Asciano boss denies Patrick sale is imminent
Asciano managing director Mark Rowsthorn has denied that the sale of its stevedoring arm Patrick is for sale, but admitted for the first time it was considering the full sale of some business units.
Asciano is labouring under $4.6 billion of debt, with just $191 million cash in the bank. The huge debt is partly what it had inherited from the Toll de-merger and partly due to the botched takeover attempt on Brambles last year.
Asciano shares closed at an all-time low of just $0.455 today.
There is concern in the markets that the group will have difficulty in meeting its obligation to refinance $2.8 billion of its debt next year, and the company’s chief financial officer McGregor conceded that even the imminent sale of Pacific National’s coal haulage business would not be enough to ease Asciano’s debt burden.
Speculation is mounting that Port of Singapore Authority, Abu Dhabi Ports and the Hong Kong-based Hutchison Ports are all interested in taking over Patrick’s stevedoring operations. If the last candidate, Hutchison, were indeed successful, it would provide a headache for port corporations around Australia who are keen to introduce more competition into stevedoring: Hutchison has won the contract to operate Brisbane’s new terminal and is understood to be tendering for the new Port Botany terminal currently being developed.
Highlights from the Asciano directors’ report follow below.
Asciano’s key operating divisions, with the exception of the container ports business, performed to expectation for the half year. The rail segment achieved expected results in both the coal and intermodal businesses. This was primarily driven by strong demand for coal exports in Northern NSW. The intermodal business experienced continued strong demand for the premium Express services, and together with tight cost control were able to fully offset softer general freight forwarder volumes. The ports segment was impacted by slower volume growth and higher costs, predominately in the container terminals business.
The auto, bulk and general business benefited from improved grain haulage earnings. Motor vehicle storage revenue was strong, however this was offset by softer stevedoring and processing revenues from reduced motor vehicle imports. Steel and iron ore exports softened towards the end of the period.
During the period, Asciano implemented and progressed a number of initiatives to deliver its key strategic objectives. Asciano’s strategic framework seeks to deliver value to security holders in the long term. The primary elements of Asciano’s strategy and initiatives are:
• A focus on Asciano’s core businesses: as demonstrated by solid operating performance of the businesses, the introduction of 3 new train sets in the Northern NSW coal business and a new express service in the intermodal rail business to meet demand from customers.
• Maximising returns from existing businesses: as demonstrated by an extensive efficiency review process to rationalise, restructure or exit businesses and services that do not deliver stable cash flows or the requisite growth profile.
• Leveraging Asciano’s operating capability into new opportunities: as demonstrated by the successful entry into the Queensland coal market, and the repositioning of the industrial and grain rail businesses into the auto, bulk and general division to capitalise on bulk port rail opportunities.
• Optimise Asciano’s capital structure: during the half year to December 2008 Asciano raised $160 million in new capital and net debt increased by $59 million to $4,592 million. Cash on hand at 31 December 2008 was $191 million (30 June 2008: $120 million). Asciano is also continuing to pursue its strategic initiative of monetising one or more of its operating business units and is in ongoing discussions with a number of parties in respect of this initiative.
Review and results of operations
Asciano’s results for the financial period reflect the strength of Asciano’s businesses and its unique operating capabilities. Revenue for the period to 31 December 2008 was $1,501.7 million (December 2007: $1,534.3 million). Underlying earnings (before depreciation, amortisation, significant items and tax) was $341.1 million (December 2007: $365.9 million). The prior year results were impacted by a $16.0 million profit in relation to Asciano’s investment in Brambles. Note that the comparative period is for 28 weeks from 15 June 2007 to 31 December 2007.
Net finance costs for the period were $201.0 million (December 2007: $194.4 million), and depreciation and amortisation totalled $126.0 million (December 2007: $130.1 million), resulting in a profit before significant items and tax of $14.0 million (December 2007: $41.4 million).
The significant items of $97.5 million (December 2007: $150.1 million) for the period to 31 December 2008 includes goodwill impairment of $82.8 million, impairment of plant and equipment of $10.1 million and $4.6 million in restructuring costs as part of the efficiency review process to rationalise, restructure or exit functions and businesses that do not deliver stable cash flows or the requisite growth profile.
During the financial period Asciano acquired 100% of the issued share capital of Terminals Australia Pty Limited, the primary asset of which is a parcel of land at Parkes NSW.
The full report can be found here.