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Last year was not one of the best for the rail industry, with freight volumes down across the board, especially in the minerals sector, combined with a general lack of direction.
But with big changes at the top recently, and the movement of a bumper harvest in full swing things may be looking up.
Remarkably, Australia’s three largest freight operators have all seen changes in senior management in the last few months.
After six years as CEO and managing director of Aurizon, Lance Hockridge, who had overseen the transition of the company from QR National to private ownership, stood down in December.
His replacement, Andrew Harding, was formerly with Rio Tinto. It will be interesting to see what leadership strategies he will transfer from the mining giant to the rail operator over the coming months.
One of Harding’s first jobs was to announce Aurizon’s results for the first half of the 2017 financial year.
Despite significant write downs, totaling well over $300 million, the company still made an after-tax profit of $54 million, considerably up on the $108 million loss recorded in the same period for 2016.
Coal volumes remained relatively flat, however, decreasing by 1% to 103.5 million tonnes for the six months. Aurizon’s expectations for coal haulage for the full year 2017 remain unchanged at 200-212 million tonnes.
Its intermodal business continues to be a problem child and despite volumes increasing towards the end of last year, they were static for the last reporting period and revenues are down.
Harding says Aurizon’s intermodal business has been restructured as a standalone function with full profit and loss accountability, reporting to directly to him pending the conclusion of the broader review of the company’s freight activities expected mid-year, which may also see service cuts in other areas.
This has given credence to rumours that have been circulating for quite some time now that Aurizon’s intermodal business is up for sale at the right price.
It could make a nice addition to QUBE’s portfolio, although players may also be interested.
Unfortunately, we won’t be getting the same kind of detailed reporting from Pacific National (PN) as we do from Aurizon for a while. With the complete separation of PN from the Asciano business in August 2016 and purchase by a consortium of foreign superannuation funds and investment banks, volume and financial data is no longer readily available.
It’s hard to know how the business is really performing. Certainly, to the outside observer the company seems fully focused on its coal interests, but there seems little emphasis on growing the business outside of this area.
The company had a recent win, securing a contract with Glencore for the movement of various traffics associated with the Mount Isa mines in Queensland, although this has come at the expense of Aurizon.
But elsewhere, especially in Victoria, it has lost several contracts over the last couple of years without picking up any new business.
The fact that under the new owners the PN business will have its second CEO in just over six months won’t be helping. Former PN Coal boss David Irwin took over the reins of the company at the time of the sale, but stepped down last month citing personal reasons.
And over at Genesee & Wyoming Australia the search is also on for a new chief executive after CEO Greg Pauline parted ways with the company just before Christmas, after a four-year stint at the helm.
It’s possible more changes could be on the way, with GWA doubling its size late last year with the $1 billion plus purchase of the Glencore coal rail business, and the taking on board of Macquarie Infrastructure and Real Assets as a 49% partner.
Possibly another prospective buyer for Aurizon’s troubled intermodal business?
All three of these companies will be watching closely as SCT Logistics seeks to build up its new intermodal service on the North South corridor between Melbourne and Brisbane which commenced towards the end of January.
Traffic is already way up on that previously carried by Aurizon on SCT’s behalf on the corridor and with SCT’s newly opened terminals at Barnawartha and Bromleton, North South freight services are in for a shake-up.
And to end on another positive note the movement of this season’s bumper harvest is going gangbusters, providing plenty of business for rail operators across Australia, most noticeably in New South Wales and Victoria.
In NSW no less than four operators – Pacific National, Aurizon, QUBE and Southern Shorthaul Railroad (SSR) are competing to run export grain services from country areas to Newcastle and Port Kembla.
Older locomotives and hoppers that have been in storage for several years have been reactivated and given a new lease of life pressed into grain service once more, though crewing resources are being stretched in some areas.
In Victoria, V/Line says record amounts of grain have been transported on the rail freight network, with 69% per cent more trains running so far this financial year, despite some serious curtailment of services due to heat impacts on the track infrastructure.
The total harvest of 10.2 million tonnes was more than double that of last year and with the recent arrival of QUBE onto the broad-gauge network hauling grain for the very first time, it is to be hoped that the increase will soon reach 100% or more.
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