4D - HALF YEAR REPORT For the half year ended 31 December 2012

Transcription

1 ASCIANO LIMITED ABN D - HALF YEAR REPORT Asciano comprises of Asciano Limited and its controlled entities. Contents Page Directors Report 1 Consolidated Income Statement 10 Consolidated Statement of Comprehensive Income 11 Consolidated Balance Sheet 12 Consolidated Statement of Changes in Equity 13 Consolidated Statement of Cash Flows Basis of preparation of the half year report Critical accounting estimates and judgments Segment reporting Acquisition of subsidiary Earnings per share Revenue and other income Expenses Finance income and expense Income tax Equity accounted investments Loans and borrowings Equity Dividends Non-controlling interests Operating leases Capital and other commitments Contingencies Events subsequent to the reporting date 32 Directors declaration 33 Independent auditor s review report to the members of Asciano Limited 34

2 ASCIANO LIMITED ABN DIRECTORS REPORT This half year report does not include all the notes of the type normally included in an annual report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2012 and any public announcements made by Asciano Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act

3 Directors report The Directors present their report, together with the consolidated half year report of Asciano Limited ( Company or Parent ) and its controlled entities (collectively referred to as Asciano ) and the auditor s review report thereon, for the half year ended 31 December Directors The following persons were Directors of the Company during the whole of the half year and up to the date of this report, unless otherwise stated: Malcolm Broomhead John Mullen Chris Barlow Robert Edgar Peter George Shirley In t Veld Geoff Kleemann Ralph Waters (appointed 23 August 2012). Operating and financial review Overview During the period, Asciano progressed its key strategic objectives of delivering value to shareholders in the medium to long term. The primary elements of Asciano s strategy and initiatives are: Targeting leadership positions in fast growing structurally attractive market sectors; Leveraging our strategic assets and deep expertise in operationally complex multi-user supply chains across freight types and modes; Collaborating with diverse stakeholders to create and deliver solutions for our customers; Attracting, developing and inspiring talented and capable people; Developing, managing and operating integrated infrastructure based supply chains by bringing together our Group capabilities; and Innovating in partnership with customers to achieve differentiated performance within standalone and integrated supply chains. Reporting structure changes During the 2012 financial year, Asciano amended its statutory reporting structure from three reportable segments to four reportable segments. This change reflected the decision to restructure the former Patrick division to separate Terminals & Logistics from the Bulk & Automotive Ports Services businesses. Asciano also changed the way it allocates corporate overhead costs to more accurately reflect the true corporate overhead cost. All first half 2012 segment comparatives in this report have been restated to reflect these changes. 2

4 Directors report Operating and financial review (continued) Change in accounting policy impact on comparatives During the 2012 financial year Asciano voluntarily changed its accounting policy in relation to the taxation treatment of customer contracts (intangible asset) as further detailed in note 1 of the financial report. The overall impact of this change resulted in a reduction in tax expense of $18.3 million for the 2012 financial year and a $24.8 million reduction in tax expense for the 2011 financial year. The opening retained reserves were also adjusted by $43.1 million in the financial statements for the 2011 financial year. The change in accounting policy was applied retrospectively and resulted in a reduction in tax expense of $0.9 million for the 2012 half year and had an impact of a 0.1 cent increase on earnings per share at 31 December There was no impact in the current year arising from the change in policy. Acquisition of subsidiary On 28 November 2012, in response to a sale process triggered by the Port of Tauranga, Asciano Limited via its subsidiary Patrick Auto, Bulk & General Ports Pty Limited acquired a further 50 per cent interest in New Zealand ports and stevedoring operator C3 Limited for AU$55.0 million, (including $13.1 million for the refinance of C3 Limited loans). This made C3 Limited a wholly owned subsidiary of Asciano Limited effective from this date. The re-measurement to fair value of Asciano s existing 50 per cent interest in C3 Limited resulted in a gain of AU$17.1 million. This amount has been included in other income in the consolidated income statement. Redevelopment of Port Botany On 18 July 2012, Asciano announced the approval by the Asciano Board of a $348 million capital investment program to comprehensively redevelop and expand its container terminal at Port Botany. The redevelopment and expansion program will include the full development of the recently leased Knuckle capacity extension and the introduction of state-of-the-art terminal handling technology. The program will increase capacity at Port Botany from 1.15 million to 1.60 million TEU per annum. Whilst still in the early stages of implementation, the program is progressing in line with schedule. Appointment of Chief Financial Officer On 5 November 2012, Asciano announced the appointment of Mr Roger Burrows as Chief Financial Officer. Mr Burrows commenced employment with Asciano on 18 February Review and results of operations The results for the financial period reflect the strength of Asciano s businesses and its unique operating capabilities. Revenue and other income for the six month period to 31 December 2012 was $1,870.6 million (31 December 2011: $1,704.1 million). Earnings before interest and tax ( EBIT ) was $375.5 million (31 December 2011: $295.0 million). Profit after tax was $199.9 million (31 December 2011: $114.8 million). Excluding the impact of a non-recurring material item, being the $17.1 million gain relating to the remeasurement of the existing investment in C3 Limited to fair value, revenue and other income for the six month period to 31 December 2012 was $1,853.5 million, EBIT was $358.4 million and profit after tax was $182.8 million. 3

