Rail operator Aurizon has completed the sale of its Queensland Intermodal Business to privately owned Australian logistics company Linfox.
Details of the deal have not been released although that may change in the near future as Australian Stock Exchange-listed Aurizon is due to release its half-year results next week.
Aurizon has not disclosed the price so far and Linfox specifically declined to do so, telling FreightWaves that Linfox is a private company and therefore does not have to reveal details of its finances. However, there is some indication of the price. In an August 2017 announcement, Aurizon revealed that a combined price for the Queensland Intermodal Business and the separate sale of its Acacia Ridge Intermodal Terminal to direct rail competitor, Pacific National, was worth about AU$220 million dollars (approximately US$174 million at the time).
According to Aurizon, its former Queensland Intermodal Business delivers general cargo for more than 300 customers across the state and includes a wide variety of freight including groceries, white goods and general goods.
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Half-year results released by Aurizon in previous financial reporting periods give an indication of the containerised throughput of the Queensland Intermodal Business. Australia's financial year runs from July to June. In the first half of the financial year 2017, the business recorded throughput of about 212,200 twenty-foot equivalent units (TEUs). In the first half of the 2018 financial year, the business recorded about 187,300 TEU throughput. The financial results due next week may provide further details.
In the purchase, Linfox bought existing customer contracts, over 500 rail wagons, 1,300 shipping containers, an unspecified number of trucks and trailers along with machinery such as forklifts and gantry cranes. It has also leased 12 new sites and has secured access to freight terminals at Cairns, Emerald, Longreach, Mackay, Rockhampton and Townsville. Between 190 to 200 Aurizon staff are now Linfox employees; the company also has launched 30 new rail services a week.
Meanwhile, Aurizon stated that as part of the deal, Aurizon's bulk cargo business will provide Linfox with rail linehaul services between Brisbane (the state capital) and Cairns (in far north Queensland). About 120 Aurizon employees have been transferred into Aurizon's bulk business to service this part of the deal.
The first formerly-Aurizon now Linfox-managed train journey has taken place. In the first days of February 2019, a train left Brisbane for the town of Mackay (about 510 miles distant northwest-by-north along the Queensland coast).
In a series of public statements, Linfox has explained its strategic rationale for acquiring the Queensland Intermodal Business.
"This deal has been a long time coming. It is a strategic investment for Linfox and is also a strategic investment in Australia. It will strengthen our network and increase competition in the Queensland logistics market," said Peter Fox, Linfox's executive chairman.
"Customers told us that the potential closure of the Aurizon Queensland Intermodal business was going to disrupt their business and were looking to us for a solution. We understand the strategic importance of this region," Fox added.
The company apparently sees opportunity in "unlocking greater volumes," although it has not specifically said how it will do this other than commenting that it will increase containerised road and rail services over time to tackle ongoing freight capacity constraints.
Linfox has begun a recruitment campaign to staff up its new business. The company currently employs 24,000, operates 5,000 vehicles and generates AU$3 billion in revenue from operations in 12 countries across the Asia-Pacific region.
FreightWaves sought independent comment on the deal. Queensland Trucking Association CEO Gary Mahon welcomes the investment by Linfox.
"It's good to see that line of business continuing. At one stage it was likely that the business wouldn't go anywhere. But commerce prevails. It's a sign of the promise of logistics in Queensland when a company on the scale of Linfox makes an acquisition of that size. It bodes well for logistics in Queensland," Mahon said.
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Aurizon announced its intention to exit the intermodal business back in mid-August 2017 after a 12-month freight review. The Queensland Intermodal Business had been generating "significant financial losses" for Aurizon.
"The business has not been able to establish significant scale and a customer base to support a profitable business in such a highly competitive market," Aurizon CEO Andrew Harding said back in 2017.
Aurizon company chairman Tim Poole added in an October 2018 annual general meeting that the company had been in the intermodal business since 2006 and it had never made a profit.
"We've been clear in our rationale to exit the loss-making intermodal business. It is a legacy business in a market that we're unable to effectively compete in and did not align with the Company's core strengths," Poole said. He added that those strengths were in the hauling of bulk commodities.
According to Aurizon's first half financial year 2018 results (released in February 2018), the intermodal business had generated AU$140 million of revenue, but spent AU$162 million on operating costs and had recorded AU$2 million of depreciation, which gave it a negative Earnings Before Interest and Taxation figure of minus AU$24 million. The company lost AU$24 million in its first half financial year 2017 too, although it recorded higher revenue, AU$159 million, but also higher operating costs and a greater depreciation. The figures were much worse on a Net Profit After Tax basis. Aurizon's Queensland Intermodal Business lost AU$132 million in the first half of its 2017 financial year and AU$71 million in the first half of its 2018 financial year.
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