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Overview of Aurizon Holdings Limited

The report focuses on conducting an evaluation of Aurizon Holdings Limited in terms of its operation in Australia and a foreign branch like United States. It would also focus on conducting an economic analysis of the Australian and the Chinese market where Aurizon tends to export its products. Finally, sustainability analysis and evaluation of Aurizon would also be carried out in the report.

The name of the business is Aurizon Holdings Limited and it is based in Queensland, Australia (Aurizon Holdings Limited , 2017).

Aurizon operates as a potential rail freight operator in Australia and ranks as one of the top 50 companies listed in the Australian Securities Exchange (ASX). Aurizon contributes in supporting around 250 million tons of merchandises that helps in generating a network between miners, producers and also the greater industry constituted by both international and domestic markets. Further, Aurizon also contributes in generating effective freight and logistics solutions to its clients based on a network of rail and road (Aurizon Holdings Limited , 2017).

Aurizon serves its customers in terms of helping in the movement of increased amount of coal resources amounting to greater than 500,000 tons for different markets like Japan, South Korea, China, India and also Taiwan. 

(Aurizon Limited , 2017)

Further, Aurizon also operates as a specialist in Bulk Rail Freight where it serves in generating supply chain solutions in an integrated fashion to miners, producers and other domestic and international clients (Aurizon Limited , 2017).

In the intermodal category, Aurizon operates based on rail freight for movement of large containers and also pallets between different Australian regions. 

(Aurizon Limited , 2017)

Further, Aurizon provides different types of specialist services to its clients in the form of rail designing, engineering services, construction activities, management and maintenance of construction works and also other types of supply chain services (Aurizon Limited , 2017). 

(Aurizon Limited , 2017)

The main customers of Aurizon focus on procuring different types of commodities and services associated to the mining, agricultural, retail and also associated to different industrial sectors.

The customers are located along different towns and cities across various regions of Australia. The customers purchasing coal products are based along Eastern ports and for iron products reside along the western region. Further, coal rail networking services are rendered by Aurizon to clients along Central Queensland region (Aurizon Limited , 2017).

Different competitors of Aurizon are listed as follows. 

The competitors of Aurizon are based along different regions of Australia and also along other international markets based in United States.

Aurizon Holdings Limited tends to holds the highest market share in Australia while sharing the same with its closest competitor, Asciano Limited. They are followed by companies like Intoll Group, Riverside Motorway Group and finally Engenco Limited. The same is reflected in the following illustrated below. 

 

(GuruFocus.com, 2017)

The above situation reflects that Aurizon Limited operates in a perfectly competitive market in Australia.

Trucking Services or Truck Load Services act as an effective substitute to Intermodal Shipping Services rendered by Aurizon Limited in Australia. It serves as an effective transportation system shifting cargoes across road networks (Levinson, 2015).

Main Customers of Aurizon

The demand curve for Aurizon Limited is observed to be elastic in nature such that the demand for the intermodal and rail freight services is affected owing to changes in the price structure. The freight services of Aurizon are financed by the regional and national government of Australia for helping in the reduction of prices to customers (Aurizon, 2017).

The impact of the Debbie Cyclone reflects that Aurizon has required incurring increased cost for generating repairs and also for development of haulage lines for hauling of coals. The same has affected the ability of Aurizon in generating an effective markup (Regan & Freed, 2017).

The factors of production operational in Aurizon Limited that contribute in the generation of freight services to diverse client groups are identified as under.

The productivity of the staffs involved in conducting the operations of the company based in Queensland region is enhanced through the involvement of needed flexibility and also the alignment of the human resources with necessary tools. The operational crew in Queensland was directed to go on leave during the period of low or no demand. Similarly, the identification of roles and responsibilities for the staffs also accounted for improvement of productivity.

Locomotives and trains also account for another important factor of production that helps Aurizon in effectively conducting its freight networking. The company management increasingly focused on improving the productivity of the same for generating greater returns.

Fuel and energy resources were employed by Aurizon in a considerable scale for running of train and other locomotives. Developments were brought about in the designing of trains for helping in enhancing the efficiency levels of fuel and energy consumption (Aurizon Holdings Limited , 2016).

