Aurizon Holdings Ltd responds to QCA’s imposed profit cut

Shares in Australian rail freight operator Aurizon Holdings Ltd (ASX: AZJ) are on the slide today, down to $4.47 at the time of writing as the company logged its response to the QCA UT5 draft decision.

Aurizon shares have been on a downward trend for the last 12-months, dropping from $5.29 at this time last year.

QCA proposed to restrict Aurizon to a maximum revenue of $3.893 billion between July 2017 and July 2021 – potentially leading to a 10% decrease in haulage capacity, despite an overall boom in the coal industry globally.

Aurizon’s response today acknowledged the QCA’s position, but said the authority “fundamentally fails to recognise the commercial and regulatory risks” Aurizon undertakes to operate in the Central Queensland Coal Network.

The Aurizon response lists concerns including the “unreasonableness” of QCA’s proposed cut of $1 billion from the Maximum Allowable Revenue (MAR) and its $104 million reduction in maintenance allowance, with QCA failing to “appropriately recognise” not only the “operational and other risks” Aurizon face, but its exposure to international demand and coal prices also.

Aurizon will consult directly with its customers and supply chain on these issues.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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