Research Update: Aurizon Operations' Capital Management To Improve Rating Headroom; 'BBB+/Stable' Rating Affirmed

Aurizon Operations Ltd. (AUO) has completed the integration of One Rail Australia (ORA)'s bulk business and the divestment of ORA's coal business. We anticipate AUO's ratio of funds from operations (FFO) to debt will remain subdued at about 33% in fiscal 2023 (ending June 30, 2023). It should improve toward 43%-47% over the next two to three years, supported by capital management initiatives to reduce debt. At the same time, the consolidated Aurizon group's FFO-to-debt ratio is likely to improve to more than 25% from fiscal 2024 onward. We affirmed our 'BBB+' long-term issuer credit rating on AUO, a subsidiary of Australia-based integrated freight railway operator Aurizon Holdings Ltd. (AUH). The stable rating outlook reflects our view that AUO will

...- Aurizon Operations Ltd. (AUO) has completed the integration of One Rail Australia (ORA)'s bulk business and the divestment of ORA's coal business. - We anticipate AUO's ratio of funds from operations (FFO) to debt will remain subdued at about 33% in fiscal 2023 (ending June 30, 2023). It should improve toward 43%-47% over the next two to three years, supported by capital management initiatives to reduce debt. - At the same time, the consolidated Aurizon group's FFO-to-debt ratio is likely to improve to more than 25% from fiscal 2024 onward. - We affirmed our '###+' long-term issuer credit rating on AUO, a subsidiary of Australia-based integrated freight railway operator Aurizon Holdings Ltd. (AUH). - The stable rating outlook reflects our view that AUO will maintain its dominant position in the above-rail coal freight market over the next 12-24 months, with an increased contribution from the bulk business....

Research Update