Aurizon to reduce costs by $230m
Australia's largest listed rail company, Aurizon, will strip more than $230 million in costs out of its business over the next two years, resulting in job losses and property sales.
The company, formerly known as QR National, also announced that it would retain its small intermodal business that specialises in shifting container freight. Analysts had speculated that Aurizon would sell or close the business, which has struggled to turn a profit since it was established in 2007.
Chief executive Lance Hockridge sought to allay jitters about subdued growth in China - the final destination for most of the coal Aurizon hauls from mines to ports in NSW and Queensland.
"We certainly do not deny that there is a more subdued environment," he told investors at a briefing.
"It is, in our view, a low-growth environment, but it is not a zero-growth environment. We just caution that while the world is more subdued ... it certainly hasn't come to an end from a growth point of view."
Almost three years since it was floated, Aurizon will begin another round of cost-cutting aimed at shedding the last remnants of its past as a government-owned rail business.
The company would not put a figure on the likely number of job cuts, but revealed it would strip out $100 million in "support costs" over the next two years - more than half of which would be from lowering its labour bill.
The cuts to its labour bill will involve a combination of laying off workers, not replacing staff who leave of their own accord, outsourcing work to third parties and reducing contractors.
Aurizon will also reduce real estate costs by up to $25 million, part of which will be done by selling property assets.
As part of the cost-cutting, Aurizon is aiming for more than $130 million in "productivity improvements" over the next two years, including up to $70 million in labour savings.
The company has made clear that it is seeking greater "labour flexibility" from renegotiating enterprise agreements over the next two years. All but one of Aurizon's 19 labour agreements, which cover about 88 per cent of its 8000-strong workforce, will expire by the end of next year.
Shares in Aurizon rose almost 4 per cent to $4.55 on Thursday in response to the latest shake-up.