• Underlying EBIT up 52% to $584 million compared to $383
million in FY11
• tatutory EBIT of $593 million compared to $222 million in
• Significant improvement in safety performance with a 22%
reduction in LTIFR
• Transformation program delivers $121 million in cost
efficiencies, productivity improvement and coal revenue
• Delivered growth projects with significant capital works
program completed during the year
• New projects commenced or announced including Wiggins
Island Rail Project and a further 25 million tonnes p.a.
expansion of Goonyella to Abbot Point
• Earnings per share increased by 18%, an unfranked
dividend of 4.6 cents per share to be paid on 28 September
Major Voluntary Redundancy Program
• Implementation of the functional organisational
model has allowed further restructuring, targeting
increased productivity and lower costs
• Company to accept approximately 750 voluntary
redundancy applications which combined with staff
reductions which have already occurred in FY12, will mean a
total reduction of 900 people in calendar year 2012
• A one off cost of $75 million applies in respect of
the 750 voluntary redundancies which will have a payback
period of approximately 12 months
On-market buy-back of up to 10% of shares
• Capital management initiative which consists of an
on-market program to buy back up to 10% of the QR National
issued share capital (244 million shares).
• Transaction is expected to be EPS accretive for
• Reflects a strong balance sheet
• Maintains capability to pursue and fund a range of
growth opportunities to create value for shareholders
QR National today announced a substantial lift in
underlying earnings before interest and tax (EBIT) to
$584 million for the year ended 30 June 2012, up $200
million in total despite lower than expected volumes.
It also announced a significant outcome from the current
voluntary redundancy program which will reduce the cost
base of the Company and facilitate further efficiencies
from the new organisational model and a capital management
program involving the buy back of up to 10% of the
Company's shares over the next 12 months. (refer separate
While EBIT increased 52% year on year to $584 million, the
Company recorded a 25% improvement in underlying earnings
before interest, tax, depreciation and amortisation
(EBITDA) to $1,048 million and Statutory EBIT of $593
million was achieved compared to $222 million in FY11.
The Directors declared an unfranked dividend of 4.6 cents
per share, which will be paid on 28 September 2012 to
shareholders on the register at the record date of 7
September 2012. (The conduit foreign income component of
the dividend is nil)
QR National Managing Director & CEO Lance Hockridge said
the strong result had been underpinned by EBIT improvements
across all three reporting segments and a sustained
campaign to reduce costs.
Coal volumes during the year were adversely impacted by the
slow recovery from Queensland's FY11 floods, ongoing
industrial action at BHP Mitsubishi Alliance's (BMA)
Queensland mines, lower than anticipated customer demand
for coal rail transport and wet weather. These events
contributed to a 47 million tonne reduction in coal haulage
volumes compared to Offer Document forecast.
"We have delivered a substantial improvement in underlying
EBIT in FY12, slightly ahead of the Offer Document
forecast, and without the benefit of almost 50 million
tonnes of forecast growth in Queensland coal volumes," Mr
"Substantial margin improvements have been driven by
enhanced revenue quality, cost outs and efficiency gains.
Combined, these have more than offset the impact of lower
"The benefits of transformation and restructuring,
including the strong expected uptake for the current
voluntary redundancy program, will deliver sustainable cost
savings and efficiencies in coming years."
Transformation initiatives delivered during FY12 included:
• A 22% reduction in the Lost Time Injury Frequency
Rate and 44% reduction in Medically Treated Injury
Frequency Rate, demonstrating improving safety performance
and broader cultural change.
• Improved revenue quality producing higher returns,
with conversion of legacy contracts into performance-based
contracts for customers now covering 38% of railed
tonnages. This produced $59 million additional revenue in
• Continued drive to improve the commerciality of the
business including bringing treatment of rollingstock
depreciation and ballast undercutting into line with
international best practice. These changes had the effect
of increasing EBIT by $36 million and $15 million
• Improvements in operating performance which
triggered the Company's ability to recognise $33
million of performance payments under the Queensland
Transport Services Contract for the first time since its
• Introduction of a new functional organisation
structure in December 2011, modelled on the high-performing
Class One North American railways, which is the platform
for transformation and cultural change across the
• Operating ratio improvement from 88% in FY11 to 84%
in FY12. (1)
Voluntary Redundancy Program Update
Following the implementation of the functional organisation
model, the Company has considered further restructuring for
optimal productivity. The next phase of this restructure,
with a range of proposals targeting improved productivity
and lower costs, has been the subject of extensive
consultation with employees and unions.