5 Directors report Operating and financial review (continued) A summary of revenue and other income for the period by business segment is set out below: First half 2013 $M First half 2012 $M Increase/ (decrease) % Revenue and other income PN Coal PN Rail Terminals & Logistics (3.5) Bulk & Automotive Port Services Corporate/eliminations (33.9) (39.1) (13.3) 1, , Material items Asciano 1, , EBIT PN Coal PN Rail Terminals & Logistics (5.9) Bulk & Automotive Port Services Corporate/eliminations (29.1) (30.2) (3.6) Material items Asciano A review of the results for the financial period by operating division is set out below: PN Coal: revenues increased by 10.2% on the 2012 half year following the commencement of new contracts in Queensland and good organic volume growth from contracts in the Hunter Valley. Total revenue also included a gain of $21.5 million from the sale of land at Kooragang Island. Revenues are also impacted in the 2013 half year by the impact of access charges being billed directly to customers in the Hunter Valley. Operating revenue growth for the period (net of access and the gain on sale of the facility at Kooragang Island) was 21% driven by a 14.2% increase in tonnes and an 18.8% increase in NTKs. EBIT increased by 49.8% to $150.4 million (31 December 2011: $100.4 million) primarily driven by the continuing growth of the Queensland operations, the organic growth in Hunter valley coal chain volumes and the aforementioned gain on sale of land at Kooragang Island. EBIT also benefitted from a $5.0 million decrease in depreciation expense arising from the extension of the useful lives of the bodies of locomotives and wagons. 4

6 Directors report Operating and financial review (continued) PN Rail: revenue and other income increased by 5.3% on the 2012 half year driven by a 0.6% increase in Intermodal NTKs and a 7.7% increase in Bulk Rail NTKs. Intermodal revenues increased 3.7% on the 2012 half year due to strong Express growth in East-West services and growth in SuperFreighter services within Queensland and on the East-West route. Bulk Rail revenues increased by 9.0% driven principally by the benefit of two train services under the Xstrata magnetite contract. EBIT increased 2.0% to $106.7 million (31 December 2011: $104.6 million) driven by the increased revenues and a marginal decrease in amortisation and depreciation expense. The depreciation expense was impacted by a $4.2 million reduction arising from the extension of the useful lives of the bodies of locomotives and wagons. Terminals & Logistics: revenue and other income decreased by 3.5% on the 2012 half year. Revenue from the Terminals business was flat with only a 1.7% increase in container lifts over the period. Logistics revenue declined by 7.0% driven by a decrease in services out of the Riverina and a decline of services into Adelaide. Revenues for the period ended 31 December 2011 also included one-off items relating to the settlement of outstanding legal claims. EBIT decreased to $88.4 million (31 December 2011: $93.9 million) driven primarily by a 13.0% increase in property expenses (mainly terminal lease costs) and the impact on labour costs of the enterprise agreement signed in May Bulk & Automotive Port Services: revenue and other income increased by 33.6% on the 2012 half year driven by new stevedoring contracts (including a full six month contribution from the contract with Agility Services for services on the Gorgon project in Western Australia) and increased demand for bulk commodity services. The Autocare business reported a 14.0% increase in revenue driven by a 43.3% increase in vehicle storage days and a 9.2% increase in vehicles carried. EBIT excluding material items increased by 59.7% to $42.0 million (31 December 2011: $26.3 million) primarily due to the revenue drivers identified above as well as the contribution of equity investments most notably Geelong Port and AAT. Depreciation and amortisation costs increased to $147.9 million (31 December 2011: $141.8 million) reflecting increased depreciation associated with the capital expansion of the business partially offset by a lower amortisation charge resulting primarily from the cessation of amortisation of the Autostrad technology which was sold in June Net finance expenses for the period were $97.4 million (31 December 2011: $133.2 million including material item of $13.2 million (loss) relating to the write-off of deferred establishment costs following the refinancing of $1.44 billion of syndicated loan facilities in October 2011). The reduction in the net finance expense is primarily a reflection of lower interest rates in the current period and the capitalisation of $8.2 million in interest to capital projects under construction. Financing Asciano s funding consists of a mix of revolving credit facilities, US dollar denominated five, seven, 10 and 12 year bonds (swapped to Australian dollars) and working capital facilities (which are currently partly drawn in the form of cash, bank guarantees and performance bonds). Asciano s loans and borrowings mature in the period between October 2013 and April

