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Qube Holdings has revealed it will write down up to $215 million on a loss-making import-export rail terminal at its Moorebank freight hub as it signed off on a deal to sell land and warehouses to a consortium led by the Logos Property Group.
The most recent forecast of short to medium-term volumes through Moorebank’s IMEX terminal in south-west Sydney, which is due to be automated by mid-2022, reflected “a slower ramp-up” than Qube’s original business case, the logistics group said on Monday.
Qube is selling land and warehouses at its Moorebank freight hub in south-west Sydney to property group LOGOS.
This is particularly true for catchment volumes – the numbers of containers moving in and out of Sydney’s south-west region, Qube said.
“This has meant that Qube’s substantial investment in automation at the IMEX is several years ahead of its likely requirement,” the logistics group said.
“The high fixed costs associated with the automation are not expected to be recovered in the short term, leading to negative earnings and operating cashflow until volumes reach the necessary scale to generate the target sustainable earnings and positive cashflow.”
Qube has previously expressed disappointment with the NSW government’s decision to issue new permits for trucks giving them direct access to Port Botany instead of encouraging freight to go on rail.
Qube expects to take a writedown on the carrying value of the IMEX terminal, which acts as a hub for containers of goods moved on rail to and from Port Botany, of between $150 million and $215 million before tax in its full year results, which are due on August 26. It has to date invested $305 million in the terminal.
Import-export volumes through Moorebank fell in the first six months of fiscal 2021, with Qube taking a net loss on the IMEX terminal at its half year results.
The company expects to mostly offset the writedown with a fair value gain on its investment properties, including the Moorebank warehouses.
Qube has signed a final agreement to sell all its warehousing and property assets to the Logos consortium, a deal that was previously flagged at its half year results in February.
The company said it would get $1.36 billion from Logos before tax immediately after finalising the sale, with another $312 million in deferred payments.
The sale reduces the amount of money Qube needs to spend developing the freight hub, allowing it to focus on its core logistics business.
It expects to spend some $200 million to $300 million automating the IMEX terminal and delivering an interstate terminal.
The Logos Property Group, which operates throughout the Asia Pacific region, will lead the development of the freight hub.
But AustralianSuper, which already has a 20 per cent stake in the NSW Ports consortium that operates Port Botany, will be the biggest single owner in Moorebank with a 40 per cent stake as it pursues property investments in Australia and overseas.
The Logos consortium also includes Canadian property group Ivanhoe Cambridge, the NSW Treasury Corporation and AXA IM Alts, the alternative investments division of French asset management group AXA.
Qube is locked in a dispute with the Moorebank Intermodal Company (MIC), which is owned by the Commonwealth and partnered with Qube to develop the freight hub, over the completion date for the first stage of the interstate terminal, which was due in March. Qube said it expected to resolve the dispute in talks over the sale transaction.
Qube will retain control of the hub’s rail terminals and other logistics assets and expects to use the proceeds from the sale to reduce debt, invest in new projects and potential capital management activities such as share buy-backs.
The sale to the Logos consortium is expected to be completed by the end of 2021 if approvals are received from MIC.
This article first appeared on www.afr.com
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