Aurizon in $197m write-down

Coal-hauler Aurizon will write down up to $197 million in the first half after deciding to sell or scrap a large number of train locomotives and wagons, as well as reducing the size of rail projects to service mines.

After axing 248 staff since July, Australia's largest listed rail company also said the bulk of redundancies targeted as part of efforts to strip out more than $230 million in costs over the next two years had been completed.

Aurizon said coal volumes had remained strong in the first half, playing down fears in some quarters about the impact of changing demand for coal in China.

As it steps up efforts to squeeze more out of its existing assets, Aurizon will slash the size of its locomotive fleet by 28 per cent to 598 by 2017-18, and the number of wagons by 12 per cent to 16,292.

"We are now confident that we can do more with less," Aurizon chief executive Lance Hockridge said.

As a result, it will book an impairment charge of between $130 million and $150 million in the first half from disposing of 181 locomotives and 2675 wagons. The company has estimated the annual savings from selling or scrapping part of its fleet at about $20 million over five years.

Aurizon will also make a $47 million write-down in the first half after it scaled back the size of strategic rail projects in which it is involved in the Surat and Galilee basins in Queensland.

Last month Aurizon and partners in a multibillion-dollar rail project in the Galilee Basin decided on a cheaper option due to weaker steaming coal prices. Instead of building a dedicated rail line, they will establish an open-access link that will use an existing line along a large part of its route.

At an investor briefing in Sydney, the company previously known as QR National also detailed plans to make better use of its assets, which will involve a review of rail links around the country. Aurizon will re-examine its operating plans by taking account of traffic flows, trains sizes, fuel consumption, and the extent of fixed assets, such as depots. It said its intention was not to close rail lines but to ensure it operated trains more efficiently on existing routes.

"Instead of having assigned assets to a particular [Aurizon] business, the assets now belong to the corporation," Mr Hockridge said, emphasising his desire to use assets "in the best way possible".

Mr Hockridge said the company was "cautious but confident" about the demand for thermal coal, citing a recent report that emphasised that about 1.3 billion people worldwide did not have access to electricity. "Coal ... is going to maintain its position in terms of the mix of fuel sources for the production of electricity, at least until 2030," he said.

Aurizon hauls mostly thermal coal from the Galilee Basin to Queensland's ports. In contrast, the Bowen Basin produces metallurgical coal, which is used by steel makers.

The redundancies over the past few months take the job cuts since Aurizon was floated in 2010 to almost 2100. Aurizon chief financial officer Keith Neate said unwanted locomotives would be sold or scrapped depending on their age and type, while wagons would mostly be written down to scrap value.