7 Directors report Operating and financial review (continued) Asciano had total committed credit facilities of $1,450.0 million (30 June 2012: $1,450.0 million) and net bank debt of $777.2 million at 31 December 2012 (30 June 2012: $600.6 million). Of the total committed credit facilities $895.0 million of bank debt and $117.6 million of working capital were utilised at 31 December As a result the balance of undrawn credit facilities at 31 December 2012 was $437.4 million (30 June 2012: $562.8 million). Dividends The Board of Directors determined on 19 February 2013 that a fully franked interim dividend of 5.25 cents per share is payable by Asciano Limited on 20 March 2013 (31 December 2011: 3.5 cents per share). The record date for entitlement to the dividend is 7 March The dividend of $51.2 million is not recognised as a liability at 31 December Future developments Based on the first six weeks of trading for the second half of the financial year, the contribution from new contracts and current customer commitments, Asciano again expects to report revenue and EBIT before material items for the second half above the prior comparative period. The result will be dependent on no further material deterioration in the outlook for the domestic and global economy and no changes to current customer commitments. In the opinion of the Directors, it would prejudice the interests of Asciano to provide additional information relating to likely developments in the operations of Asciano and the expected results of those operations in financial periods subsequent to 31 December Events subsequent to the reporting date Other than for the resolution to pay a fully franked interim dividend of 5.25 cents per share, there has not arisen in the interval between 31 December 2012 and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Board of Directors, to affect significantly the operations of Asciano, the results of those operations, or the state of affairs of Asciano in future financial periods. Rounding of amounts The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the Directors report and financial report. Amounts in the Directors report and financial report have been rounded off in accordance with that Class Order to the nearest one hundred thousand dollars, or in certain cases, to the nearest one thousand dollars. 6

8 Directors report Auditor s independence declaration A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page and forms part of the Directors report. In line with previous years and in accordance with the Corporations Act 2011, the Directors report including the Operating and financial review is unaudited. Notwithstanding this, the Directors report including the Operating and financial review contains disclosures which are extracted or derived from the Consolidated Interim Financial Report for the half year ended 31 December 2012 which has been reviewed by the Group s Independent Auditor. This report is made in accordance with a resolution of the Directors. Malcolm Broomhead Chairman Sydney 19 February

9

10 ASCIANO LIMITED ABN FINANCIAL REPORT 9

11 Consolidated Income Statement Restated 1 First half First half Note $M $M Revenue from services rendered 6 1, ,686.3 Other income Share of net profit of associates Operating expenses excluding depreciation and amortisation 7 (1,356.9) (1,275.4) Profit before depreciation, amortisation, net finance costs and tax Depreciation 7 (125.9) (116.9) Amortisation 7 (22.0) (24.9) Profit before net finance costs and tax Finance income Finance expense other 8 (100.5) (129.5) Finance expense material items 8 - (13.2) Total finance expense 8 (100.5) (142.7) Profit before tax Tax expense 9 (78.2) (47.0) Profit after tax Attributable to: Owners of Asciano Limited Non-controlling interests Earnings per Parent share Basic and diluted cents The restatement relates to the voluntary change in accounting policy for the treatment for taxation of customer contracts as detailed in note 1. The above Consolidated Income Statement should be read in conjunction with the accompanying notes. 10

12 Consolidated Statement of Comprehensive Income Restated 1 First half First half $M $M Profit after tax Other comprehensive income/(loss) Items that will not be reclassified to profit or loss: Defined benefit superannuation funds actuarial losses (32.8) (24.4) Income tax benefit on items that will not be reclassified to profit or loss Total items that will not be reclassified to profit or loss net of tax (23.1) (17.0) Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences for foreign operations (1.6) (0.1) Net gain/(loss) change in fair value of cash flow hedges 1.7 (4.2) Income tax (expense)/benefit on items that may be reclassified subsequently to profit or loss (0.2) 1.4 Total items that may be reclassified subsequently to profit or loss net of tax (0.1) (2.9) Other comprehensive loss, net of tax (23.2) (19.9) Total comprehensive income Total comprehensive income attributable to: Owners of Asciano Limited Non-controlling interests The restatement relates to the voluntary change in accounting policy for the treatment for taxation of customer contracts as detailed in note 1. The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 11

13 Consolidated Balance Sheet As at 31 December 2012 December June Note $M $M Current assets Cash and cash equivalents Trade and other receivables Prepayments Inventories Derivative financial assets Assets classified as held for sale Total current assets Non-current assets Trade and other receivables Prepayments Inventories Derivative financial assets Net deferred tax assets Equity accounted investments Property, plant and equipment 3, ,581.7 Intangible assets 2, ,750.3 Other assets Total non-current assets 6, ,586.6 Total assets 7, ,162.2 Current liabilities Trade and other payables Loans and borrowings Derivative financial liabilities Current tax liabilities Provisions and employee benefits Total current liabilities Non-current liabilities Trade and other payables Loans and borrowings 11 2, ,858.2 Derivative financial liabilities Provisions and employee benefits Total non-current liabilities 3, ,074.4 Total liabilities 3, ,814.8 Net assets 3, ,347.4 Equity Contributed equity 12 8, ,604.7 Reserves (4,962.0) (4,963.7) Retained earnings (169.4) (306.1) Equity attributable to owners of Asciano Limited 3, ,334.9 Non-controlling interests Total equity 3, ,347.4 The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes. 12

