Aurizon Holdings (ASX:AZJ) share price wobbly on FY21 earnings

The Aurizon FY21 results are out today, and the company has also given investors a glimpse as to what’s ahead for FY22.

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The Aurizon Holdings Ltd (ASX: AZJ) share price has been up and down in trade this Monday after the company reported its earnings for the 2021 financial year this morning. At the time of writing, Aurizon shares are up 0.25% to $4.07 a share.

Aurizon share price rises following dividend increase

  • Aurizon raises dividend by 5%
  • Revenues fall 1%, but earnings up
  • Profits flat at $533 million
  • Earnings per share rises 5%

What happened in FY21 for Aurizon?

Aurizon has reported a revenue slump of 1% for FY21 to $3.019 billion, down from the $3.065 billion reported in the previous year (FY20). Despite this, Aurizon managed to grow its earnings before interest, tax, depreciation and amortisation (EBITDA) to $1.482 billion, up 1% from FY20’s $1.468 billion. However, net profits after tax (NPAT) were essentially flat, rising from $531 million in FY20 to $533 million for FY21.

As mentioned above, Aurizon has also announced a final dividend of 14.4 cents per share, franked to 70%, to be paid out to shareholders on 22 September. That represents a 5% increase in its total dividends for FY21 to 28.8 cents per share, up from last year’s 27.4 cents per share. Aurizon tells us that this dividend is “based on [the] 100% payout ratio of underlying continuing NPAT”.

Aurizon also managed to grow its earnings per share (EPS) by 5% as well, which went from 27.2 cents per share in FY20 to 28.5 cents per share for FY21. This was supported by Aurizon’s $300 million share buyback program, which was completed over FY21.

Aurizon largely blames coal volumes and pricing declines for the fall in EBITDA, pointing to a “challenging” Chinese market and the conclusion of contracts. That was despite a drop in operating costs over the period, thanks to lower fuel prices and maintenance costs.

These earnings are the first to reflect the sale of Aurizon’s Queensland rail terminal, which the company finalised back in March. The Aurizon share price dipped at the time on this news.

What did management say?

Here’s some of what Aurizon CEO Andrew Harding had to say on these results:

The Company has delivered solid operational and financial performance in challenging markets that have been  impacted by the COVID-19 pandemic and China import restrictions. We expect coal volume growth of around 5% in FY22, as markets recover and with Australian coal successfully redirected into alternative markets.

Our Bulk business has continued to perform well as it grows volumes and revenue with existing and new customers… We have aspirations to double the earnings of the Bulk business over the next decade. This includes organic growth, extending across the supply chain and acquisitions such as our new ports businesses in Newcastle and Townsville.

What next for Aurizon?

Aurizon has also given investors a glimpse as to what it sees ahead for FY22. The company tells us that it is expecting Group EDITDA to be “in the range of” $1.435 billion to $1.5 billion for FY22, which includes sustaining capital expenditure in the range of $475 million to $525 million.

Aurizon expects a 5% growth rate in coal volumes over the coming financial year, but also anticipates lower contract rates to offset lower costs. It’s also expecting continued revenue growth from its bulk business.

The Aurizon share price has had a subdued 2021 so far. The company is up 3.83% in 2021 so far, compared to the 12.97% the S&P/ASX 200 Index (ASX: XJO) has put on over the year to date. At the current share price, Aurizon has a market capitalisation of $7.47 billion, a price-to-earnings (P/E) ratio of 14.46 and a trailing dividend yield of 6.9%.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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