Asciano interim beats forecasts
ASCIANO expects to boost earnings in the second half amid tentative signs of an upturn in the economy, after it overcame weakness in two of its four divisions to post a 74 per cent rise in first-half profits.
Shares in the ports and rail company rose as much as 6 per cent to almost a three-year high on Tuesday after it beat analysts' expectations by posting a $199 million profit for the first half, from $114 million previously. Revenue rose 8 per cent to $1.8 billion.
Asciano declared an interim dividend of 5.25¢ per share, up from 3.5¢ previously.
The chief executive, John Mullen, said the company had been able to boost earnings despite "very subdued market conditions" for its Pacific National Rail, and ports and logistics divisions.
The company bore the brunt of a sharp fall in economic activity between June and September.
"In this first half, even though two of our major divisions contributed very little in [pre-tax earnings] growth, the company overall still managed to deliver on target," Mr Mullen said.
The terminals and logistics division was "especially impacted by the sharp drop-off in the domestic economy" in the first half, particularly in Victoria.
While its fastest-growing division, Pacific National Coal, faced a decline in export demand for metallurgical coal in Queensland during the first three months of the half, contract wins helped it to boost pre-tax earnings 50 per cent to $150 million over the six months.
The division's earnings included $21.5 million from the sale of land at Kooragang Island in Newcastle.
Mr Mullen pointed out the rail-haulage division was unsuccessful in winning a large contract from Whitehaven Coal in NSW. It went to Queensland rail company Aurizon, which was "prepared to offer terms and conditions that PN Coal was not able to match".
The company has begun a review of the coal-haulage division's business strategy to ensure it can cope with the impacts of lower coal prices, the high Australian dollar and increased costs in the medium term.
Asciano expects earnings and revenue in the second half to be higher than in the same period in 2011-12. However, it cautioned that an improved bottom line would be dependent on the outlook for the domestic and global economy not deteriorating.
"We share the enthusiasm of everybody that we hope we will see some ... general economy rebound," Mr Mullen said. "[But] in this last half we didn't see it."
So far in the second half, volume growth for Asciano's ports and logistics division had been soft but Mr Mullen said he did not expect market conditions to weaken further.
The division is focused on redeveloping its terminal at Port Botany in Sydney.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free