Aurizon Holdings Limited

Good morning, and welcome to Aurizon's FY2026 results presentation. Aurizon delivered strong execution across the business, with earnings per share increasing by 29%. Underlying EBITDA was above the midpoint of guidance, supporting full-year dividends of 23 cents per share alongside the completion of the $250 million on-market buyback. I'll focus on three themes today. Strong financial performance. positive contributions from Network, Coal and Bulk, together with a clear pathway for containerised freight to achieve EBITDA break-even in FY2027, and progress on our strategic priorities, including UC5+, coal re-contracting, bulk growth and expansion into vehicle logistics. We're in Brisbane today, therefore I acknowledge the traditional custodians of this land, the Turrbal and the Agra people, and pay my respects to the elders past, present and future for they hold the memories, the traditions, the culture and hopes of Aboriginal Australia. We must always remember that under the ballast, sleepers, rail systems and office buildings where Arise and Does business was and always will be traditional Aboriginal land. I'm joined on the call by the group executive team including Ian Wells who commenced as CFO in April. Turning now to safety. Our focus at Aurizon is protecting our employees, customers and the communities in which we operate. While the reduction in serious injury frequencies is encouraging, the increase in total recordable injuries is not where we want performance to be. It was pleasing, however, that the second half had a much lower injury rate than the first half. I'm pleased to announce that in FY2026 we completed our train guard rollout in CQCN, deploying the technology across 2,000 kilometres of network and more than 100 electric locomotives. As a result, one third of our national coal fleet now operates with Supervisory Braking Protection, helping prevent signals passed at danger and uncontrolled train movements. Level crossings continue to be a safety issue for the rail industry and we've updated our Community Engagement Program reframing the importance of waiting at a level crossing as an act of responsibility for the people that matter most. Billboards have been rolled out at target locations and used across social media. Our focus continues to be on improving safety performance through stronger frontline safety disciplines, enhanced intervention activity and continuing targeted engagement with employees, contractors and communities. Before discussing the year in detail, I want to summarise why Aurizon remains a compelling long-term infrastructure investment. We own and operate strategically significant rail assets, including approximately 5,000 kilometres of rail infrastructure, and have Australia's largest rail fleet. These assets connect key commodity basins and exhibit the characteristics of what has been described as halo assets – heavy assets with low obsolescence risk, and high barriers to replication. We're also drawing volume away from road, as demonstrated in our bulk and containerised freight business units. Our earnings are supported by contractual and regulatory frameworks. Our haulage contracts generally include indexation mechanisms and fuel and energy cost pass-throughs, supporting resilience through inflationary cycles. These attributes provide investors with exposure to high-quality infrastructure assets, resilient cash flows, a diversified commodity portfolio and disciplined capital returns. Finally, our Capital Allocation Framework has delivered more than $1.8 billion to shareholders over the past four years through dividends and buybacks. Turning now to the four-year results. FY2026 was a strong financial result, with underlying EBITDA up 9%, NPAT up 24%, and importantly, earnings per share increased by 29%. Underlying free cash flow was up 11%, and the board has declared a final dividend of 10.5 cents per share, ranked at 90%. This once again represents a 90% payout ratio of underlying NPAT. At $0.23 per share, full-year dividends are up almost 50% compared to last year. A reminder that we also completed the $250 million on-market buyback at an average price of $3.72. This is a strong result for shareholders. High earnings, strong cash generation, a materially high dividend and additional returns for our completed capital management program. Turning now to the business unit. Network underlying EBITDA increased 8%, driven by higher regulatory revenue, partly offset by increased operating costs. Importantly, UT5 Plus was submitted to the QCA in December 2025, and the QCA draft decision supports the material components of the proposal. Coal underlying EBITDA increased 2%, with revenue yield and disciplined cost management driving this result. Since July 2025, over 60 million tonnes of annual volume has been recontracted. This includes today's announcement that major central Queensland customers, VMA and Whitehaven, have been recontracted in our competitive market. Bulk delivered a very strong result, with underlying EBITDA up 38%, driven by customer growth and the non-recurrence of doubtful debt provisions from prior year. The successful start of the BHP South Australia logistics contract during the year is a good proof point for our bulk strategy. Containerised freight continued to build momentum, with national interstate TEUs up 25% against the prior year, including a significant uplift in non-foundation customer TEUs. We have reached an important inflection point, with EBITDA break-even expected in FY2027, driven by continued customer growth. Importantly, we've made our entry into vehicle logistics with major new contracts as part of a land bridging strategy, which I will cover shortly.

Turning to network.

In December 2025, we submitted UT5+, a proposed 10-year access undertaking to the Queensland Competition Authority. The proposal was lodged with customer support approximately 18 months before its scheduled commencement, providing potential for greater long-term regulatory certainty in the network business. In June, the QCA published its draft decision. In material respects, it supported key elements of the proposal, including the WACC methodology, accelerated depreciation profile and the throughput payment. The draft decision also establishes a pathway towards final approval, with submissions currently invited. The slide shows regulatory revenue under UT5 Plus increasing by almost $200 million in the fifth year of the undertaking. These figures are based on our December submission, which included a placeholder WAC of 7.79%. This indicative figure is now approximately 8.3%, but the final WAC will be determined using prevailing market parameters in 2027. As a rule of thumb, a 25 basis point increase in the risk-free rate would increase network revenue by approximately $15 million per annum. The undertaking is subject to QCA's usual process and we expect to see progress through the calendar year. Turning to the coal contract book. It has been a significant year for coal recontracting. with more than a quarter of the portfolio recontracted since July 2025 and with these contracts now expiring in the mid to late 2030s. This includes major central Queensland customers, BMA and Whitehaven. The BMA contract represents 100% of the tons tendered for recontracting and services their five coaching coal mines in the Bowen Basin. The contract is effective from 1 July 2028 for a period of up to 12 years. The Whitehaven Coal Contract is a new 10-year contract for the haulage of coal from the central Queensland mines of Blackwater and Dornier. Horizon will continue to be the exclusive rail provider for Whitehaven's central Queensland coal portfolio. The contract began on 1 July 2026. Although the 60 million tonnes of re-contracting has been undertaken in a competitive environment, we have not seen a material change in the haulage rates. As shown on this chart, and when looking out to FY2028, the task is not yet complete and recontracting discussions are taking place with around 10 council parties at the moment. Before turning to vehicle logistics, I want to provide some context on coal markets. The relevant consideration for Horizon is not simply the outlook for total global coal consumption, but the outlook for seaborne traded markets and Australia's position within them. The key point is that demand for Australian coal is not simply a function of global coal consumption. It is more specifically linked to seaborne traded markets, which are increasingly concentrated in Asia. For steel-producing coking coal, India is expected to be the largest driver of seaborne coking coal demand over the coming decades. India has a deficiency of high-quality domestic coking coal and sources over 90% of supply from the seaborne market. India is already the largest destination for Australian coking coal exports, accounting for more than a quarter of export volumes. For thermal coal, global import volumes are around record levels at over 1.2 billion tonnes per annum. The share of Asian demand has increased from 35% of the import market to almost 90% last year. When we look at the average age of coal-fired electricity assets in Asia, it is just 15 years. Compared with an expected retirement age of 40 years, over 99% of Australian thermal coal is destined for Asia. As demonstrated on this slide, the demand for Australian coal remains strong, but there is no doubt opportunity is being lost to competing supply nations like Russia and Indonesia. Despite significant reserves of premium coking coal and thermal coal, Australian supply is not keeping up with demand, which is flowing through to diminished export volume and, in turn, our above-rail contract book. There are a number of factors contributing to this, including Queensland's coal royalty regime. Finally, I want to turn to vehicle logistics, which is an important development for containerised freight and land bridging. Following our earlier engagement with major vehicle logistics providers, Aurizon has customer contracts to transport vehicles using our containerised freight network and a land bridge through the port of Darwin. The first is a long-term partnership with SEVA, operator of the largest national vehicle logistics network. Aurizon will transport vehicles by rail to the domestic market, which is a significant road-to-rail conversion. Initially, vehicles will be carried on existing containerised freight services in SEVA-owned and Arizon-owned car containers. The service is expected to transition to purpose-built auto-wagons following their delivery in mid FY2028. The contract commenced in June and also includes general freight, contributing additional volume in FY2027. The second contract provides for the initial movement of 7,000 imported vehicles per annum from the Port of Darwin for logistics partner NYK. While this initial volume is subscale, as it involves only partial vessel discharges in Darwin, the longer term objective is to move to larger scale volumes through full vessel discharges. This has the potential to reduce port calls and improve fleet utilisation for our logistics partner. that a total of 1.25 million cars are imported into Australia each year. The Horizon autowagons under construction are fully enclosed with a ventilated sidewall design to protect vehicles during long-haul moves. They are double-stacked and engineered to the exterior dimensions required to fit under bridges and access Melbourne and Sydney directly, and the only rolling stock in the country able to do this. The initial order has been made. with associated capex of around $100 million through to FY2028, including around $20 million outlaid in FY2026. Returns are expected to be in line with previously outlined IRR targets of low double digits. This is another example of using the rise in strategically significant assets to drive growth for the business supported by customer contracts. vehicles will be transported using Aurizon's existing containerised freight services, including the Tarkula to Darwin Rail Line driving asset utilisation.

