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Aurizon outlines further impairments

Prashant Mehra  |  27 Jul 2017Text size  Decrease  Increase  |  

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SYDNEY - [AAP] Aurizon (ASX: AZJ) has outlined fresh impairments of $606 million with its intermodal and bulk transport divisions continuing to face challenging market conditions.

The rail freight operator expects full-year underlying earnings will be $836 million, within its revised guidance range of $800 to $850 million.

However, it could be left facing a full-year loss after flagging a fresh $526 million writedown in the value of its bulk business and further transformation-related costs of $80 million, taking its full-year impairment charges to $927 million.

Aurizon blames continued challenging market conditions and deteriorating performance in its diversified bulk businesses for the fresh writedowns.

Managing director Andrew Harding called the situation disappointing but said the business has the potential to deliver.

"The underperformance and deterioration in outlook for the Bulk business is disappointing and serves to reinforce the need for disciplined action to effect a satisfactory business turnaround," he said in a statement released after the market closed on Wednesday.

"Bulk is well-positioned to leverage Aurizon's core capabilities in operating bulk supply chains yet is failing to deliver on its potential for customers and shareholders."

The company said reassessment of the bulk business' future revenues--following a review of freight and intermodal operations, and the exiting of contracts--had shown that the division's financial losses had increased.

It said it is implementing a turnaround plan for its intermodal business while simultaneously considering options to sell it.

Aurizon took $321 million worth of writedowns in its first half results and, in April, cut its full-year earnings guidance after a $115 million hit from damage and lower haulage volumes caused by Cyclone Debbie.

It now expects 2017 full-year coal haulage volumes to be 198.2 million tonnes, within its revised guidance of 190-200 million tonnes.


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