Last week the Queensland rail freight company formerly known as QR National, Aurizon (ASX: AZJ) held an Analyst and Investor presentation which covered a lot of ground and provided shareholders with plenty of information.
Aurizon operates in three main businesses namely coal, freight and network services with its largest exposure by far to the transportation of coal from mines to ports for export. Having only listed in 2010 when the Queensland government sold down its stake in the company, many investors are still to appreciate the unique monopolistic attributes of Aurizon and significant cost savings occurring from managements efficiency drive.
6 key points to come out of the presentation were:
- Management confirmed that total coal tonnes hauled in financial year (FY) 2013 was 193.7 million tonnes (Mt).
- Aurizon is targeting over $230 million in cost efficiencies and productivity improvements. A chart provided in the presentation showed that the aim was to meet this target by FY 2015.
- While the coal price has fallen, which in turn has affected many coal mining companies, Aurizon's volume-based business has remained resilient. In FY 2013 the firm secured coal haulage contracts for 120 Mt per annum. These contracts were signed with major coal producers including Rio Tinto (ASX: RIO) and Whitehaven Coal (ASX: WHC).
- Management has set the hurdle bar high. Its aim is for Aurizon to be world class. A slide contained in the presentation highlights businesses globally which have world's best practice and Aurizon is aiming to emulate these practices.
- While Aurizon's primary focus is on coal and iron ore freight, it sees significant potential to further develop its capabilities in secondary bulk areas such as food, energy, minerals, metals and industrial goods. This could provide significant long-term growth for shareholders.
- Saving the best till last – the most exciting topic discussed in the presentation was management's aim to drive the operating ratio to 75%. For shareholders, one of the highlights is that management is pushing for a lean business from the top, right down to the "little things". Of course all the little savings add up to big savings and provide the right mind-set for employees across the whole business.
Foolish takeaway
Aurizon's management appear deeply focussed on creating shareholder value. It's a pleasant surprise to see a presentation that focuses so intently on value creation — a focus, sadly, too few managers have. With its significant economic moat and shareholder-oriented management, Aurizon is definitely one for the watch list.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