On that, I'll hand over to Ian to present the financial results in more detail.

Well, thanks, Andrew. It's great to be joining you today for the first time as CFO and Group Executive Strategy of Aurizon. Since joining the company, I've taken the opportunity to visit some of our strategically significant infrastructure and meet with employees. And I've got to tell you, I'm impressed with what I saw. I'm excited for the opportunities ahead for the company, and I acknowledge the quality of employees delivering against our strategic objectives. And it's a privilege to be presenting today's results on behalf of the team, and it's a strong financial performance. To start, we've delivered against all major metrics. EBITDA of $1.7 billion, $718 million combined sustaining and growth capital. as well as FY26 total declared dividends of 23 cents, all within guidance. A couple of headlines. Group revenue of $4.2 billion increased by 6%. That was driven by higher regulatory revenue and network, bulk customer growth, as well as the above-rail coal business performing consistent with 2025 levels. Underlying EBITDA increased by 148 million, or 9%, and importantly, we delivered a significant increase in shareholder returns. In the face of elevated fuel prices and inflationary pressures, combined with customer growth in bulk and containerised freight, total operating costs increased by 4% compared with the prior year, reflecting the focus on cost discipline and targeted savings program implemented from the start of the year. We had expected an under-recovery of fuel costs of approximately $10 million, but by year end we had fully recovered these costs at a consolidated group level. Depreciation and amortisation were steady year on year. Net finance costs increased by 3% and there was no change in the effective tax rate. That delivered an underlying net profit after tax, which increased by 24% to $433 million. At a statutory level, EBITDA was $1.62 billion. That's $101 million lower than underlying EBITDA. and statutory net profit after tax was $71 million, lower at $362 million. So important context for our results are the key items in the underlying earnings reconciliation, which includes the recognition of network revenue, that's a timing difference, and the exclusion of two expense items. As Horizon indicated to the market in August 2025, we disclosed the intention to align network revenue recognition with the cost of operating and maintaining the central Queensland coal network. The disclosure advised that from FY26 the full regulatory allowable revenue, that's including the revenue cap timing component, would be recognised in underlying earnings regardless of actual volumes hauled. Actual volumes were lower than the regulatory assumption this year, which has resulted in $27 million being recognised in underlying earnings. So turning to the two expense items, the first one is a $54 million non-cash impairment which was recognised against our NSW coal assets and that's after undertaking a carrying value assessment which included the changed NSW contract book, intercompany transfer of locomotives as well as operating cost changes. And just for context, this impairment represents less than 3% of the above rail coal asset base. And the second item was a $20 million expense for enterprise resource planning system upgrade and some redundancy costs associated with the cost out program. And I just note a full reconciliation to statutory earnings is included in the appendix of this investor pack. So moving to the next slide, slide 14. One of Horizon's key strengths is the quality and consistency of our cash generation and the metrics on this slide demonstrate how that underpins sustainable shareholder returns. Return on invested capital increased by 1.4 percentage points on the prior year to 9.5%, driven by higher earnings and therefore improving returns from our invested capital base. Importantly, it was another strong year of cash generation with underlying free cash flow, that's free cash flow before growth capex, increasing by 11%. This year, we've also added free cash flow to equity, so that's the bottom line cash available to equity with no adjustments. free cash flow to equity is equal to operating cash flow, less total capex, less interest paid. Turning to dividends, the board has declared a final dividend of 10.5 cents per share, 90% frank, including interim dividend of 12.5 cents, full year declared dividends of 23 cents, represents a payout ratio of 90% of underlying net profit after tax. So you can see that free cash flow translates into higher shareholder returns with FY26 dividends per share increasing by 46%. The successful completion of our buyback reduced shares on issue by a further 3.8% in FY26 on top of the 4.9% reduction in FY25 and the reduction in the shares supports growth in earnings per share, dividends per share and therefore enhancing shareholder returns. Turning now to our operations and the network business. Network EBITDA increased by $74 million, or 8% to $1.03 billion. And turning to the bridge on the right on slide 15, access revenue increased by $95 million, reflecting a higher allowable revenue driven by increased returns on and of capital, together with a higher maintenance cost allowance. These figures are showing net of energy costs which are passed through to network customers. Although volumes increased by 2%, The regulatory assumption of 221 million tonnes was not reached, leading to an under-recovery and future revenue cap. The regulatory regime sets the per-tonne revenue based on a forecast of 221 million tonnes, when actual volumes were lower at 212.5 million tonnes. The regulatory mechanisms allow Aurizon Network to receive the under-recovery in cash in FY28, and this under-recovery of $27 million, which I mentioned earlier, is recognised in underlying revenue in FY26. The inclusion of this timing difference matches revenue with the cost of operating and maintaining the CQCN, providing increased transparency, consistency and predictability of the network and the consolidated horizon group. Looking forward to FY27 in terms of the broader maximum allowable revenue. we see a further uplift of around $60 million inclusive of the FY25 revenue cap adjustment. And we expect approximately 60% of this to flow through to increased FY27 EBITDA due to it being offset by an expected step up in maintenance costs and other costs. As usual, the appendix has got a full table on the maximum allowable revenue. Just to focus for a moment on UT5, Andrew provided important context for where we're at in the process. The UT5 regulatory reset takes effect from FY28 and it provides an additional 10 years of certainty on the single largest contributor to the group's earnings and cash flow. Moving to bulk. Bulk's underlying EBITDA increased to $233 million. That's an uplift of 38% year-on-year. and the result was driven by contract and customer growth, including a 6% increase in rail volumes, and the non-recurrence of a prior year provision for doubtful debts. Block revenue was up 10% to $1.23 billion, driven by base metals, grain and new iron ore customers in WA, partially offset by lower iron ore volumes in South Australia and the Northern Territory. Excluding the prior year identified doubtful debt provision, operating costs increased by 11%, including costs that are not expected to flow through to FY27. So turning your attention to the waterfall, after adjusting for the prior year provision, the increase in revenue can be seen in the first green column and then we're shown two cost elements. The second element is $23 million of one-off margin impacts around fuel timing that is expected to recover in FY27 with a balance attributable to start-up costs and a number of new contracts that commenced in FY26. On the fuel timing, some of our bulk contracts adjust quarterly rather than monthly, so the June quarter uplift was not fully recovered within the financial year. On contract start-up costs, establishing and standing up these contracts do involve upfront investment, and that doesn't always align perfectly with revenue, so we don't expect this margin impact to reoccur in FY27. So looking ahead, we expect bulk EBITDA to grow again in FY27, supported by a higher contribution from the BHP South Australia Copper Contract, higher grain volumes and a reversal of the fuel timing impact. These benefits are expected to be partially offset by lower iron ore volumes in South Australia. Regarding containerised freight, whilst it's not reported as a separate business unit, I'd like to call out some performance indicators for the year. Andrew mentioned that national interstate 20ft equivalent units were 25% higher than the corresponding period. That's representing growth from both existing and new customers. And transport revenue as shown in the segment note increased by 32% to $150 million. As a result, containerised freight monthly run rate has improved over the course of FY26, though not yet at a break-even level. So two things change from here for containerised freight. Operationally, we expect continued growth from existing customers, increased utilisation, and the SCT Logistics Agreement is now operational. And we've successfully mitigated the third-party rail network outages in South East Queensland that constrained us this year. So on that basis, containerised freight is expected to reach break-even in FY27. Now turning to coal. Coal EBITDA increased by $13 million. which is consistent with consistent year-on-year demand reflected in hauled volumes remaining at 192 million tonnes. The moving parts on tonnes hauled showed higher volumes in the Blackwater, South East Queensland and Goonella corridors and they were offset by lower railings in the weather-impacted New South Wales, Newlands and Moura. Operating costs, that's operating costs excluding access to fuel were flat. and importantly, controllable unit costs, which are operating costs excluding access and fuel, reduced by 1% on a net tonne per kilometre basis, reflecting the cost discipline across the business unit and matching operating costs with volumes hauled. At the start of the year, we had expected yield to be negatively impacted by customer mix, and that is exactly what happened. The cost escalation protection within our haulage contracts is reflected in a $10 million year-on-year benefit of access including $7 million of fuel cost recovery benefit. Noting on a group basis, there was no impact because coal offset bulk. Moving to an update on the contract book as we move into FY27. As noted on slide 18, FY27 contracted volume stands at 211 million tonnes, which is a 20 million tonne reduction when compared with the prior year. Half of this volume is the non-recruitment renewal of a major Hunter Valley contract announced this time last year, and the majority of the difference relates to customers right-sizing their contracted volumes to match against respective production plans. In FY27, we expect rail volumes to remain at a similar level to FY26, which against a lower contract volume will see contract utilization lifting from around 83% to over 90%. Whilst there's a cost to a rising holding capacity to match contracted volumes, the direct operating cost is relatively low and the fixed revenue coming out therefore carries a higher margin. The impact is that coal earnings reduce even though the haulage task doesn't change. So in response and to mitigate the earnings impact, we have a three-year coal transformation program targeting $30 million in annualised savings. and the program includes deployment and rolling stock optimisation, overhead reduction and consideration of train guard or single driver only services across the diesel fleet in Queensland. At the same time, we remain focused on the contract pipeline to maximise renewals, improve asset utilisation and repricing approach, progress cost to serve initiatives and further redeployment of New South Wales capacity. Our focus is on the areas within our control including discipline management of controllable unit costs and aligning our cost base with contract volumes. Finally, a tighter contract utilisation does come with greater opportunity for surge and spot volumes where customers are seeking to push more volume into the market and maybe hitting the contractual volume ceiling. In closing on operations, the FY26 results and future outlook highlights Aurizon's portfolio with the network and coal businesses underwriting shareholder returns while continuing to support investment and growth. So I'll just switch gears now and move to the balance sheet, gearing and capital allocation. Having reviewed our funding and balance sheet, one of the things that stood out to me is both the diversity of Verizon's funding sources and the strong support we receive from globally diversified lenders and debt investors. This reflects the quality of our asset base and resultant investment grade credit profile. And our funding strategy remains the same. At a group level, available liquidity comprising cash and undrawn facilities at 30 June was $1.1 billion. Net debt of $5.2 billion is unchanged. Interest costs are hedged to 95% and group gearing, that's the book value of net debt over net debt plus equity, is 57%. Importantly, a key component of our capital allocation framework is our commitment to maintain strong investment-grade credit ratings. Horizon Operations and Horizon Network's credit ratings are both BBB Plus from S&P and the equivalent BAA1 from Moody's, and this commitment is supported by group net debt to EBITDA of three times. Turning to capital allocation, slide 20. Strong free cash flow generation combined with lower capital expenditures continues to support higher shareholder returns through both dividends and share buybacks during the year. This has been reflected in total shareholder returns for FY26 which was 45% including reinvested dividends. Having spent time understanding the business and other observations, this horizon's capital allocation framework strikes a good balance between maintaining a triple V plus credit rating, funding reinvestment capital back into the business returning capital to shareholders while also allowing the flexibility to invest in growth options. The overriding objective of course is to optimise each individual part of the framework to maximise returns to shareholders. And I'd like to make one point on durability. A 90% of underlying MPAC payout is supported not by a single year of low capital expenditure but by the structural improvement in free cash flow that follows the completion of our elevated investment phase. As capital expenditure normalises to the levels I'll come to shortly, we expect dividends to remain in the upper end of the policy to target 70% to 100% of underlying impact. We also remain disciplined in our approach to capital expenditure. As shown in the chart, over the past four years, we've moved through a period of elevated investment and now seeing the benefits with lower capital expenditure and the growth in earnings from those investments contributing to cash flow generation. As a result, the proportion to shareholders has increased in FY25 and FY26, noting that shared buybacks were funded principally with debt, not operating cash flow. Looking ahead, we believe the framework continues to position us well to optimise shareholder returns, reinvestment and growth capex, as well as maintain balance sheet strength. Based on the dividend guidance that Andrew will speak to shortly, we expect similar proportions allocated to shareholder returns in FY27. So in closing, Horizon has the privileged position to operate critical national infrastructure and deliver returns to our shareholders and other stakeholders across Australia. Horizon has a disciplined capital allocation framework and cash generation that is both consistent and predictable. That combination is what converts the quality of this asset base into returns for shareholders and that is what we will be focused on protecting and improving. We'll continue to focus on the things that we can control which includes safety, volumes and costs to deliver long-term shareholder returns. Thank you and I'll now hand back to Andrew.