In addition to the on-going changes implemented over recent
months, the Company will be accepting approximately 750
applications for voluntary redundancy in the coming weeks,
with all staff to leave by December 2012.
Combined with other reductions during the year, this will
mean a total reduction of 900 people during calendar year
The one-off cost of the 750 redundancies will be
approximately $75 million which will be incurred in
FY2013. The payback period for this is approximately
QR National today announced an on-market program to
buy-back up to 10% of its issued share capital (244 million
The buy-back demonstrates QR National's commitment to
managing its balance sheet efficiently, whilst maintaining
appropriate flexibility to invest in future growth
The combination of the Company's focus on capital
efficiency and a slower than expected pace of growth
projects supports this initiative at this time.
The Company believes that the buy-back will be Earnings Per
Share (EPS) accretive for shareholders.
QR National has available a range of sustainable funding
solutions that will secure our leadership position in
providing resource infrastructure in Australia whilst
optimising returns to QR National's shareholders.
QR National has strengthened its medium to long-term
position during FY12 with projects concluding in Queensland
(Goonyella to Abbot Point Expansion - GAPE, coal
rollingstock & facilities), Western Australia (iron ore
rollingstock & facilities) and New South Wales (Hunter
Valley rollingstock). The next wave of committed projects
includes the Wiggins Island Rail Project (+ 27 mtpa) and
the recently announced expansion of Goonyella to Abbot
Point (+25 mtpa).
Mr Hockridge said QR National expected the softer demand
environment for coal haulage services to continue in the
near-term however anticipated a modest increase in coal
volumes to a range of 195 to 205 million tonnes for
"The medium to long-term outlook for Australian resources
remains robust and we don't believe the fundamental drivers
of Asian demand have changed," he said.
"There's a strong pipeline of new and expansion projects
committed in the resource sector, especially for coal and
iron ore, which will underpin QR National's growth."
Mr Hockridge said the Company was committed to maintaining
the pace of transformation in FY13 and beyond, focusing on
improvements in revenue quality and cost efficiency, as
well as volume growth.
"The Company-wide changes with the new functional model are
delivering a fundamentally lower cost base, as well as
allowing us to better focus on market and customer
"The Company is very well positioned to continue to execute
on its key platforms of transformation and growth."
Supporting information - Divisional Performance
Full year revenue of $1,210 million and underlying EBIT of
$341 million were up on the prior year by 3% and 13%
The improvement in revenue reflects an increase in
regulatory tariffs and first contribution from GAPE
earnings. Improvement in EBIT was further helped by more
profitable external infrastructure work.
The lingering impacts of Queensland's record floods in
2010-11, softer global demand and industrial action at some
Queensland mines reduced railings across the network to
166.7 million tonnes, up 2% on the prior year.
Any shortfall in access revenues is able to be recovered
through the regulatory revenue cap mechanism in 2014
subject to regulatory approval.
Despite flat volumes and Net Tonne Kilometres (NTK),
revenue grew 8% compared to the prior year. This was due to
improved revenue margins from the renegotiation of
contracts, resulting in full year revenue of $1,828 million
(FY11: $1,691 million).
The coal business is continuing to deliver on a range of
productivity and efficiency improvements, including the
Reliability Centred Maintenance Program which delivered
approximately $18 million in maintenance savings during the
In the Hunter Valley, coal volumes increased 15% to 33.9
million tonnes compared to 29.6 million tonnes in the prior
Revenue of $1,524 million was up 19%, or $247 million, on
the prior year with bulk, general and intermodal freight
volumes all contributing.
Iron ore in Western Australia continues to track to its 30
million tonnes a year haulage target by 2014 and delivered
a doubling of EBIT in FY12 compared to prior year. Revenue
growth and improved cost management in Intermodal delivered
the objective for the business of being EBIT neutral or
better in FY12. Improved revenue of $33 million was booked
for delivery of the Transport Services Contracts (TSC) with
the Queensland Government for regional and livestock
services in Queensland.
Underlying EBIT grew by 226%, or $69 million, to $100
million. Capital expenditure grew from $196 million to $332
million to support iron ore growth projects.
This included delivery of 22 locomotives and 438 wagons for
iron ore customers, as well as construction of the
Esperance Depot and Narngulu East Rail Yard near