14 Consolidated Statement of Changes in Equity Contributed equity Reserves Retained earnings Total Noncontrolling interests $M First half 2013 Balance at 1 July ,604.7 (4,963.7) (306.1) 3, ,347.4 Profit after tax Other comprehensive income ( OCI ): Net movement in cash flow hedge reserve Defined benefit superannuation funds actuarial losses - - (32.8) (32.8) - (32.8) Foreign currency translation differences for foreign operations - (1.6) - (1.6) - (1.6) Income tax (expense)/benefit on OCI - (0.2) Total comprehensive (expense)/income - (0.1) Transactions with owners in their capacity as owners: Final dividend paid - - (39.2) (39.2) - (39.2) Employee equity benefits (39.2) (37.4) - (37.4) Balance at 31 December ,604.7 (4,962.0) (169.4) 3, ,486.7 First half 2012 Balance at 1 July 2011, as previously reported 8,607.4 (4,968.6) (431.6) 3, ,217.8 Impact of change in accounting policy - - (18.3) (18.3) - (18.3) Restated balance at 1 July ,607.4 (4,968.6) (449.9) 3, ,199.5 Profit after tax Other comprehensive income ( OCI ): Net movement in cash flow hedge reserve - (4.2) - (4.2) - (4.2) Defined benefit superannuation funds actuarial losses - - (24.4) (24.4) - (24.4) Foreign currency translation differences for foreign operations - (0.1) - (0.1) - (0.1) Income tax benefit on OCI Total comprehensive (expense)/income - (2.9) Treasury shares acquired (1.8) - - (1.8) - (1.8) Transactions with owners in their capacity as owners: Final dividend paid - - (29.3) (29.3) - (29.3) Employee equity benefits (29.3) (26.1) - (26.1) Balance at 31 December ,605.6 (4,968.3) (382.1) 3, , The restatement relates to the voluntary change in accounting policy for the treatment for taxation of customer contracts as detailed in note 1. The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. Total 13

15 Consolidated Statement of Cash Flows First half First half $M $M Operating cash flows Receipts from customers 2, ,923.4 Payments to suppliers and employees (1,587.0) (1,506.9) Interest and other costs of finance paid (106.8) (131.8) Interest received Dividends received from associates Net income tax payments (107.8) (13.1) Net operating cash inflows Investing cash flows Payments for property, plant and equipment and intangible assets (318.6) (406.0) Proceeds from sale of property, plant and equipment and intangible assets Acquisition of subsidiary, net of cash acquired (39.0) - Settlement of loan to associate (13.1) - Disposal of associate investment Repayment of loans from associates Net investing cash (outflows) (366.1) (400.9) Financing cash flows Treasury shares acquired - (1.8) Final dividend paid (39.2) (29.3) Drawdown on borrowings Proceeds from refinancing of syndicated bank loans, net of transaction costs Repayment of borrowings (25.0) (800.0) Net financing cash inflows/(outflows) 80.8 (31.1) Net (decrease) in cash and cash equivalents (31.6) (143.0) Effect of exchange rate fluctuations on cash held - - Cash and cash equivalents at the beginning of the half year Cash and cash equivalents at the end of the half year The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 14

16 1. Basis of preparation of the half year report This consolidated interim financial report for the half year reporting period ended 31 December 2012 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act This half year financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2012 and any public announcements made by Asciano Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act The accounting policies adopted are consistent with those of the previous financial year with the exception of the accounting policy for determining the tax base for customer contracts as described below. Certain comparative amounts have been reclassified to conform with the current period s presentation including segment reporting (refer to note 3). Changes in accounting policies Presentation of transactions recognised in other comprehensive income From 1 July 2012 Asciano applied amendments to AASB 134 Interim Financial Reporting outlined in AASB Amendments to Australian Accounting Standards Presentation of Items of Other Comprehensive Income. The change in accounting policy only relates to disclosures and has had no impact on consolidated earnings per share or net income. The changes have been applied retrospectively and require Asciano to separately present those items of other comprehensive income that may be reclassified to profit or loss in the future from those that will never be reclassified to profit or loss. Change in accounting policy for determining the tax base for customer contracts During the 2012 financial year, Asciano changed its accounting policy for determining the tax base for customer contracts. Asciano previously determined the tax base of its customer contracts using a single tax base approach whereby the tax base of the customer contract from use and expiry was considered together. Asciano now determine the tax base of its customer contract using a dual tax base approach whereby the tax base of the customer contract from use and expiry is considered separately. As there is no tax base for customer contracts from use and the tax base for customer contracts from expiry is not considered recoverable, there was a significant increase in the deferred tax liabilities associated with customer contracts as a result of the change in policy in Asciano believes the change in accounting policy will result in the financial report providing reliable and more relevant information as it better reflects the expected manner of recovery of the assets and Asciano s ability to utilise the tax base. There was no impact in the current year arising from the change in policy. The change in accounting policy was applied retrospectively and resulted in a reduction in tax expense of $0.9 million for the half year ended 31 December 2011 and an increase of 0.1 cent in both the Parent s reported basic and diluted earnings per share at 31 December

