Aurizon Holdings Ltd (ASX: AZJ) has reported its FY20 result today and also announced a large share buyback worth $300 million. The Aurizon share price is down 3%.
Aurizon is Australia’s largest rail freight operator. It moves coal, iron ore and agricultural products as well as other commodities.
Aurizon’s strong FY20
The rail business announced that its revenue increased by 5% to $3 billion.
Aurizon said that there was solid tonnage for both ‘coal’ and ‘network’ with no significant volume impacts from COVID-19 in FY20. Its bulk business outperformance was driven by new contracts and efficiency improvements.
Underlying EBIT (click here to learn what EBIT means) rose 10% to $909 million with reported EBIT growing 22% to $1.01 billion.
Underlying net profit increased by 12% to $531 million and statutory net profit increased 28% to $605 million. Statutory earnings per share (EPS) increased by 30% thanks to the $400 million share buyback.
Management have actually announced another share buyback for a total of $300 million.
Dividend
Aurizon declared a final dividend of 13.7 cents, an increase of 10%. That brings the total year dividend to 27.4 cents, up 15% from last year.
Summary
This was a solid growth performance from a business like Aurizon. In FY21 the business is expecting underlying EBIT to be in the range of $830 million to $880 million. That guidance assumes flat coal volumes of 210mt to 220mt based on COVID-19 impacts on steel demand. Flat volumes imply a revenue under recovery of around $50 million.
Management said that efficiency improvements remain a key driver of the business.
Aurizon seems like a fairly stable ASX dividend share, but it’s not the type of business I’d go for with its reliance on coal. I prefer an idea like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (WHSP).
[ls_content_block id=”14948″ para=”paragraphs”]
