Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — QR National — CLSA Investment Conference 2011
30 slides from Aurizon's conference presentation, Sep 22, 2011
Slide 1: CLSA Investment Conference Hong Kong
CLSA Investment Conference Hong Kong Lance Hockridge Managing Director and CEO 22 September 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: QR National is Australia's Largest Rail Freight Operator
QR NATIONAL IS AUSTRALIA'S LARGEST RAIL FREIGHT OPERATOR Operations across all mainland States 2,300kms of track owned, managed and operated in Central Queensland 242mtpa of volumes hauled in FY11 9,001 employees West Australian $9.2bn of total assets bulk and iron ore freight Market cap
Slide 4: QR National's Key Operations
QR NATIONAL’S KEY OPERATIONS Coal Freight Network Services Largest coal haulage operator in National transporter of bulk Network – 2,300km of track Australia mineral commodities (including across four coal rail systems in >500,000 tonnes hauled per day iron ore), agricultural, mining and Cen
Slide 5: FY11 Performance
FY11 Performance €£D aR NATIONAL.
Slide 6: 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 - $72m loss in FY10 Flood impacted coal volumes resulting in a reduction o
Slide 7: FY11 - Delivering on Transformation and Growth
FY11- DELIVERING ON TRANSFORMATION AND GROWTH Strategy Execution Transformation Transformation Safety 50% reduction in LTIFR - safety performance Commercial outcomes VR Program fully implemented - 660 people departed Customer service Revenue quality uplift in coal Performance improveme
Slide 8: A Solid Outcome
A SOLID OUTCOME Financial Key Metrics Revenue ($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 9: 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 10: 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 $m 10 1. Full year expectations without flood and cyclone
Slide 11: Performance Metrics Trending in the Right Direction
PERFORMANCE METRICS TRENDING IN THE RIGHT DIRECTION QR National Group Operating metric FY10 FY11 Commentary Revenue / NTK 46.3 55.1 (A$/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 12: 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 13: Focus on Productivity & Service
FOCUS ON PRODUCTIVITY & SERVICE 10,500 10,500 CQCN CQCN Payloads Payloads (tonnes) (tonnes) Goonyella 10,000 10,000 Goonyella New operating model established in Capricornia 9,500 9,500 and Goonyella Central Queensland coal systems 9,000 9,000 Payloads have increased 5% in Goonyella and 6% 8,500
Slide 14: More Than 70mtpa of Committed Additional System Capacity
MORE THAN 70MTPA OF COMMITTED ADDITIONAL SYSTEM CAPACITY 14
Slide 15: GAP – On Schedule & On Budget
GAP – 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 33mtpa GAP Project includes: Construction of the Northern Missing Link – 74kms A major upgrad
Slide 16: Wiggins Island Project Adds 27mtpa Additional Capacity
WIGGINS ISLAND PROJECT ADDS 27MTPA ADDITIONAL CAPACITY 16
Slide 17: Wiggins Island Project Adds 27mtpa Additional Capacity
WIGGINS ISLAND PROJECT ADDS 27MTPA ADDITIONAL CAPACITY 17
Slide 18: Hunter Valley Out-Performance
HUNTER VALLEY OUT-PERFORMANCE QR National Coal – Hunter Valley Volumes /Market share 58% increase in volumes railed in FY11 to 30mt Volume (LHS), Market share (RHS) 50 ~30% 30 in export plus domestic 45 22% 25 40 Effectively implementing strategy with 35 18% 20 30 cornerstone customers BHP, Yanc
Slide 19: Diversification Through Iron Ore Growth
DIVERSIFICATION THROUGH IRON ORE GROWTH 19
Slide 20: Capital Breakdown FY11
CAPITAL BREAKDOWN FY11 Growth capital spend of $3.5bn over the past 4 years* QRN capital expenditure* ($m) FY11 breakdown: 1800 GAPE $460m 1,557 1600 Blackwater electrification $86m 1400 1,339 441 Other Network projects $135m 1200 200 1,030 New Coal rollingstock $352m 1000 853 307 Iron
Slide 21: Leveraged to Global Growth Sectors
LEVERAGED TO GLOBAL GROWTH SECTORS Thermal Coal Metallurgical Coal Iron Ore Global thermal coal imports … Australian Exports of Metallurgical Coal Australian Exports of Iron Ore Million Tonnes Million Tonnes 1,000 220 600 900 +8% +9% +21% 180 500 800 700 400 140 600 500 300 100 400 300 200 60 200 10
Slide 22: Positive Growth Expectations
POSITIVE GROWTH EXPECTATIONS World crude steel production for the 64 countries reporting to the World Steel Association (worldsteel) was 127 million metric tons (mmt) in July - 11.5% higher than July 2010. China’s crude steel production for July 2011 was 59.3 mmt, an increase of 15.5% compared t
Slide 23: Strategic Investments for Growth
STRATEGIC INVESTMENTS FOR GROWTH QRN capital expenditure* ($m) 1,600 1,339 1,030 * Excludes capitalised interest 23
Slide 24: QR National - Driving Performance Excellence
QR NATIONAL - DRIVING PERFORMANCE EXCELLENCE Key Priorities Safety Revenue Quality Cost, Efficiency & Productivity Capital Efficiency Growth 24
Slide 25: 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 26: Questions
— We eg & > 1 Questions
Slide 27: Additional Slides
Additional Slides QR NATIONAL.
Slide 28: 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 28
Slide 29: The Impact of the 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 - $22m deficit tonnage charges FY12 Revenue quality upside – improvements due to newly negotiated contracts inc
Slide 30: Performance Metrics
PERFORMANCE METRICS UNDERLYING QR National Group FY10 FY11 Divisions Operating metric FY10 FY11 Operating metric Revenue / NTK 37.3 41.4 Revenue / NTK 46.3 55.1 (A$/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