17 1. Basis of preparation of the half year report (continued) Going concern Asciano has a net current asset deficiency at 31 December 2012 of $119.4 million. Given that Asciano has an unutilised syndicated revolving credit facility of $405.0 million maturing in October 2016, the Directors believe Asciano has the capacity to pay its debts in full as and when they fall due. 2. Critical accounting estimates and judgments The preparation of half year financial reports requires management to make estimates, judgements and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation and critical judgements in applying accounting policies that have had the most significant effect on the amounts recognised in the financial statements are described below. Further details of the nature of these assumptions and conditions may be found in the annual report for the year ended 30 June Revision of useful lives of plant and equipment As a result of a detail review and analysis of the current fleet of locomotives and wagons, including an assessment of expected future usage and current condition, the useful lives of the core bodies of locomotives and wagons were adjusted upwards from 25 to 30 years to more accurately reflect their useful lives. As part of this review the residual value of these assets was also revised downward to reflect the impact of extending the useful lives. The change in accounting estimate has been applied with effect from 1 July The net effect of these changes for the half year ended 31 December 2012 was a decrease in depreciation expense for the Group of $9.2 million. Assuming all assets are held until the end of their estimated useful lives, the net effect of the change in depreciation expense for the 2013 financial year is forecast to $18.3 million. Impairment Asciano assesses at least annually whether goodwill and intangible assets with indefinite useful lives are impaired. These calculations involve an estimation of the recoverable amount of the cash-generating units ( CGUs ) to which goodwill and intangible assets with indefinite useful lives have been allocated. The recoverable amounts of CGUs have been determined, based on value-in-use calculations. These calculations require the use of assumptions. 16

18 2. Critical accounting estimates and judgments (continued) Impairment (continued) Asciano assesses impairment by evaluating conditions specific to Asciano and to the particular asset, which may lead to impairment. These include technological, market, economic or legal environments in which Asciano operates. If an indicator of impairment exists, the recoverable amount of the asset is reassessed. Taxation Interpretation and application of tax legislation Asciano s accounting for income tax requires management s judgement as to the types of arrangements considered to be subject to tax. Judgement is also required in relation to the application of existing tax legislation, including the impact of Australian Taxation Office interpretation and ongoing Federal Government reviews of existing legislation. Furthermore, from time to time, in the ordinary course of business Asciano may receive enquiries from the Australian Taxation Office regarding the treatment of various transactions. When responding to these matters, management uses its judgement to interpret the relevant legislation and case law applying to the particular matter. As a result of these uncertainties, there is a possibility that changes in circumstances may occur. These changes may result in amendments to amounts previously claimed as deductions and/or the measurement of deferred taxes. Any such change may result in a corresponding adjustment in the income statement. Incident provision Where Asciano is involved in an incident, such as a train derailment, and it is probable that Asciano will be held liable for the consequential damage, a provision equal to the estimated cost of third party claims is set aside. The cost estimate where material, is made by loss adjusters but the final quantum of the potential claims can be significantly different to the estimate. Adjustments to the provision are booked to earnings in the period in which the finding is made. Site restoration provision The provision is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date, based on current legal requirements and technology. Future restoration costs are reviewed annually and any changes are reflected in the present value of the provision at the end of the reporting period. Significant uncertainties exist as to the amount of restoration obligations that will be incurred due to the uncertainty as to the remaining life of existing operating sites, and the impact of changes in environmental legislation. Assumptions have been made as to the remaining life of existing sites based on studies conducted by independent technical advisers. 17

19 3. Segment reporting First half 2013 $M PN Coal PN Rail Terminals & Logistics Bulk & Auto Port Services Eliminations/ unallocated Revenue External revenue ,826.6 Inter-segment revenue (39.2) (34.3) 1,826.6 Other income Revenue and other income (33.9) 1,853.5 Operating expenses (297.0) (532.1) (277.3) (263.6) 13.1 (1,356.9) Share of net profit of associates Earnings before interest, taxes, depreciation, and amortisation (20.8) Depreciation (44.1) (47.9) (21.7) (10.0) (2.2) (125.9) Amortisation (14.4) (0.2) (1.1) (0.2) (6.1) (22.0) Earnings before interest and taxes (29.1) Finance income Finance expense (100.5) (100.5) Profit before material items and tax Material items Re-measurement to fair value of existing investment in C3 Limited 17.1 Profit before tax Tax expense Profit after tax Total (78.2) 1 Includes $21.5 million from the sale of non-current assets. 18