Thanks Ian. FY2027 Group underlying EBITDA is expected to be between $1.725 billion and $1.775 billion, with full-year dividends of 23 to 24 cents per share. Non-growth capex is expected to be between $590 million and $660 million, including $25 million of transformation capital. Growth capex is expected to be between $70 million and $120 million, Network earnings are expected to be higher than FY2026, reflecting increased regulatory revenue, including the final recognition in underlying earnings of prior year revenue cap adjustments, partly offset by high direct costs. Coal earnings are expected to be lower than FY2026, reflecting reduced contracted volumes and yield, with haul volumes expected to be broadly flat. Bulk earnings are expected to be higher than FY2026, driven by full-year contributions from new customer growth and non-recurrence of one-off costs, offset by reduced INR volumes in South Australia. Other earnings are expected to be higher than FY2026 with containerised freight expected to break even on an EBITDA basis. As usual, guidance assumes no significant disruptions to supply chains or customers. including major derailments, extremely prolonged wet weather or inability to access fuel. Overall, the FY2027 outlook reflects stronger network earnings, continued bulk growth, improvement in containerised freight and a reset in coal as contracted volumes become more closely aligned with customer production plans. To conclude, FY2026 was a strong year for Horizon. We delivered earnings growth, strong cash flow, a higher dividend and completion of the $250 million buyback. Bulk continued to demonstrate our strategy in delivering new customer contracts and earnings growth. We secured over a quarter of the coal contract book. We progressed UT5+, with the QCA draft decision supporting the material components of the proposed undertaking and providing a pathway to final approval. The progress against our strategic aims can be seen on this slide, with Arizon's resilient network and coal businesses continuing to support growth in bulk and containerised freight, while at the same time supporting shareholder returns. Thank you, and I will hand over to the operator for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Anthony Mulder from Jefferies. Please go ahead.

Good morning all. A few questions if I can on coal. The BMA contract has sold about 65 million tonnes. As far as I remember it signed that previously. It's now down to 37 million tonnes of pressure. That includes the sale of Blackwater and Dornier. but should there also be some lower nominations that they're making for that reduction from 65 less those contract or those sale of the mines down to 37 please?

Oh hi Anthony, I'll get Ed to give you some background on the VMA contract.

Thanks Andrew and thanks for the question Anthony. The way you think about BMA and the 65 million tonnes is with their current nomination, I won't get into the specifics of their actual nominations, but if you add back in, as you rightly say, the volume associated with the divestment of Blackwater and Dornier to Whitehaven, but also the previous divestment of BMC, you'll get back to the 65 million tonne portfolio.

Right, okay, so importantly, no nomination changes from BMA on the mindset they've still got?

That's commercially sensitive for BMA, and so I won't get into that. Suffice to say, nominations can go up or down, and that's with our portfolio of contractors, which is what our customers seek.

Secondly, if I can on coal, you've re-signed 60 million tonnes of coal contracts in the last 12 months. Can you comment then on the competitive intensity that you're seeing and the yield pressures that you're seeing more broadly across that re-contracting phase please?

Thanks again Anthony. I can't get into the specifics of the contracts of course and the negotiations. but we've not seen, as Andrew said in his speech, we've not seen material change in freight rates or deterioration during recent contracting since July 25. It remains a competitive market. Every renewal has its trade-offs around price, flexibility, resharing and performance. However, as I said, across the portfolio, we're not seeing material change in rate per tonne and flowing through FY2017.

Right, but some of these contracts are obviously signed for beyond 2027, so that's still potentially ahead. Is that fair to think? Yeah, that's fair to think. If I can just ask quickly on the breakeven that you're expecting through containerised freight, sounds like it's not currently breakeven, but expected to get to that point throughout FY27. So will it exit FY27 breakeven or will it report a breakeven result throughout FY27 on average, please?