Aurizon Limited continues its freight operations through the involvement of needed infrastructure, technology, land, plant and equipments and also machineries that amount to potential production factors for the company. It also consists of telecommunication resources with computers and other signaling systems.

The manpower resources, fuel and energy resources and trains and locomotives employed by the organization are identified to be variable factors such that the cost associated with employing the same tends to increase with growth of production and sales. On the other hand, the cost associated to building and machinery and plant and other types of equipments held by the institution are identified to ideally constitute the fixed cost for the organization. The costs associated with such factors do not increase or decrease with the increase in the level of production and sales (Harris, 2014).

The analysis of the overall cost structure of Aurizon reflects that the company has large amount of fixed factors compared to variable factors of production. The existence of larger amount of fixed costs compared to variable costs potentially reflect that the company tends to gain on greater profits and margins in periods where increased freight services are rendered by the organization. In cases however, with lower production of services the margin and profitability of Aurizon tend to get affected. The higher profits and margins are gained by Aurizon during periods of high productivity owing to the fact that fixed costs tends to remain the same and are not affected by growth in level of operations. It also reflects that Aurizon is a larger organization in terms of size.

Location of Customers

The existence of political stability in Australia with also the presence of an effective regulatory system rightly encourages the formation and growth of business enterprises in the region. Moreover, existence of sound governance policies potentially contributes in creating a safer operational environment for the business organisations (Australian Government ).

Australia

The annual inflation rate in Australia is estimated to amount to below 2 to 3 percent as targeted by the Reserve Bank of Australia. Consumer Prices were accounted to rise only by 0.2 percent that led the inflation rate to amount to 1.9 percent (Janda, 2017).

United States

The current rate of inflation in the US economy amounted to 1.39 percent while the year-to-year inflation percentage amounted to 1.73. Further, rate of monthly inflation in US was recorded to show a negative rate or deflation at around -0.07 percent during July 2017 (Stat Bureau , 2017).

Australia

The rate of unemployment in Australia amounted to 5.6 percent with a reflection on the growth of jobs in the economy. Estimates reflect that around 27,900 jobs were generated in the region that accounted for the reduction in unemployment rate (Hutchen, 2017).

United States

The current unemployment rate in United States is observed to have dropped to around 4.3 percent owing to the growth of jobs in the US Market (Mutikani, 2017).

Australia

The average rate of interest in Australia is taken to increase by around eight times which would create problems like increasing the level of mortgage in the region (McCauley, 2017).

United States

The average rates of interest in United States as a sum for total marketable and non-marketable debt amounted to 2.3 percent (Treausry Direct , 2017).

The Australian economy currently reflects going through a recessionary period with growth of large number of events like shut down of the car industry with the fall in prices of property and infrastructure. Further, the emergence of the banking crisis in Australia with also the win of Trump as President of United States further fuelled the recessionary climate in the region (Janda M. , 2017).

The currency exchange rate between Australia and China taken as the exporting country for export of services and products of the business reflects the following exchange rate.

1 AUD amounts to 5.24 Chinese Yuan.

Aurizon continually focuses on enhancing the quality of service through the development of railway and logistics networks based on building effective ties with overseas companies. Aurizon focuses on development of its base of raw materials like steel and other materials for enhancement of its service potential (Viellaris, 2017).

Aurizon is taken to effectively counter the recessionary period in Australia through its significant measures associated to cost cutting and also in terms of generation reductions in the level of capital expenditure of the organization. The same would help the company in generating affordable prices for its logistics and coal transportation services along the region. Further, a reduction in the level of fuel costs further contributes to such effect (Duyn, 2016).

Aurizon reflects growing demand for coal resources along different economies Japan and South Korea in Asia along with the Indian subcontinent. Similarly, Asian economies like Japan, China and also India are observed to be potential consumers of steel products exported by Aurizon. 

Main Competitors to Aurizon

(Aurizon , 2016)

Aurizon with a focus on carrying out its steel production activities in China is taken to face emerging challenges owing to the policy of the Chinese government to curb the production steel in the region for generating a safer environment. The same would affect its possibility in getting easy access to effective resources and employing the same for steel production (Metal Bulletin , 2017).