20 3. Segment reporting (continued) First half 2012 (Restated) 1 $M PN Coal PN Rail Terminals & Logistics Bulk & Auto Port Services Eliminations/ unallocated Revenue External revenue ,686.3 Inter-segment revenue (44.3) (39.7) 1,686.3 Other income Revenue and other income (39.1) 1,704.1 Operating expenses (309.6) (495.4) (282.9) (201.9) 14.4 (1,275.4) Share of net profit of associates Earnings before interest, taxes, depreciation, and amortisation (24.7) Depreciation (34.7) (51.4) (21.5) (7.9) (1.4) (116.9) Amortisation (14.5) (1.1) (4.9) (0.3) (4.1) (24.9) Earnings before interest and taxes (30.2) Finance income Finance expense (129.5) (129.5) Profit before material items and tax Material items Write-off of deferred establishment costs (13.2) Profit before tax Tax expense (47.0) Profit after tax Total 1. This segment note has been restated for the change to Asciano s statutory reporting structure from three reporting segments to four reporting segments as well as for the voluntary change in accounting policy for the treatment for taxation of customer contracts as detailed in note 1. 19

21 3. Segment reporting (continued) $M PN Coal PN Rail Terminals & Logistics Bulk & Auto Port Services Eliminations/ unallocated Total Segment assets 31 December , , , , June , , , , Acquisition of subsidiary In response to a sales process triggered by the Port of Tauranga, the Asciano Group obtained control of C3 Limited by acquiring the remaining 50 per cent of the shares and voting interests in the company on 28 November As a result, the Group s equity interest in C3 Limited increased from 50 percent to 100 percent. C3 Limited is the leading provider of ports and stevedoring services in New Zealand operating in 14 ports across the country as well as providing forestry services in three ports in Australia. C3 Limited is a strategic asset for the Bulk & Automotive Port Services division and this acquisition delivers Asciano a leading position in the New Zealand port services market and the opportunity to drive cross fertilisation benefits, leveraging the skills and experience of both C3 and our Australian businesses. The acquisition will provide new opportunities to expand the Bulk & Automotive Port Services division s activities and drive further growth. Since acquisition, C3 Limited has contributed revenue of $8.2 million and profit after tax of $0.9 million to the Group s results. Management estimate that if the acquisition had occurred on 1 July 2012, then the consolidated revenue would have been $47.7 million and consolidated profit for the period would have been $4.7 million higher. In determining these amounts, management has assumed no provisional fair value adjustments arise on the date of acquisition pending completion of the purchase price fair value adjustment exercise. 20

22 4. Acquisition of subsidiary (continued) Consideration transferred The following table summarises the acquisition date fair value of each major class of consideration transferred Note $M Cash paid 41.9 Less cash acquired (2.9) Net cash consideration 39.0 Identifiable assets acquired and liabilities assumed The following summarises the recognised amounts of net assets acquired and liabilities assumed at the acquisition date $M Cash and cash equivalents 2.9 Trade and other receivables 14.6 Inventories 2.1 Property, plant and equipment 22.0 Deferred tax assets 1.2 Investments 2.4 Trade and other payables (5.4) Provisions (5.3) Loans and borrowings (28.4) Total net identifiable tangible assets 6.1 The recognised amounts of assets acquired and liabilities assumed at the acquisition date are subject to change pending the completion of the purchase price fair value adjustment exercise. Goodwill Goodwill arising from the acquisition has been recognised as follows: 2013 $ M Total cash consideration for 50% interest acquired 41.9 Fair value of existing 50% interest in C3 Limited 25.3 Total consideration for 100% interest 67.2 Fair value of identifiable tangible assets (6.1) Goodwill on consolidation 61.1 The re-measurement to fair value of Asciano s existing 50 per cent interest in C3 Limited resulted in a gain of $17.1 million. This amount has been included in Other income in the consolidated income statement. 21

23 5. Earnings per share Restated 1 First half First half Cents Cents Parent basic and diluted earnings per share The calculation of earnings per share was based on the information as follows: $M $M Profit attributable to Parent shareholders Basic weighted average number of ordinary shares 974, ,065 Diluted weighted average number of ordinary shares 975, ,318 1 The restatement relates to the voluntary change in accounting policy for the treatment for taxation of customer contracts as detailed in note Revenue and other income First half First half $M $M Revenue Services rendered 1, ,686.3 Other income Lease rental income Net profit from sale of non-current assets Re-measurement of original C3 Limited investment to fair value Other The net profit from sale of non-current assets in the period to 31 December 2012 is inclusive of a gain of $21.5 million in respect of the sale of land at Kooragang Island in the Hunter Valley. Other income in the period to 31 December 2011 is inclusive of compensation received in respect of consequential damages suffered as a result of subsidence and crumbling pavement works previously carried out by a third party at the Port Botany Terminal site. 22

24 7. Expenses First half First half $M $M Employee benefits Rail access Fuel, oil and power Repairs and maintenance Rental expense relating to operating leases Rates and taxes Hire expenses Insurance related Other Operating expenses excluding depreciation and amortisation 1, ,275.4 Depreciation Amortisation Total operating expenses 1, ,