I might get George to talk about that. Anthony?

Hey, Anthony. We're expecting over the full FY27 for it to be breakeven at an EBITDA level. Maybe just to give you a bit of a sense on the three things we need to deliver that. The first one is volumes. So we grew volumes by 25% in FY26. We need to grow volumes again by 25% in FY27 to hit that. We're expecting half of that growth to come from new contracted volumes, including SEBA, where we're moving cars and containers and also general freight, and then the other half to come from non-contracted customers, so We're expecting to see that growth come through. The second lever is on the cost side. I've talked before about our new terminal in Perth, Kewdale. Maybe remind everyone, we currently operate at Forestfield, which is three 300-metre tracks. We'll be moving to Kewdale in September when it will become operational and we'll be able to bring in two 1,800-metre trains. So that'll reduce shunting time, reduce train crew costs. So that gives you a sense of some of the cost efficiencies that help support that earning shift from FY26 to FY27. Very good. Thank you.

Thank you. Your next question comes from Andre Vermeer from UBS. Please go ahead.

Thank you. Maybe if I could pick up on that question around containerised praise. I guess if I look broadly at the other segment that includes it we're seeing minus 3 mil EBITDA move year to year but I think if you take out the legal settlement benefits from last year it would be more like plus 17 so I'm just curious to understand how much of that plus 17 would have come from movements in corporate costs versus the movements in containerised freight itself and I guess whether or not what's required, as George laid out, to get to break even in FY27 is as big a step as what we saw as an improvement in 26.

Ian, I might get you to try and help Andre with that.

Yeah, so when you unpack it, Andre, the costs include... So you've quite rightly identified the legal settlement in other income, and then when you unpack the cost is corporate costs or unallocated corporate costs in there. And so that'll give you a better idea of what the EBITDA contribution from CF was, which for the year was obviously a loss, which we've called out, an EBITDA loss.

I guess I'm just talking about the scale of improvement. You know, if it improved by 10 to 15 mil, is that the same order of magnitude that you've got to improve by in FY27 as well?

George, do you want to say? Yeah, sure, Andre. No, it needs to be a bigger improvement from an earnings perspective in 27 compared to what we saw in 26. A few things I'd call out that are behind that. The first one is we only started moving the SEVA volumes in April, contracted in June, so we'll get the full benefit in FY27 at that. Secondly, we'll get QDAO online in September, which will drive the cost benefits. and then the other thing I'd say is in the second half to FY26 in containerised freight we had multiple weeks of track outages which we're not assuming to repeat and that's consistent with how we provide our guidance to the market.

Sure, that's perfect. And then maybe one for Ian just to pick up on the comments he was making earlier in the prepared remarks about the capital intensity. I guess if we look at the above rail coal maintenance capex to DNA, I know this is a topic we've spoken about before, but it fell again year on year to only 39% for FY26. So I guess I'm curious to understand how much of that is a factor of where you are in the cycle and reflecting the investments that you've made in terms of asset productivity but also a more broad question about what's a more normal rate going forward and is that a combination of CapEx coming up and DNA coming down because you're now a less capital intensive business or just how we should think about that?

Yeah okay, there's a few moving parts. So firstly I'd say with respect to coal that it is part of the cycle and that's point number one and point number two if you separate sustaining capital from growth which I think that what you're looking at is that we are investing at less than depreciation which as a major infrastructure company that's what you would expect, however we will go through peaks and troughs. A big part of coal for example is refurbishment programs which you do over time. So this is all scheduled and known and taken into consideration of all of our operating and capital cost planning.

Okay, thank you. Thank you. Your next question comes from Matt Ryan from Baring Joey. Please go ahead.

Thank you. I just had a question on the contracted coal volume expectations for the next four months and I guess specifically around those customers that have prioritised their coal contract nominations. So I guess I'm trying to sort of interpret what's happening here and just interested in your thoughts on whether this is being driven by the expectations for haulage being lower or whether it's perhaps driven by some sort of cost-saving initiative and the expectation is maybe that they potentially will haul but won't have the certainty of volumes they can potentially move into the spot market, for example. So I'd be interested in your thoughts on what's happening there. Sorry, that's a great question, Matt.

Look, when I... I'll start at the top, actually. If you look at demand for coal in the markets of Australia applies to. It's quite strong. And you can see Australia is actually losing market share in countries like India, and we're losing it to Russia, et cetera. And if you step back and say, well, if that's happening, there's probably a challenge with supply and if you look in both states, there's different reasons for why supply is not keeping up with demand. And then if you look at the, just by way of the example and I mentioned it very briefly in my speech, if you look at the Queensland coal royalty situation, then you've clearly got a lot of angst being expressed by our customers publicly quite strongly. So you've really got a policy setting and supply side settings driving Australian supply into a high demand market. So if I think about having managed a lot of mines in the past, if I think about my reaction to those sort of situation and if I put myself in Queensland particularly and I'm taking a view that actually the royalty situation is not conducive to investment and I add in the second thing which is cost pressures which the customers are clearly under and have talked about regularly in public communications. you'd be reacting to that. So to your very point, one of the ways that you can actually manage your cost exposure if you take a view that from a contracting point of view, you might risk reducing the volumes that you contract closer to your actual mine plan, which mine plans are updated all the time and they reflect all the assumptions that our business will make about its near and medium term to longer term future. So you make that... You make that cost decision. No decision's risk-free. So one of the risks that you actually get when you actually make a decision like that is if there is, well, turns out to be to the upside from a production point of view, then you'll have to compensate for those decisions probably, you know, for example, in the spot market and those sort of things. So that's, hopefully that gives you some colour as to what we believe is happening. And look, I should also... It just occurred to me that when Ed finished his answer to Anthony, I think it was, I should make it clear that there is no material change in holdings rates for the 60 million tonnes recontracted since July 2025. It just reflected that that might have been a possibility of misconstruing what he said. and then if you think about what's seen on the contract expiry chart, which he was talking to at the time, we still have contracts to renew and that the outcome of those negotiations will, of course, impact coal earnings in future years, but you've got to get through the contract negotiation cycle to actually get to that point.

Just to be clear on those right-sized contracts, within your guidance, you've effectively taken a hit for the capacity charge that you would receive going down, but you haven't assumed anything for small volumes that would offset that at all?

So it's exactly, if you think about what happens in the way that the coal business gets its revenue, it gets it from the supply of capacity, so the capacity sits there and it's just available and you've got to be able to supply it on demand and then you get a payment that's associated with how many tonnes you actually move, and that's to incentivise the moving of the volume. So when we talk about the capacity contracted volume going down being the driver of revenue, you can see that in that the volumes, we're talking about the volume being flat from year to year. So it's actually that capacity charge that's actually being reduced. Yeah, stop there.

Good enough. And then just the decision not to announce another buyback today?

So the decision-making behind buybacks from a process point of view, if you look at the way the board's done it in the past, you make it based on your assessment of where things are at the moment in time and where you think the world will be. I mean, it's a pretty generic sort of statement. if you look at Arisen's practice with announced buybacks at the full year and at the half year, and there's no... We're not necessarily trying to establish a pattern as to what time of the year that we would actually announce a buyback. So the board will consider the matters that lead into a decision like that and make a decision at the right time.

Right. Thank you. I appreciate it.

Thank you. Your next question comes from Jacob Tecanis from Jardin Australia. Please go ahead.

Hi Andrew. Hi Ian. I just wanted to pick up on the other segment if I could please. It's probably not the first time that we've had the expectation that we'd get back to break even for that division but notwithstanding that there's been really strong volume growth so I'm just trying to tie together the volume growth and the operating leverage in that business. It looks like FY26 EBITDA for containerised freight was at or around the FY24 levels. So what gets us back to breakeven from here? Appreciate that there's some cost, but how do we get confidence that volume's the driver that George was just describing, please?

Yeah, I might get George to talk through those details rather than Ian.

