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Asciano saved by coal haulage


The Asciano Group has reported a net loss approaching $1 billion, reflecting a large tax impairment charge and characterised by weak earnings in its ports and intermodal businesses, but a strong result from its coal haulage business has improved the results somewhat.
 
During the year Asciano delivered a 15% increase in Earnings Before Interest and Tax (EBIT) before significant items. A strong contribution from the coal haulage operations and a continued focus on cost management and productivity were the key drivers of earnings growth for the year.
 
As announced in May 2010, Asciano completed annual impairment testing, and reflecting a conservative reassessment of long term assumptions and weighted average cost of capital, pre-tax impairment charges of approximately $1,137 million were incurred in the second half of the year to June 2010. As a result, Asciano recorded a Net Loss After Tax of $976 million.
 
EBIT margins for the group improved during the year primarily due to increased coal haulage volumes and achieving over $100 million of efficiency review benefits on time and in full. These major factors delivered an improvement in overall Return on Capital Employed of around 30% per cent (excluding the impact of the impairment charges on the capital base).
 
During 2010 a significant number of coal haulage contracts in both New South Wales and Queensland were secured.
 
“If we combine the 7 contracts, signed with customers in Queensland and NSW for both existing and growth volumes we have, in 2010, secured over $3.3 billion of total revenues over an average term of ten years, this is a significant achievement for the Pacific National Coal business,” Asciano CEO and managing director Mark Rowsthorn said.
 
Asciano will be restructuring its portfolio of businesses and move from four to three divisions. The new structure will include the following divisions: Patrick Ports, Pacific National Rail and Pacific National Coal.
 
“The structure in place over the past two years was extremely effective to drive out costs and deliver efficiencies; the next stage is to create synergies by integrating these enhanced businesses. The coal business will remain a standalone business to ensure there is continued focus on the significant growth opportunities in this area. We expect that the simplified structure will also create improved clarity and understanding of our businesses,” Mr Rowsthorn said.
 
Business unit results
 
Divisional highlights for the full-year were as follows:
 
Pacific National Coal
 
Coal delivered very strong earnings growth for the period predominately due to the entry into Queensland coal haulage market and the ongoing strength of coal export volumes in New South Wales.
 
The Queensland coal business moved more than 14.5 million tonnes during the year and haulage volumes in the Hunter Valley increased by 4%. Overall EBIT margins for the business improved significantly once again as a result of the new Queensland operations and ongoing effective cost management. Revenue at $672.6m was up 27.5% over 2009.
 
Pacific National Intermodal
 
Intermodal suffered a reduction in revenue following a reduction in overall volumes hauled. Steel tonnages hauled increased by 14% due to customer restocking and increased non residential construction which was offset by softer containerised freight volumes. Revenue of $819.0m was down 7.5% over 2009.
 
Patrick Container Ports
 
Container Ports earnings were below last year due to lower volumes moving through the
container terminals and a deterioration of the performance of the Port Logistics business.
 
The decrease in volumes reflects the continued impact of the global economic crisis and the loss of the OVSA services during the year.
 
Overall results for the Container Ports division were adversely impacted by the fatality at Port Botany and subsequent operational constraints which impacted productivity. Revenue of $721.4m was down 3.0% over 2009.
 
Auto, Bulk & General (AB&G)
 
AB&G earnings declined slightly year on year. Improved motor vehicle and steel stevedoring volumes combined with strength in grain exports and motor vehicle processing were offset by softness in other areas.
 
A weakness in motor vehicle storage and non grain rail haulage volumes adversely impacted the overall performance of the division. Revenue of $682.1m was down 2.1% over 2009.

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