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RAIL operator Aurizon is axing more than 300 jobs and writing off the last $73 million of value from a takeover two years ago of Western Australia resources company Aquila.
The bottom line of Brisbane-based Aurizon is also copping an additional $29 million hit on the value of railway locomotives and carriages.
The problems reflect ongoing struggles for resources-linked companies and wipe-outs on acquisitions made during the mining boom.
“Clearly we’re operating in a tough and volatile market with lower growth conditions for our customers,” Aurizon chief executive Lance Hockridge said in a stockmarket announcement on Thursday.
“In this environment, we are targeting further reductions in our cost base and finding new ways to drive asset and labour productivity.”
Aurizon said the amount of coal it hauled would be 207 million tonnes, down on last year’s 211 million tonnes. The amount of coal carried on Aurizon lines by a subsidiary and other players was a record 226 million tonnes.
Underlying earnings (before interest, tax, depreciation and amortisation) would likely be within guidance at $871 million, Aurizon said.
Underlying earnings strip out the impact of one-off charges, and Aurizon had $528 million worth of impairments in 2016, including the hits released on Thursday.
Shares finished up 11c at $5.11.
BIG JOB FALL SINCE PRIVATISATION
Aurizon has cut almost 3000 roles since privatising from State-owned Queensland Rail in 2010 and has about 6300 staff now.
Now another 120 senior and middle management roles in operations are to go “to simplify and improve service delivery”.
Almost 180 jobs are also being lost from areas including train crewing and yard operations, which Aurizon said was to boost productivity and meet forecast demand. Lastly, two direct reports to Mr Hockridge are being cut as divisions get merged, triggering “further management and headcount reductions”.
Rail Train Bus Union state secretary Owen Doogan said they hoped any reductions would be done via voluntary redundancy.
“We are very disappointed,” Mr Doogan told The Courier-Mail. He said concern was some problems for Aurizon might be short term and a loss of industry skills might not be the wisest step.
“If demand lifts it might take some time to get the skills they need,” Mr Doogan said.
The Aquila writedown stretches back to Aurizon and China’s Baosteel making a joint $1.4 billion bid in 2014 for the resources company, whose assets included Western Australian iron deposits and Queensland coal fields.
The latest writedowns brings the total hit to Aurizon from Aquila to $309 million. The latest impact “follows a deferral in the timing of the development of Aquila’s Queensland coal assets and reflects the material reduction in the long term forecast hard coking coal price of 15 per cent since December 2015”, Aurizon said.
Other Queensland companies to have suffered hits on boom time acquisitions include laboratory operator ALS, which bought energy outfit Reservoir for $578 million in 2013 only to subsequently write off the whole play. BHP also wrote off $10.3 billion on its US shale oil ambitions last half-year.
This article first appeared on www.couriermail.com.au
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