Hey, Jake. Yeah, I'll start with 26, then I'll move to 27. So... There's three things to be aware of in 26. Yes, we had strong volume growth, 25% higher TEUs, but we had three things that impacted the business. The first was we're paying SET to do that hook and pull arrangement. Now, we had to enter into that because we couldn't get into Brisbane for a quarter of the year with the Cross River Rail closures, which will continue for three years. There's an extra cost to that that we have to offset with volumes. The second driver was particularly in the second half. We had about three weeks of track outages, which impacted us on the revenue line, but we've still got to keep paying train crew and paying for track access in other parts of the country where the track wasn't out. And the third thing to note is we stood up a new service. So we started the year running four Melbourne to Perth services. We're now running five Melbourne to Perth services, and it takes some time to utilise those. So those are three things in FY26. When you look at the biggest step we've got to take now from an earnings perspective in 27, you've got the contracted SEVA volumes, you've got cost efficiencies, and then you've got the broader market growth. Now, that third one, we don't contract for volume. We don't have capacity charge in containerised freight. So it will depend on how the broader macro economy goes in Australia. But we have seen volumes in July up about 10% on the prior corresponding period. So we're getting there, but hopefully that gives you some colour.

Thanks, George. Yeah, so GDP growth, is that the right way to think about volumes for that business? Obviously, July trending better than that. I'm just trying to draw the link between volume and the earnings, the balance probably being rate. Like, how do we think about that with utilisation?

Yeah, rate's pretty consistent. It will be volume growth. So I mentioned about 10% growth versus the prior corresponding period. we need to see about 20% to 25% volume growth to hit that break-even earnings number. And what you tend to see in containerised freight is a strong October-November. It's called peak period leading into Christmas, and then you see another mini-peak coming into Easter. So October to November are kind of our grand final quarter, put it that way.

Understood. Thanks for the colour, George. Just one for Ed. It's been a while since we've seen the tech or pay mix across the business generally, particularly for coal. Can you just give us a sense where that stands from a portfolio perspective, just taking into account the recontracting, please?

Yeah, thanks for the question. At a portfolio level, it's not changed material and we're still sitting between the 50% and 60%. Thanks, Ed.

Thank you. Your next question comes from Justin Barrett from CLSA. Please go ahead.

Hey guys, thanks very much for the opportunity today. Maybe a question for Andrew, just sort of coming back to your, I guess, holistic response to Matt's question on, I guess, coal shipments out of Australia. I guess given the context of everything that you sort of said there, to me it sort of reads like it may be difficult to get yield growth in that coal business for a couple of years or the next few years without meaningful volume growth. Is that fair to say or have I, I guess, misread, I guess, some of your comments there?

I was talking about the potential for volume growth specifically when I was answering the question. At the end of the day, when you're talking about any other factors that come into play, it'll depend on the competitive environment that you're in at that moment in time, the decisions that the customer is trying to make and when they're trying to make those decisions. So I was making comments about volume.

Okay, understood. And then just with the Hunter Valley Contractor volumes that you lost, I guess based on slide 18, which is super helpful, I guess I sort of read that there was a fair bit of take or pay that will help increase that utilisation into FY27 with those less volumes. And so with the BMA re-contracting that you announced today, how should we think about utilisation potentially into FY28? Do we think it would step up again? Is there a reduction in take-all pay as part of that re-contracting that should drive that utilisation potentially higher again into 28?

Ed, do you want to talk about your...

Yeah, sure. Thanks for the question. I can't get into the specifics of the nomination in relation to any particular customer, including the cessation of that previously announced contract loss. I mean, what I can say is our customers value the nomination flexibility, so ups and downs as their end user demand for their product changes. But at a macro level, As Andrew and Ian have outlined, whilst the headline contract volume number has come down by 20 million tonnes, we actually expect hold volumes to be broadly flat. And that will mean that contract utilisation will rise from below 80s to closer to 90%. So we'll move the same volume but the revenue mix will shift toward a lower yield and usage charge.

Okay, great. Thanks for that.

Thank you. Your next question comes from Rob Coe from Morgan Stanley. Please go ahead.

Good morning. I just wanted to make sure I understood some of your transformation and efficiency initiatives. In coal, you've caught out a 30 mil three-year target. I wonder if you could give us any colour on the timing of that and the cost to achieve. And is that cost to achieve included in the like the 25 mil CAPEX guidance this year for transformation. And then I guess there's also 50 mil transformation project costs scheduled for this year. I wonder if you could just help me understand which buckets I should be putting those numbers in, please.

Ed, do you want to talk through the coal transformation program that you're launching?

Yes, thank you, Andrew. And I can certainly talk to the capital for our program. So maybe just at a high level, I'll just reiterate what Ian said, that we're really focused on what we can control. And we've got a trade record for discipline and cost management. So starting with that, I wanted to make the point that we intend to hold costs flat again in nominal terms, which would be the third consecutive year. We should also keep in mind we're working hard to secure the contract pipeline and maximise those volumes. So there's levers... value levers in addition to the coal transformation program. We've already right-sized the workforce and locomotive fleet after the contract cessation in New South Wales, having retained some capacity for spot volumes, which we're trying to pick up at the moment. So in terms of the three-year coal transformation program, which you've rightly articulated is $30 million over three years, We're looking at, to give you a bit of colour, we're looking at opportunities in the deployment, really the planning, scheduling and deployment of our assets. So focus on productivity, on maintenance efficiency, on overheads and general operating model improvements. In relation to the capital, the capital is phased over the three years, so we have to approach it in a digestible way and some improvement initiatives follow on from others. So the first thing we're going to look at is the technology integration in our deployment centre during the course of this year to enable us to make better decisions on the day of operations and make better use of the capacity deployed.

Rob, you made reference to a $50 million transformation program. So there was the SSR program that was implemented and is flowing from Australia. from previous year.

I'm not sure what the question is.

Well, the only thing I can think of, Rob, is are you reflecting on the ERP technology upgrade and migration? Yeah.

It's on slide 13. Yeah, okay.

So that is the replacement of the ERP program that occurs over a number of years. which I think we announced 12 months ago. So that in itself is not a transformation program, Rob. We have SAP. We're replacing it with a better SAP with AI tools in it and changing some of the ways that the business processes interact with the ERP program to get more efficient operation, so we'll get some benefits from that point of view, but it's not... I don't want to be selling to you that the ERP upgrade is a transformation project by itself.

Just looking at the slide, Rob, what it is is the second part of transformation goes back to the SSR, and so there's some redundancy costs associated with that, which we've called out, which pretty much won't be happening going forward.

Yeah, OK, OK. So the ERP project is 50 mil and then there's a separate 25 transformation and then it sounded like Mr McKeever's efficiency gains is actually pretty small and phased over the three years.

You got it, yeah.

That's all operational, the stuff that Ed was talking about. Yeah, yeah, lovely. OK, if I can ask your shiny brand-new CFO a question about debt. Just looking at slide 19, there's a reasonable debt tower coming up in FY28. You've got plenty of time. Just wondering if you can give us a steer on how you're thinking about that refi versus what it's hedged at now. Would current market rates be higher or lower? Just any thoughts there, please.

Yep. Yeah, so we'll approach that maturity concentration in advance, as you would have expected in the past, and we'll look at the various markets. But I guess the big point that we've called out is that 70% of it's bank debt. We've got great relationships with our banks, so it's always better when it's done, but nonetheless, high confidence in relation to that. In terms of the current interest rates, I guess naturally you would expect them to be higher because of a higher interest rate environment but we are at a good credit rating so therefore we'll look to reduce the cost as best we can but then I'll also note that at the same time we are heading into UT5 territory and the regulatory reset on that and the the WAC associated with the revenue that we earn on the network. So all of these things are happening at the same time. So we've got, I guess, the natural hedge associated with current refinancing as well as hedging that we'll do during that regulatory measurement period. So confident on the refi. Yes, interest costs are going up, but remember a fundamental premise of our business is our protections, particularly under the regulatory regime.

Okay, cool. So we could probably find it in the network accounts, but of the $1.69 billion, how much of that is network?

About 70%, I think, probably consistent with the bank that the guys are confirming. Yeah, 70%.

Okay, and that's where you've got the natural hedge in the revenue, so that's all good. All right, maybe just a final question. If I look at your coal volumes, I think for the second year in a row, you're including a bit of grain volumes in the coal volumes. And I wonder if you could just talk a little bit about the wider exposure to agri this year in what's potentially an El Nino year, please.

George, I think that's a question for you.

Sure. Yeah, Rob, we do. A little bit of grain in New South Wales in Ed's business. Our main grain exposure is Western Australia and South Australia. If you look at those two markets, Western Australia, depending on the years, about 40% of Australian grain exports. South Australia, around 20%. But those two states are also where they get into rain, so they tend to experience a lot less volatility than the East Coast. If you look at South Australia's grain outlook, I think there's been... is a good report to look at. South Australia looks like being at average or slightly above average for this next harvest. I think WA looks like being about on average for this next harvest, which of course is down from the record year last year. One of the things we'll benefit though from in FY27 is we have volume that we're still moving from the last harvest. So our July grain volumes in WA were much stronger than the corresponding period. August is looking the same. And that's why Andrew and Ian made the comments that we expect to move more grain in FY27 than FY26. Cool. All right.

