Rail and port operator Asciano Ltd (ASX: AIO) has today released an update for its third quarter operations, confirming it is still on track to achieve full-year earnings guidance despite a small decline in coal haulage volumes.
The shares fell 1.7% to $6.35, having traded in a range of $5.19 to $6.64 over the last 12 months.
So What: The Company, which boasts a market capitalisation of almost $6.2 billion, according to Google Finance, said that it had transported 40 million tonnes of coal during the March quarter, a 2% decline compared to the prior corresponding period.
Meanwhile, coal volumes declined by 6.8% from its South East Australia (SEA) unit which the company attributed to a train derailment in the Gunnedah Basin, as well as "recurring maintenance issues" at the Port Kembla Coal Terminal. While coal volumes declined; Asciano's total net tonne kilometres rose by 5.1%.
Despite the drop in coal haulage volumes, Asciano expects that it will deliver stronger growth in its earnings before interest and tax (EBIT) this year than last year's 5% increase. The group's Managing Director and CEO, John Mullen, said this would be driven by improving volume growth across some activities compared to last financial year, combined with its "ongoing focus on business improvement initiatives".
Pleasingly, the company will also continue to focus on strengthening its free cash flow in order to boost shareholder dividends. According to Morningstar's estimates, Asciano will pay a dividend of 17.9 cents per share this financial year, putting it on a fully franked yield of 2.8%.
Now What: Infrastructure companies can often make for good investments, particularly when they command a dominant position in their industry (think, Sydney Airport Holdings Ltd (ASX: SYD)).
While Asciano enjoys the benefit of limited competition; it could continue to suffer from lower volumes as spending in the resources sector continues to decline – particularly in the coal and iron ore industries. As such, investors might be wise to leave it on the watchlist for now.
