Aurizon Holdings (ASX:AZJ) (Formally Queensland Rail) is an often misunderstood company, owing to the fact a large part of their revenue is derived from a sate regulated contract/lease to operate the Central Queensland Coal Network (CQCN).
AZJ operates one of the largest rail networks in Australia and transports a comprehensive range of commodities, including mining, agricultural, industrial, and retail products for a diverse range of customers across Australia.
This includes retail goods and groceries in containerised freight to cities and towns across their national footprint; including commodities such as grain, phosphate, critical minerals, high-quality Australian coal and iron ore. They also operate and manage 5,100 kilometres of track infrastructure that supports domestic and export industries. This includes the Tarcoola to Darwin railway, a vital supply chain for central Australia that feeds into the nation’s closest port to Asia; and the CQCN. AZJ’s operations comprise of four categories: Network, Coal, Bulk and Containerised Freight.
Network: The CQCN, a 2,670-kilometer coal rail network in Australia. It is the largest coal rail network in the country and connects over 40 mines to five export terminals across three ports. The primary source of revenue for the company is from providing access to the CQCN and is regulated by the Queensland Competition Authority (QCA). Over the years negotiations have resulted in significant share price fluctuations as they can adversely or favourably impact AZJ’s earnings and costs. I would encourage any potential investor in AZJ to thoroughly understand this process and its effects on AJZ before investing. CQCN contributes about 32% of revenue and 68% of profits and has been problematic in terms of trying to achieve revenue growth.
Coal: AZJ’s Coal business provides a critical service to Australia's $110 billion export coal industry (ABS Statistics); the nation's second largest source of export revenue in FY2022. As a supply chain partner for their customers, AZJ transported 194 mt of coal in FY2022 (185mt FY23) and hauled around half of Australia’s exported coal by volume.
Bulk: AZJ’s Bulk business offers integrated supply chain services, including rail and road transportation, port services, and material handling. It serves various industries in different regions of Australia and has the capability to transport bulk commodities safely and efficiently.
Containerised Freight: AZJ’s Containerised Freight business provides rail line haul services for customers…
