The Transurban Group (ASX: TCL) share price could come under pressure on Wednesday.
This follows the release of a trading update which included a revision to its distribution guidance.
What did Transurban announce?
Today’s update revealed that Transurban has been impacted materially by the COVID-19 outbreak and the subsequent shutdowns enacted by governments across its markets.
According to the release, Transurban observed COVID-19 related traffic impacts from early March, with weekly traffic then deteriorating throughout the month.
For example, during the fourth week of March, average daily traffic volumes across its toll roads fell by 36% over the prior corresponding period. This compares to a 1% increase in volume during the first week of the month.
Overall, for the March quarter, the company’s average daily traffic fell 4% compared to the same period a year earlier.
Positively, commercial traffic has displayed greater resilience to date. Management notes that large vehicles have grown as a proportion of revenue to 37% in the most recent week of March. This compares to an average of 26% for the first quarter.
When will things improve?
Management warned that the extent and duration of impacts to traffic volumes will be dependent on measures taken by governments in response to the COVID-19 virus.
It has looked to the China market for a guide of how things might progress.
It notes that overall traffic in major Chinese cities remains below normal levels. However, traffic has been increasing week on week since February 10 as lockdown restrictions are lifted and industries recommence operations.
Management also pointed out that highway traffic has rebounded in China. It believes this is due to social distancing, which is encouraging more people to commute using their cars instead of public transport.
But given how uncertain the current environment is, the company has withdrawn its distribution guidance for FY 2020.
It was due to pay a final distribution of 31 cents per unit, bringing its full year distribution to 62 cents. Instead, Transurban will now pay a distribution in line with free cash, excluding capital releases.
Finally, the company explained that it has sufficient liquidity to meet capital requirements and debt refinancing obligations to the end of FY 2021.
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