25 8. Finance income and expense The net interest expense for the period is as follows: First half First half $M $M Interest income Interest expense (100.8) (120.0) Hedge ineffectiveness recognised in the Income Statement Net interest expense (89.0) (109.7) The finance income and expense are reconciled to the Income Statement and Statement of Comprehensive Income as follows: First half First half $M $M Recognised in the Income Statement Interest income Interest expense (109.0) (120.0) Capitalised interest Hedge ineffectiveness recognised in the Income Statement Gain on hedges not in a derivative relationship Amortisation of capitalised borrowing costs (2.0) (2.9) Commitment and other facility fees (4.6) (5.9) Unwind of discount on long term provisions (1.8) (1.5) Finance expense other (100.5) (129.5) Write-off of deferred establishment costs - (13.2) Finance expense material items - (13.2) Finance expense (100.5) (142.7) Recognised directly in the Statement of Comprehensive Income Changes in fair value of cash flow hedges, net of tax 1.2 (2.9) Foreign currency translation differences for foreign operations (1.1) (0.1) Finance income/(expense) recognised directly in the Statement of Comprehensive Income, net of tax 0.1 (3.0) 24

26 8. Finance income and expense (continued) Write-off of deferred establishment costs As the proceeds of the new loan facilities in October 2011 were used to repay the drawn down portion of the $1.44 billion of existing syndicated loan facilities (refer to note 11), an amount of $13.2 million of deferred establishment costs relating to the extinguished syndicated loan facilities was charged to the Income Statement. As the proceeds of the prior year bond issuances were substantially used to repay the syndicated loan facility (refer to note 11), an amount of $10.9 million of deferred establishment costs relating to the syndicated loan facility was charged to the Income Statement in the 2011 financial year. De-designation of interest rate swaps As a direct consequence of the bond issuance in September 2010 and April 2011, the notional value of Asciano s interest rate swap hedge book exceeded the balance of the bank debt at those dates. As a result, the ineffective portion of the fair value of the hedges, amounting to $42.3 million in 2011, was transferred from the hedge reserve to the Income Statement. 9. Income tax Restated 1 First half First half $M $M Reconciliation between profit before tax and income tax expense Profit before tax Income tax at 30% Other non-deductible items Recognition and derecognition of temporary differences Non-assessable equity accounted profit (2.9) (2.4) Non-assessable equity accounted profit on revaluation of C3 Limited (5.1) - Non-assessable income (1.4) (2.2) Prior period under provision Net capital gain on sale of assets Income tax expense Income tax recognised directly in equity Revaluation of derivatives 0.2 (1.4) Actuarial losses and gains on defined benefit funds (9.7) (7.4) (9.5) (8.8) 1. The restatement relates to the voluntary change in accounting policy for the treatment for taxation of customer contracts. 25

27 10. Equity accounted investments December June $M $M Equity accounted investments Asciano s share of profit after tax in its equity accounted investees was $9.7 million (31 December 2011: $8.1 million). Summary financial information for associates, not adjusted for % ownership held by Asciano, is as follows: Owned First half 2013 First half 2012 % $M $M Profit/(loss) before tax: 1-Stop Connections Pty Limited Australian Amalgamated Terminals Pty Limited Albany Bulk Handling Pty Limited Car Compounds of Australia Pty Limited Geelong Unit Trust C3 Limited Patrick Portlink (SA) Pty Limited Auckland Stevedoring Company Limited Insync Solutions Smart Cargo Logistics Limited Income tax expense (5.0) (8.0) Profit after tax All associates were incorporated or formed in Australia, apart from Auckland Stevedoring Company Limited, Insync Solutions and Smart Cargo Logistics Limited which are incorporated in New Zealand. These associate investments where recognised on the consolidation of C3 Limited into the Asciano Group. 1. Asciano Limited acquired the remaining 50 percent interest in C3 Limited on 28 November 2012 thereby making C3 Limited a wholly owned subsidiary (see note 4) effective from that date. 2. Asciano Limited sold its 50 percent interest in Patrick Portlink (SA) Pty Limited on 30 September Equity accounted investments acquired on consolidation of C3 Limited. 26

