Rail freight operator Aurizon Holdings Ltd (ASX: AZJ) released its rail volumes figures for the March quarter on Wednesday, after which the stock closed 0.2% lower at $4.87. That compares to a huge 1.8% decline for the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
So What: During the three-month period, Aurizon moved 49.6 million tonnes of coal, which represents a 2% increase on the 48.6 million tonnes it moved in the prior corresponding period. The quarter was restricted by Tropical Cyclone Marcia and a Protected Industrial Action, but bolstered by a 12% increase from New South Wales to 10.7 million tonnes which reflected the commencement of a long-term contract with WHITEHAVEN COAL LIMITED (ASX: WHC) on 1 March 2015.
While Aurizon kept its coal voume guidance unchanged at 210-220 million tonnes for the year, it increased its full-year iron ore volume guidance. Although volumes fell 17% during the quarter due to the end of two key contracts, it said it now expects to move roughly 25 million tonnes, up from previous guidance of 23 million tonnes.
Further, freight volumes fell by 9% during the quarter and Aurizon said it expects full-year freight volume growth to be marginal due to the performance in the March quarter, together with the estimated impact from the recent NSW storms and lowered expectations for the June quarter.
Now What: Aurizon has generated significant returns for shareholders since its market debut in November 2010 (originally QR National). However, investors considering building a position in the stock also need to consider the potential impact that falling iron ore and coal prices could have on its business. As such, Aurizon may be one to avoid, for now.