Sounds good.

Thank you so much.

Thank you. And the next question comes from Sam Sia from Citi. Please go ahead.

Morning, guys. Thanks for letting me ask the question. I just wanted to ask, I guess, post-rightsizing some of your contract book, that toll guide implies low 90% utilization. I just want to understand how reflective that number is across the whole book or how we should think about where those contractual volume ceilings are and maybe where that spot opportunity may exist. Thanks.

Ed, do you want to see if you can help?

Yeah, sure. Thanks for the question, Sam. I think you're asking me about... I think you're asking about the right sizing and whether or not we'll think it will be stable for the outlook. If not, please let me know. I think what I'd say about the right sizing is we see this as an isolated event for now as some customers in Queensland have looked at that profile that Ian showed. and have decided to match their production pipeline, their production output, with their rail contracts. We see the right-sizing driven, as Andrew said, by three factors. One is their cost focus. Two is that some mines have changed ownership and the new owners are reviewing the production plans, cost structures and other priorities that they inherited from the previous owners. And also the broader investment environment that Andrew spoke about. So at 90%, with the trimming then of those contracts to more align with their production, we really will see contract utilisation lift to 90%. 90% now is sustainable and we think that the risk of future ripetising is reduced as whole tonnes will now be within 10% of contract tonnes.

I guess on the other side, Could I ask, you know, that 90%, you know, is it particularly thin anywhere or, you know, expanded anywhere? I just want to try and understand, you know, if you do have opportunities to spot times or the market does turn where they're probably most likely to appear.

Thanks. It's difficult to say in advance, Sam. That's the nature of spot volume. It is very localised and time-dependent. and so I made the comment on an earlier question around investing in the deployment centre. I mean that's exactly the type of thing we're looking at to be able to take advantage of perishable capacity in the day of operation by taking advantage of emergent spot business. So as the largest coal hauler in the country we have assets deployed delivering to nine coal seaports. We've got 25, well 50 odd load points we collect from. and we're about 50% of the market share. So it's very dynamic, difficult to predict in advance. Got it.

That's helpful. And then maybe just on the impairment, can we maybe just talk at a higher level to some of the underlying assumptions? I think, you know, obviously it's quite small versus the asset base, but, you know, is that just the contract or is there anything, you know, other changes in, you know, forward assumptions that you'd like to call out, I think?

And Ian, do you want to talk further?

Yes, sure. Quite simply, the trigger for an assessment is losing a major contract, which is what occurred. And so you do a DCF, you look at your expectations for recontracting and you look at your DCF relative to the asset base. And as you say, the result is a $50 million contract. write-off which is non-cash and it's written off against hard assets. So it's as simple as that. Got it.

Thanks for that, guys. Appreciate it. Thank you. Your next question comes from Tom Payton from RBC Capital Markets. Please go ahead.

Hey, guys. Andrew in and hope you're doing well. Let me answer the question. FY27, if I look at slide 20, and this is just me trying to interpret a chart that is clearly a draft, when we look at buybacks and dividends in FY27, the dotted line on the angle, am I to interpret that as FY27, we're just seeing dividends, so that dividend figure is growing to the full amount, or how should I think about that FY27 spot?

So think about it as the proportion of shareholder returns and that's going up to show the proportion of dividends will be higher because it doesn't reflect a buyback because you haven't done a buyback in 27, haven't announced a buyback in 27. So that's what the charts mean to be showing.

Right. Awesome. Thank you. And just on the CapEx distribution, if I can correct you, moving away from coal and into freight but keeping a sort of headline capex figure consistent across periods. Is that the trend that we can expect to continue moving forward?

Well I think if you think that George went through the capital program particularly for finished vehicles and so we've spent some money on that in 26, we're going to have some more in 27 and then the balance will be in 28. So the growth element is probably, I don't know, ground numbers maybe going to be consistent in 28, not that we're guiding 28 for the moment. But then the discussion on the existing business, that's not going to change particularly depending on the cycle that we're through and the lumpy capital is probably further out than in the medium term.

Thanks.

Thank you. Your next question comes from from Bank of America. Please go ahead.

Hi, team. Thank you for making the question. With locomotive capacity becoming available from coal, does that provide additional flexibility to accelerate growth opportunities in bulk? How is the balance between the additional locomotive capacity that will be redeployed versus the new customer growth that Barker is seeing and will this additional capacity be used up straight away or will there potentially be some softer utilisation?

Yeah, good question Lara. I'll get George to talk through what he's doing with some of the extra capacity that has been sent his way from the coal business.

Thanks Andrew, thanks Lara. It's a combination of both. Some are deployed straight away. We've seen that in the early part of FY27. Some will be deployed over time. To give you a sense of those deployments, we've leased a couple of locomotives to SCT as part of our hook and pull arrangement. We've also deployed a handful of locomotives into our CF business, containerised freight, and handed back some locomotives that we had leased as part of the start-up exercise. And then there's a few locomotives that we expect to deploy in calendar year 27 as we're seeing growth projects, particularly in the Northern Territory. Some high-grade iron ore, some phosphate rock projects that are coming on there. So it's a combination of deployed straightaway and deployed over time.

Right, that was so helpful. Thank you. And just one more, if I may. To what extent in containerized freight... is no benefit from the existing terminal locomotive capacity already within the group versus as volumes grow, how capital efficient do you think this business can become relative to bulk and coal?

Do you want me to answer that one, Andrew? Yes, please.

I think when you're talking about containerised freight, you're moving volumes over thousands of kilometres and so you won't ever get the same type of productivity or, say, tonnage moved per train set as you do in coal, where the average haul length is about 250 kilometres. But what I would say is we're making incremental improvements each year. So FY27, we're bringing on Kewdale, which will be a big step change in our Perth terminal. To remind you, we've got eight services a week that run from the east coast into Perth. So it's a really important end destination for us. Then in FY28, we've got auto wagons coming online, which Andrew mentioned. We called out $100 million of capital that we're spending on those auto wagons backed by the SEVA and NYK contracts. The great thing about that capital is that's just the auto wagons. You actually put those auto wagons on the back of our existing containerised freight services. So you're just lengthening the train sets. You don't need extra locos. You don't need extra train crew. And so we're seeing incremental improvements each year and we've got other targets for FY29 and FY30.

Perfect. Thank you very much.

Thank you. The next question comes from Ian Miles from Macquarie. Please go ahead.

Hey, guys. Just on the last point, firstly, can you tell me the length of the contracts with Seaver and NYK for $100 billion spend?

Ian, I cannot tell you that because it's commercial in confidence. What I would say is one is a very long-term contract, not dissimilar contracts. to our coal and bulk contracts. The other one is a broader partnership. So we don't just look at the haulage contract itself. We're also looking at landside logistics with NYK. And so we've got a broader partnership with NYK and we're looking to grow their volumes in our auto wagons supported not just by the haulage but also landside logistics. Now, one of the things that makes me excited about that is what NYK have committed to horizon and we've called it out in Andrew's slide at 7,000 vehicles per annum is less than 4% of the volume they bring into Australia today. So there's lots of room to grow for us and NYK to change that supply chain going forward.

Does that mean you have to buy some land and actually set up a, for want of a better word, service centre in each of the individual capital cities? Keep going, George.

All right. We will have different terminals because we'll need car parks in each capital city. I've mentioned Forestfield and Kewdale a few times in Perth. Forestfield will become our car park in Perth so our containers will move to Kewdale and Forestfield will become the finished vehicles logistics centre in Perth. The other thing we've done is already bought significant land in South Australia so we've about 800 hectares of land in South Australia that with NYK we're looking to turn into a vehicle logistics precinct. Before you ask Ian, yes, that has been included in our growth capex, but given where the land is located, it was a fraction of the price that you'd get in a capital city.

I can imagine. But does that mean you've got another, above and beyond 100, you've got to spend another, I'm going to make up a number, 50 to get all these sites up to speed?

What I would say is when we started up containerised rate, we said that start-up would be about $425 million of capital. Now we've spent already, if you include FY26, about $350 of that $425. Now what we're saying is add $100 to that $425 and that should be sufficient to move the volume we've announced for NYK and SEVA. Obviously, if their volumes grow, and we hope they will, or we attract new customers, then we will need to expand those terminals. And yes, there'll be more CAPEX attached to it, but we'll tie that to future contracts.