28 11. Loans and borrowings December June $M $M Current Working capital facility Total current loans and borrowings Non-current Syndicated bank loan US dollar bonds 1, ,947.1 Unrealised fair value loss on US dollar bonds Capitalised borrowing costs (15.3) (17.1) Total non-current loans and borrowings 2, ,858.2 Total loans and borrowings 2, ,858.2 On 24 October 2011, Asciano Limited entered into new A$1.45 billion syndicated loan facilities to refinance A$1.44 billion of existing bank facilities. The refinancing involved the extinguishment of the A$300.0 million and A$500.0 million syndicated bank loans maturing in May 2012 and December 2014 respectively, the A$500.0 million syndicated revolving credit facility maturing in December 2013 and the A$140.0 million working capital facility maturing in December Bank facilities The following table provides details of the components of Asciano s bank facilities and cash: December 2012 June 2012 $M Maturity Facility Utilised Facility Utilised Syndicated revolving credit facility October Syndicated revolving credit facility October Less: cash and cash equivalents - (117.8) - (149.4) Net bank debt 1, , Working capital facilities 1 October , , The $117.6 million of drawn working capital facilities at 31 December 2012 consisted of $25 million (June 2012: $50 million) of cash and $92.6 million (June 2012: $87.2 million) in respect of performance bonds and bank guarantees. Asciano pays interest on its bank facilities at a margin above the bank bill swap rate. As at 31 December 2012, Asciano s outstanding interest rate swaps hedged 87% of the net bank debt (30 June 2012: 100%). 27

29 11. Loans and borrowings (continued) US dollar bonds The following table provides details of the components of the US dollar bonds: December 2012 June 2012 Maturity US$M A$M US$M A$M US dollar 5 year bonds September US dollar 7 year bonds April US dollar 10 year bonds September US dollar 12 year bonds April Discount on US dollar bonds (5.7) (5.4) (6.0) (6.0) 1, , , ,947.1 The US dollar bonds maturing in 2015 and 2020 are fully hedged by cross currency swaps, which were entered into at the time the bonds were priced, to convert US dollar fixed rate borrowings into Australian dollar fixed rate borrowings. The US dollar bonds maturing in 2018 and 2023 are fully hedged by cross currency swaps, which were entered into at the time the bonds were priced, to convert US dollar fixed rate borrowings (in combination with the redesignated interest rate swaps) into Australian dollar fixed rate and Australian dollar floating rate borrowings. 28

30 12. Equity Movement in number of issued shares December 2012 Parent Allotment date Price $ Number of shares $M Balance at 1 July ,385,664 8,604.7 Balance at 31 December ,385,664 8,604.7 Movement in number of issued shares/units June 2012 Parent Allotment date Issue price $ Number of shares/units $M Balance at 1 July ,926,103,883 8,607.4 Share buy-back (retained as treasury shares) 18 November (1.8) Share consolidation 15 December 2011 (1,950,718,219) - Transaction costs, net of tax - (0.2) Treasury shares allocated Treasury shares acquired - (1.3) Balance at 30 June ,385,664 8, Dividends The Board determined on 19 February 2013 that a fully franked interim dividend of 5.25 cents per share will be payable by the Company on 20 March 2013 (31 December 2011: 3.5 cents per share). The record date for entitlement to the dividend is 7 March The dividend of $51.2 million is not recognised as a liability at 31 December

31 14. Non-controlling interests December December $M $M Contributed equity - - Reserves Retained earnings Other non-controlling interests Other non-controlling interests relate to the 20% of Patrick Autocare Pty Limited. Movement in non-controlling interests The following table provides details of the movement in non-controlling interests: Contributed equity Balance at 1 July December December $M $M - - Balance at 31 December - - Reserves Balance at 1 July Balance at 31 December Retained earnings Balance at 1 July Total comprehensive income Balance at 31 December Total

32 15. Operating leases December June $M $M Non-cancellable operating lease rentals are payable as follows: Within one year One year or later and no later than five years Later than five years , ,295.3 Asciano leases property under non-cancellable operating leases expiring between two to 46 years. Leases generally provide Asciano with a right of renewal, at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria. 16. Capital and other commitments December June $M $M Plant and equipment Contracted capital expenditure committed but not yet payable: Within one year One year or later and no later than five years Later than five years Maintenance Non-cancellable maintenance contracts committed but not yet payable: Within one year One year or later and no later than five years Later than five years Other Non-cancellable other contracts committed but not yet payable: Within one year

33 17. Contingencies Litigation From time to time, Asciano is subject to litigation and claims during the normal course of business. The Board has given consideration to such matters which are or may be subject to litigation at the half year end and, subject to specific provisions raised, is of the opinion that no material liability exists. Environmental liabilities Asciano provides for all known environmental liabilities. While the Board believes that its provisions for environmental rehabilitation are adequate, there can be no assurance that material new provisions will not be required as a result of new information or regulatory requirements with respect to known sites or identification of new remedial obligations at other sites. 18. Events subsequent to the reporting date Other than for the resolution to pay a fully franked interim dividend of 5.25 cents per share (refer to note 13), there has not arisen in the interval between 31 December 2012 and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Board, to affect significantly the operations of Asciano, the results of those operations, or the state of affairs of Asciano in future financial periods. 32

34 Directors declaration In the opinion of the Directors of Asciano Limited ( Company ): 1. the financial statements and notes, set out on pages 10 to 32, are in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the consolidated entity s financial position as at 31 December 2012 and of its performance for the half year ended on that date; and (b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and 2. there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Directors. Malcolm Broomhead Chairman Sydney 19 February