant Statutory Items Items Revenue (1) 2,973 2.0 2,975 3,294 - 3,294 Consumables(2) (1,259) - (1,259) (1,358) - (1,358) Employee benefits expense (993) - (993) (1,103) (117) (1221) Other expenses
Slide 36: Recovery from Floods and Cyclone
RECOVERY FROM FLOODS AND CYCLONE Volume impact of 37.2 million tonnes in FY11 Recovery of infrastructure completed within days of floods receding Damage limited to $5.8m Available rail capacity exceeds coal production 36