Aurizon has swung to a half-year net loss of $108 million after taking higher-than-estimated impairments from its West Pilbara iron ore project amid challenging market conditions.
Aurizon has swung to a half-year net loss of $108 million after taking higher-than-estimated impairments from its West Pilbara iron ore project amid challenging market conditions.
Australia's largest freight rail operator outlined impairments worth $426 million in its results for the six months ended December 31, mainly related to assets acquired under the Aquila Resources takeover and delays in a planned rail network in Queensland's Galilee Basin.
It had reported a profit of $308 million for the same period last year.
The company in December flagged an impairment of up to $240 million in the half-year results but today said it had been forced to write-down a further $186 million, most of which was attributed to its West Pilbara iron ore project, which it jointly owns with China's Baosteel and South Korea's Posco.
Aurizon also said the iron ore project was unlikely to proceed in the medium term because of the slump in iron ore prices.
In December, the company said work at the $6 billion project in WA had been stopped and the project partners would review the situation at the end of the March quarter.
Underlying earnings for the six months, which exclude the one-off charges, fell 17 per cent to $403 million, within the lowered $390 million to $410 million range the company had forecast in December.
"Our underlying business is strong and resilient but we need to respond rapidly in a very challenging business environment for our customers," chief executive Lance Hockridge said.
"Cost reduction and transformation will remain the key drivers of margin growth and shareholder value creation, and were determined to pull every cost and efficiency lever available to us," he added.
Aurizon's first half revenue fell 11 per cent from a year ago to $1.76 billion, as a slump in commodities prices and demand severely affected haulage volumes from the company's key mining customers, who have moved to cut back volumes and slash spending.
The company said it was reducing its own capital expenditure by $150 million to $200 million over the next 18 months, and is setting up a dedicated unit to identify cost-cutting opportunities.
Aurizon now expects full year earnings in the range of $845 million to $885 million.
At 9:30am, Aurizon shares were down 7 per cent to $3.58 each.
