Group hits contracts ‘beat-up’

Asciano chief executive John Mullen says the group plans to cut another 500 jobs.Ports and rail group Asciano has lashed out at suggestions high rail transport costs are forcing unprofitable coalmines to stay open.

After Asciano chief executive John Mullen revealed plans to cut a further 500 jobs, the head of the group’s Pacific National unit, David Irwin, said the hit coal miners were taking from take-or-pay contracts had been exaggerated.

Take-or-pay contracts lock miners into a fixed cost for rail haulage, regardless of whether they actually ship the coal or not.

”It is a real beat-up to suggest that the only reason coalmines continue to produce is because of the onerous charges that would come their way to us from a take-or-pay perspective if they stopped,” Mr Irwin told investors at a briefing in Sydney on Thursday.

”Our charge in the scheme of the total cost of the mine is insignificant.”

Pacific National is at present renegotiating many of its rail contracts with coal producers as the miners seek to cut costs amid weak coal prices.

Many in the coal sector claim the contracts leave resources companies with little choice but to keep unprofitable mines in operation. Anglo American chief executive Mark Cutifani said earlier this month that take-or-pay contracts were causing some of the company’s mines to run at a loss.

Anglo is among Pacific National’s coal customers, which also include BHP Billiton, Glencore and Peabody.

Mr Irwin said take-or-pay costs per tonne had declined in recent months.

”Our take-or-pay bills we are sending to customers have gone down quite significantly,” he said.

”Through moving more of their contracted tonnes, and having less take-or-pay charge, their actual effective haulage rate per tonne has gone down.”

Mr Mullen said Asciano’s decision to cut a further 500 jobs would save the group about $90 million.

At least 80 per cent of the cuts would be made across administrative and support roles, with half to come from Pacific National and the remainder to be spread across Asciano’s business.

Asciano expects to report material items pre-tax this financial year of between $120 million and $130 million, a sizeable increase from the previous forecasts of $15 million to $25 million.

The difference can be put down mainly to the integration of Pacific National rail and savings from the restructuring.

Asciano was aiming to increase its dividend payout ratio to 50 per cent, from the present levels of 30 to 40 per cent, by 2016.

”Our dividend may not be shooting the lights out,” Mr Mullen said. ”But remember it has come from zero.”

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