And one more on that issue. The amount of wagons you've ordered, how many cars would that facilitate the movement of coronavirus?

I would say think about it as if we can move about 1,000 vehicles a week with the wagons that we have bought. But, of course, it depends on the origin and destination pair. You know, if you're moving from Darwin to Melbourne, it's fewer. If you're moving from Melbourne to Adelaide or Sydney to Adelaide because you're relocating, Ian, then it would be more.

Okay, that's great. No planes go to South Australia just yet. In terms of the BHP contract renewal, one of the comments you always made was it had a very high take or pay relative to the rest of the contract. Has that renewal seen a normalisation, that take or pay, to what would be typically seen in your other contracts?

Thanks for the question, Ian. I can't, as you would expect, I can't talk about the specific terms within that contract. Thank you.

Okay. Can you clarify? I wasn't quite understanding the beginning. That 65 million tonnes would have been sort of 43 filled with BMA and you said that the 37 is the same amount. I was just a bit confused on how that maths worked.

Yeah. When the contract was last tendered back in 2012 actually, it started in 2016 or 2015, 2016, it was contracted prior to the commencement of BMO Rail, so you've got to also factor in the BMO Rail volume as well. Broadly, Ryzen's contract was a 65 million tonne headline contract and there's been changes in nominations over the years, ups and downs, and if you add back in the divestment of the Blackwater Dornier assets and also the BMC, Southwark Pre-Portel Assets, you get back to something in the vicinity of the original volume.

Okay, okay. And in terms of cost reductions, you're going to drive off operations. Have you been able to retain that within your re-contracting or has that been passed back through to your customers to go into a single driver operation?

I'm sorry, could you restate the question, please?

So you've been moving to a single driver operation up in the Green Yellow and the Blackwater Corridors. You've gone through recontracting. Have you been able to retain that productivity benefit? Are you passing that back through your customers?

A little bit of both. I mean, it's a competitive market and we have to... First of all, what I'll say is that the train guard investment we've made stands alone on its own business case and we've seen the opposite of productivity and the safety benefits associated with that. when you get into a competitive process, as you'd appreciate, you know, we've really reset our structured cost base. And so, you know, I will say, as I said earlier in the call, that based on the, more broadly, based on the basket of contracts we've renegotiated since July 25, we've not seen a material change in rate, haulage rate.

Okay and so we're coming into this FY28. I presume we should be seeing most of those contracts get rolled this year? And where I'm coming from is when you look at the broader market, is it really just AZJ which carries spare LOCO capacity or is there still spare capacity across the industry?

It's difficult to say. I can't speak about our customers' capacity. I mean, we are always focused on keeping our capacity utilised. And up until the cessation of the previously announced contract in the Hunter Valley, you know, it was finally balanced, our capacity. So we're looking, as we talked about earlier, in that regard, to deploy to bulk and also retain for growth because we've got some customers, including Mac Energy, they've got their Mod 8 application through on Friday. looking to actually increase volume. So there's some spot, there's some growth and there's some redeployment. And so rather than talk about more broadly the industry, there's not been a material change in the fleet deployed in coal haulage. In relation to the stack, the FY27, 28 stack on the slide that Andrew spoke to, what I can say is we're in live tenders or late stage negotiations for all of that remaining contract volume expiring over that period. So I obviously can't get into customer specific details. We're also though, just to remind you, we're competing for contestable competitive volume that isn't actually shown in that current pipeline at the moment as well. So the difference between the near term re-contracting and the contracting we've just announced is that it's around 10 smaller volume contracts rather than another large base load re-contract like the one announced today.

Okay, that's great. And then one final question on the CapEx side. The drop in the CapEx spend for coal for the sustainable side in FY26, Is that a reflection that you just didn't need to do the maintenance on a whole lot of wagons and locos because contracts come to an end and you're going to park them in sheds and the equivalent and so it's just a permanent step down?

Not at all Ian. It's partly cyclical in timing and also I may suggest the result of good planning over the last decade. I mean to give you some colour we have done the mid-life overhauls for our entire 105 strong electric loco fleet in Queensland over the last 10 years. We've also built our own Gelellan wheel overhaul facility in Gelellan and we're now halfway through our 5,500 wagon mid-life overhauls. We've invested in south-east Queensland or the West Moreton corridor to grow with our customers there. So our fleet has been renewed there as well and now we're starting on our overhauls in in New South Wales as well. So we've changed. On previous call, one of the ways we're able to get more capital efficiency is by we moved from monolithic overhauls of our locomotives to component level change out of those components. So we're not replacing things early that don't need to be replaced. And the other thing we've done, we're doing a lot better in recent years and certainly still a focus for us. is making sure the periodicity of our maintenance intervals are optimised and that is by fleet, also by the corridor where those particular assets are deployed.

And if I could add in, optimised means longer periods. Yes. It's when you have interventions.

So can I extrapolate, because that was a lot of information and I'm a bit dim. Can I extrapolate that you're actually having in coal a capex number which is sustainably lower than what it's been for, say, the average of the last five years?

I think the short answer is yes. I wouldn't depart too far from the... There's a timing impact associated with it, and it'll be dependent again on recontracting and customer nominations. You know, it'll remain in the same.

I mean, probably to... Possibly the heart of the question is that there have been deliberate changes to the way maintenance is done in coal and in bulk that drops the level of planning down to a component level from a unit level. And in doing that, and application of the right technology, information technology, you can actually make really good decisions to push out the inspection and replacement intervals and can move to a more condition-based fleet. And in doing that, you'll see something that Ed was trying to point to, is you see an immediate impact because you're just pushing the timeframes out, but over the longer term, because you push those timeframes out, you'll also see some benefit in the future. But the key benefit you see is in the first couple of years that you actually do that work.

Ian, I'd say if you take a five-year view, we're probably spending $100 million a year. This is 82 or something last year. So that's the cycle. So it's going to be a bit more in the future to cover that off, but not a material change. So don't assume it's a steps change. We're still shipping 192 million tonnes. So in theory, you should be spending the same amount of money, plus you've probably got inflationary pressures as well. So it's not a material... drop.

Okay, that's great. Thank you. You're welcome.

Thank you.

Thank you. Your next question comes from Cameron McDonald from EMP. Please go ahead.

Just on the coal transformation of the $30 million benefit, is that the right number to be sort of thinking about the earnings headwind that you're then trying to offset because of the the recontracting and the yield pressure that you're seeing come through in 27? Do you want to talk about it?

Yeah, yeah, yes. I'm sure I answered it. Yes, Cameron?

Yep. Okay, so it's going to take you three years to get back to FY26 earnings effectively, all other things being... No, no, no.

So maybe, Ed, I can help with that. So we've told you about the recontracting and the, you know, so what are you going to do about it? So this transformation is about improving the underlying cost and productivity to get back. The plan is $30 million per annum is what we're targeting. So therefore, that run rate, you take that forward.

Yeah, but if that is an earnings headwind in 27 and it takes you three years to get to that run rate, all other things being equal, are you saying coal earnings will be lower for the next three years than they were in 26?

No. We're saying that the transformation benefits, we're putting them in to protect earnings going forward from the 27 little.

We don't give guidance by business unit, Cameron, as you know. And as Andrew has noted, earnings will be lower in FY27 because of the lower contract volume and lower yield. We've got more recontracting to do. it will depend. We're very focused on, I'm very focused personally, on rebuilding earnings and recovering earnings. That's why we're announcing the transformation plan today.

Okay, great. Then just on the network, This year, FY27, is the final year of getting some previous period revenue cap adjustments coming through. What is that number expected to be in 27, please? Because on the slides, you've got something between 60 and 101.

Yeah, the number in 27 is 60, 6-0, and we expect about 60% of that to drop to EBITDA.

60% Cool, thank you. Just in terms of where you're at in terms of the building and this is the BHP South Australia contract you're building a depot at Pimber to facilitate all that. Where are you in that process and how much more is to spend in FY27? So just

to go back a little bit into where we started the contract. We started with a temporary terminal and then we talked about moving from a temporary... As the volume is built, we would have to exit the temporary terminal and move into the permanent terminal. So, George, do you want to just talk about where we are in that process?

