--Transurban mulls disposal of U.S. toll road
--FY profit down 51% to A$54.9M
--Distribution guidance disappoints; shares fall 1.5%
(Recasts first paragraph to add possible U.S. road disposal;
details throughout)
By Ross Kelly
SYDNEY--Transurban Group (TCL.AU) said Tuesday it's mulling the
disposal of a U.S. toll road that drove a 51% slide in its annual
profit and indicated its robust Australian assets aren't invincible
to softer economic conditions at home.
The Pocahontas Parkway in the southern part of Virginia state
was constructed in anticipation of new housing developments that
never materialized due to the global financial crisis. Transurban
in June wrote down the value of the asset to zero. A related
A$138.1 million impairment charge brought the company's profit for
the year to June 30 down to A$54.9 million from A$112.5 million a
year earlier, it said Tuesday.
"The short-term growth in Pocahontas has been strong, however
the levels of traffic are still well below what we were seeing
prior to the financial crisis," Chief Financial Officer Samantha
Hogg told reporters on a conference call.
Discussions with relevant parties including lenders and
regulators about Transurban's involvement in the asset will occur
over the coming six to 12 months, Ms. Hogg said.
The road's consistent poor performance has been a blight on an
otherwise stable growth trajectory at Transurban's other six
assets, all located in Australia. Still, the company said softer
economic conditions are showing up in weaker traffic volumes across
its portfolio despite the defensive nature of toll road assets. Its
distribution guidance for the current financial year of 31 cents
per stapled security missed Deutsche Bank and Goldman Sachs
expectations of 32 cents and 33 cents, respectively.
At 0305 GMT, Transurban stapled securities were down 1.5% at
A$5.94, underperforming a wider market up 0.4%. The shares have
otherwise outperformed this year, generally because people have to
keep commuting to work when consumer confidence wanes, limiting the
impact of weaker economic conditions that only start to bite hard
if unemployment rises significantly.
Recently appointed Chief Executive Scott Charlton said the
current financial year will be transitional for the company as it
starts paying interest on some U.S. debt and completes an upgrade
of the M2 motorway in Sydney. By the 2014 financial year, however,
Mr. Charlton said toll revenue and traffic volumes should have
"caught up" with debt repayment requirements, improving the
company's free cash flow position.
Completion of the M2 upgrade could slip into the first quarter
of the 2014 financial year due to rain disrupting construction, he
said.
Transurban's underlying proportional earnings before interest,
tax, depreciation and amortization--a smoothed measure closely
watched by analysts--rose 9.1% to A$784.0 million, boosted by
higher toll revenue at its key CityLink road in Melbourne.
Write to Ross Kelly at ross.kelly@wsj.com
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