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Transurban’s half-year profit rose by 11 per cent amid higher traffic on its toll roads in Australia, with the toll road operator working with contractors to resolve an impasse over the troubled $6.7bn West Gate Tunnel in Melbourne.
Net profit totalled $162m in the six months through December, rising from $145m a year ago.
Proportional earnings before interest, taxation, depreciation and amortisation, reflecting income from Transurban’s stakes in toll road assets, rose 9.5 per cent to $1.09bn after removing acquisition costs. Proportional toll revenue increased 8.6 per cent to $1.39bn.
The transport operator expects to deliver shareholders an interim dividend of 31c per share and reaffirmed its guidance for a 62c annual payout.
Builders CPB and John Holland notified Transurban earlier this month of their intention to terminate the West Gate construction sub-contract because of a dispute over contaminated soil.
Transurban said on Tuesday it does not consider the deal has been “validly terminated” and said it was actively working with the contractor and the Victorian government “to resolve outstanding matters including those related to spoil management”.
Transurban is in the midst of a major expansion in Australia and North America, with large investments in projects ranging from the WestConnex highway in Sydney to an extension of the reversible I-95 express lanes in Virginia.
Australia’s major cities are expanding at a rapid rate, resulting in more cars on the road and stoking concerns around congestion. Sydney is projected by government statisticians to have up to 25 per cent more residents in the decade through mid-2027. Even faster growth is forecast for Melbourne, which could become Australia’s biggest city.
In September, the company completed the raising of $812 million in new capital to fund the buyout of the M5 West toll road in Sydney, with a security purchase plan scaled up because of strong demand from investors. It has also refinanced loans on several assets, including the Lane Cove Tunnel in Sydney.
Transurban, which has been working on four major projects in Australia worth more than $17 billion, told securityholders in October that one of its new investments is already performing better than expected. Early traffic data on the M4 East in Sydney were ahead of its original investment case.
Still, toll-road use is vulnerable to swings in economic conditions. While average daily traffic in Sydney during the September quarter rose by 2.1 per cent, demand by large vehicles was hurt by a general weakening in the economy, as construction activity fell and households tightened their budgets.
Australia’s economy faces two new challenges in the impact of bush fires, which shrouded Sydney and Melbourne in smog at times over the past two months, and the coronavirus outbreak in China.
The central bank expects the fires and virus to weigh on growth in the short term, although it still expects GDP to expand by 2.75 per cent this year. Economists at ANZ last week forecast a 0.1 per cent contraction in growth in the first quarter of 2020.
This article first appeared on www.theaustralian.com.au
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