AZJ: -10.34%: The freighter put out a largely in-line FY26 result, though the market instead focussed on a softer FY27 outlook for its coal haulage business. As we flagged ahead of the result, FY26 was relatively well understood and the key question was whether growth elsewhere could offset pressure on coal volumes – today’s guidance suggests that task will be harder than hoped.
Key results:
- Earnings (EBITDA) of $1.72bn, up 9.4% and in line with consensus.
- Revenue of $4.19bn, slightly ahead of $4.16bn expected.
- Free cash flow increased 11% to $573m.
- Final dividend of 10.5cps.
- FY27 earnings (EBITDA) guidance of $1.73–1.78bn, implying relatively modest growth.
- FY27 dividend guidance of 23–24cps.
The disappointment is coal, where FY27 EBITDA is expected to decline as contracted tonnage falls ~9% to 211mt. This is expected to outweigh some encouraging trends elsewhere, with Network, Bulk and Other all forecast to grow EBITDA in FY27.
MM’s view: Today’s reaction is understandable given the stock had performed strongly into the result and expectations were elevated. The softer coal outlook reinforces the long-term issue we highlighted earlier this month: AZJ needs growth in Network, Bulk and containerised freight to increasingly offset a mature-to-declining coal business.
The core infrastructure assets remain highly cash generative, FY27 earnings should still grow modestly, and the guided 23–24c dividend provides a reasonable yield. After today’s sharp pullback, we think the risk/reward is becoming more interesting, although evidence that non-coal earnings can materially offset weakening coal volumes remains the key.
MM remains cautiously bullish AZJ
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