Yeah, thanks, Andrew. The team did a fantastic job getting that temporary terminal up and running in what was three months, Cameron, for the first train to run on 1 October. We're now going through the approval process with the South Australian Government and also an Indigenous Land Use Agreement to then build the permanent terminal adjacent to the temporary terminal. How much of that permanent terminal we get built and how much capex we spend in FY27 will depend on how quickly those approvals and bill you as get in place. But I'd be saying it could be 10 to 20 million and we'll have a better idea when we come to the half year results. So happy to give an update then. but that range I mentioned is reflected in our FY27 CAPEX guidance.

Okay, great. And then Andrew, just while you've got the floor there, TGE has been in the press either looking for a new owner or looking for some capital support with a partner. Can you either confirm or rule out that, you know, Horizon would be looking to inject capital of any description into TGE?

That's not a particularly fair question, is it? I'm talking about one of my customers, but what I would say is when we started the contract and the business of containerised freight, which was based on the key customer of TGE, we said we'd learned a number of things from the past where we'd made mistakes and we weren't looking to repeat them. And amongst those decisions or those learnings, one of them was that we would not be a freight forwarder and compete with our customers.

Okay, great. Thank you.

Thank you. Your next question comes from Nathan Lee from Morgans. Please go ahead.

Hi, gents. Thanks for your presentations. Just the first one from me, the FY27 EBITDA guidance range, just what are the factors that swing it from top to bottom?

Do you want to talk through any of the factors?

Can do. Can do. I think you go through each of the business units and they'll have they'll have different reasons for, I guess, the risks and the opportunities, if you want to frame it that way. Network, we know, is consistent and predictable. In terms of coal, we've talked a lot about coal today. You know, the pluses and minuses associated with that. But similarly, off the base of a predictable hauled tonnage. George has spoken about bulk as well, you know, and so the the key things there are probably mostly the things that we cannot control, which would be weather, track access, those types of things. And CF is in largely the same boat, albeit we're in a much stronger position from the perspective this year than we were last year. So they're the pluses and minuses and that's the balanced position. When we look at probably the balance is the corporate costs, you'd expect corporate costs will be consistent, if not we'll be trying for lower but nonetheless. So they're the things that we've put in place, probably nothing different than what you've heard in previous years.

Yep, okay, great. Second question is with the new coal haulage contracts, you've spoken about the sort of the mix of capacity revenue and volume based revenue. I just wanted to, and also you've talked about sort of the Hawley trades, but just wanted to just get confidence that the escalation type formula for these long-dated contracts hasn't changed or if there's anything going on on that front?

If you mean CPI escalation and fuel and energy pass-through, Nathan?

Yeah.

Yeah, no, no, no material change.

Okay, great. I'm just sort of thinking about that, I suppose, from the sort of... the credit quality of the coal segment. Final one from me, just for you Ian, I suppose. You've had a chance to look into the capital management of the business. How much debt capacity do you think the group overall has within its current credit ratings?

Well, we've got roughly a billion dollars of available capacity. That's probably an area that I'd sort of look at that's available. That's, I suppose, the balance sheet, the extent to which the capacity we have, I guess, if you like, we generally use that capacity for refinancing. We'll use that as part of our refinancing as well. But if you said what was the hard number of what we could raise within the credit rating boundaries, it would be around that number.

around a billion dollars. I suppose the question then goes back to what's stopping you doing more buyback?

So, Nathan, I deliberately said and went to the process that the board uses to make a decision. I didn't say anything about stopping or starting a buyback. The board makes a decision on buybacks based on all the information it has at the time. if you look at the history we've made decisions and only last year at the half and at the prior full year and then not randomly but different times through previous periods so the board will make a decision based on the information it has at the time.

Nathan I was really hoping you'd ask me about the capital allocation framework that would be a way more exciting discussion but the point being what Andrew is saying is that we've got a very clear and disciplined capital allocation framework in which the objective is to maximise shareholder returns and we'll look at all of the opportunities to do that through that lens.

Well just on I suppose on capital allocation I mean Andrew you've previously said about how painful it had been to reduce the payout ratio. Can we assume that 90% is kind of steady state at the moment, and in franking, you can kind of continue at that 90 or above?

So I think the way I've answered that question before, Nathan, and there's no reason to change it, is that we want a payout ratio that is a good reflection of where the business is, which is where business, that is not X growth. So we need to take that into account. but we are also a business that generates an awful lot of cash from our network and our coal businesses. So the payout ratio at 90% reflects that judgment. When it comes to franking, so I'm not an expert in all of the stuff that goes into generating the franking calculation, but equally you don't want to forecast franking too far into the future, but rather look at what we've done in the past. And we've been fairly well franked in the past, and I think that's some indication of where we can be in the future. Did you want to add anything to that?

Yeah, I think it's important to note, if you have a look at our free cash flow to equity, the bottom line free cash flow, and have a look, if you look at either our statutory or underlying, the two, NPAT and free cash flow are quite aligned. So that means reinvesting back into the business at or around depreciation, which we've discussed about today. And then we've probably got a pick-up on tax because we're currently paying less tax than earnings, which the good news... So that's good news, but that also limits the franking. So two things. One is NPAT and free cash flow are aligned, so therefore a 90% payout of NPAT also means a 90% payout of free cash flow. That's important. And the second part is franking as a function of accelerated depreciation, which is good because it means we pay less tax, which means we have more capital to allocate.

Great.

Thank you.

Thank you. Once again, if you'd like to ask a question, please press VAL1 on your telephone and wait for your name to be announced. Your next question comes from Scott Ryle from Remore Equity Research. Please go ahead.

Hi there, thank you. I've got a very quick question, hopefully, so I'll just rattle through. On slide 16, George, this is probably for you, could you just tell me, over a three- to five-year timeframe, of those business units that you've put, hopefully, down on the bottom left-hand side, which is the ones that excite you most over a three- to five-year timeframe, please?

Yeah, Scott, if I heard you right, it's the chart that shows revenue broken down by commodities. Is that right?

Correct, yeah.

Yeah, got it. Okay. I mean, look, when I think about growth of the bulk business, there's three broad categories we drive growth. The first one is in better operational performance. The second one is in relation to growing with our existing customers. And the third one is new customers. If I tackle it that way, and then I'll circle back to your question. So we improved our cancellation performance in bulk quite significantly in FY27. Just in WA alone, we took 1300 cancellations in FY25 and we dropped it down by 300. We want to do that again in FY27 and then further improvements across the business in the next two years. The second lever I mentioned is grow with our existing customers. There are two that have public growth targets out there. The first one is CBH that wants to increase its average harvest and also push more of that harvest out in the first six months of the year post-harvest. The second one is BHP Copper who have public aspirations out there, of course, subject to investment decisions. The third one is growing with new customers and I mentioned earlier in the call iron ore, I mentioned phosphate rock and I mentioned rare earths. So if you step back to your question then, Scott, grain, I'm excited about the growth in grain, particularly in Western Australia and South Australia. The second one is copper. South Australia has two-thirds of Australia's copper reserves. That's the reason why we invested in the one-rail business a few years ago. And the third one I'd mention is phosphate rock and rare earths. And when we talk about rare earths, They're not big volumetrically in terms of exports, but much like copper projects, they need inputs into the mining process. And some of the rare earth projects, particularly in the centre of Australia, but also Western Australia, we're excited to look to partner with long term. So if I was to project five years down the track, I'd love to see a bigger percentage of grain, bigger percentage of copper and a bigger percentage of rare earths in that diagram. and I think containerised freight volumes will hopefully grow with GDP longer term. And then if you were to combine it with containerised freight, I expect you'll see a big wedge there called vehicles post our investment in auto wagons, which, as you can tell, I'm pretty excited about.

Yep, all right. Thank you. Ed, I'm Cole. I'm 17. I'm a simple person and I love waterfall sharks, so... Can I just summarise, you've given a number of answers to this over the course of the call. So you talked about, if I could look forward to fiscal 27 and look at what's changed relative to 26. So you said volumes are about the same, pump holes about the same. Operating costs, you said a similar kind of expectation for 27. I'm thinking price indexation shouldn't change too much, but most of the yield change should be the red bar, the customer mix. And then I'm not sure that net access and fuel actually having a gain year on year is achievable again. So can you just correct me on anything I've said there? I'm trying to wrap it all into one package for my simple brain. Thank you.

Thanks, Scott. I think you summarised it very well, especially the bit about net access and fuel not repeating in FY27.

All right. Fantastic. Thank you. And then, Andrew, just one last question for you. You mentioned the ERP earlier on the call. Can you just remind us when that goes live, please?

So that's due... June next year. Yes. 1st of July, 2027.

Okay, so you're right. Okay, thank you. Let's go ahead. Thank you.

Thank you. There are no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.