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.