Markets: Aurizon's new track

The Queensland rail company plans to cut $230 million of costs with the aim of attaining a 25 per cent earnings margin by 2015.

Aurizon Holdings shares rose as much as 3.9 per cent after the 147-year-old railway company said it plans to boost its margin by cutting as much as $230 million of costs in 2014 and 2015.

At 1408 AEST Aurizon’s stock shares were up 16.5 cents, or 3.8 per cent, to $4.555, just below an intraday high $4.56. In an ASX statement the company said it plans to attain 25 per cent earnings before interest and tax operating margin by 2015.

Aurizon says it has closed three infrastructure depots, netted $19.5 million in savings from a voluntary redundancy program and improved payload performance. The company says it has opportunities to win iron ore and coal mining haulage contracts amid the expansion of the Abbot Point coal terminal.

“Cost efficiencies and productivity gains (will be) achieved through greater integration and collaboration across” Aurizon’s businesses, said the former state-owned QR National.

Chinese growth rates of 7 to 8 per cent will result in more demand for Australian commodities than when the country was growing at 10 per cent a year or more, according to Aurizon. In its 2013 financial year Aurizon said it had hauled 193.7 million tonnes, matching earlier forecasts of between 192-195 million tonnes.

Aurizon plans to expand into other railway networks owned and operated by rivals. It wants to gain market share in single use railway networks used by mining companies while pursuing deals when rail networks are sold. The company is targeting ports in its expansion plans.

The company plans to cut more jobs in the next two years while ensuring it integrates its mine and port operations to reduce rolling stock. It plans to sell businesses, without specifying what they may be.

Aurizon said it has 60 per cent of Australia’s iron ore and coal haulage market which it estimates at 420 million tonnes per annum. The company’s network is made up of 2670km of heavy haul rail infrastructure, according to the Aurizon website.

The stock has gained 38 per cent in the last 12 months compared with the S&P/ASX200 Index which is up 21 per cent during the same period, according to Bloomberg data.