Analysts reflected that the exchange rates between Chinese Yuan and the Australian Dollar would be stable in the forthcoming period. The same would thus not affect the export and import trading activities carried out between the two countries. It would thus help Aurizon for exporting the coal and steel products to China in an effective fashion (Conerly, 2017).

Aurizon is required to become an active participant of the Global Reporting Initiative (GRI) in terms of reporting its sustainability practices mainly along nine different domains. The same is reflected as under. 

(Aurizon, 2014)

The Australian Government focuses on the generation of a regulatory environment for checking the emission levels from business operations and also in development of efficient supply chains. Similarly, the Australian Government also focuses on the generation of effective regulations generating greater safety in the organisations (Aurizon, 2014).

The impacts from the consumption of products and services rendered by Aurizon is rightly countered through the reduction of carbon footprint by around 2.5 percent while also enhancing the level of community engagement by around 86 percent. Further, developments of effective partnerships are generated with the customers such that the same would help in increasing of coal demand in the region.

The total consumption of coal in the OECD countries is taken to increase by around 73 percent at the close of 2035. Aurizon here acts as a active partner in the sourcing and transportation of coal products in the region (Aurizon, 2014).

Conclusions

The analysis carried out in the report reflects on the economic situation of Australia and China where Aurizon focuses on exporting its products. It also focuses on evaluating the economy of United States as a potential region where large number of employees operates along the transportation and steel development sector. The analysis also reflects on the sustainability initiatives undertaken by Aurizon and its feasibility both in reducing the impacts of consumption and also the initiatives undertaken by the Australian government based on such.

References

Aurizon . (2016). Future of Coal. Retrieved September 17, 2017, from https://sustainability2016.aurizon.com.au/library/pdf/FY2016-Future-of-Coal.pdf

Aurizon. (2017). Retrieved September 17, 2017, from News : https://www.aurizon.com.au/news/news/competiveness-is-key-to-inland-rail-infrastructure-investment

Aurizon. (2014). Aurizon Beyond 2020. Australia: Aurizon .

Aurizon. (2014). Aurizon Sustainability Report. Retrieved September 17, 2017, from

https://www.aurizon.com.au/~/media/aurizon/files/sustainability/documents/aur%201388%20sustainability%20report%2020144aurizon%20sustainabililty%20priorities.ashx

Aurizon Holdings Limited . (2017). About Us . Retrieved September 17, 2017, from https://www.aurizon.com.au/

Aurizon Holdings Limited . (2016, June 30). Appendix 4E. Retrieved September 17, 2017, from

https://www.aurizon.com.au/~/media/aurizon/files/investors/documents%20and%20webcasts/2016/full%20year%20results/fyr%202016%20appendix%204e.pdf

Aurizon Limited . (2017). Potential Cutomers. Retrieved September 17, 2017, from

https://www.aurizon.com.au/portals/potential-customers

Aurizon Limited . (2017). What We Deliver. Retrieved September 17, 2017, from

https://www.aurizon.com.au/what-we-deliver/services

Australian Government . (n.d.). Business. Retrieved September 17, 2017, from 2017:

https://www.austrade.gov.au/International/Invest/Why-Australia/Business

Conerly, B. (2017, May 30). China Exchange Rate Forecast: More Stable Than Headlines Suggest. Retrieved September 17, 2017, from https://www.forbes.com/sites/billconerly/2017/05/30/china-exchange-rate-forecast-more-stable-than-headlines-suggest/#60e850806498

Duyn, P. V. (2016, March 16). Transport outlook: larger companies will survive global economic downturn and slowdown in mining. Retrieved September 17, 2017, from https://theconversation.com/transport-outlook-larger-companies-will-survive-global-economic-downturn-and-slowdown-in-mining-55620

GuruFocus.com. (2017). Aurizon Holdings Ltd (OTCPK:QRNNF) Market Cap (M): $8,225 Mil (As of Today). Retrieved September 17, 2017, from https://www.gurufocus.com/term/mktcap/OTCPK:QRNNF/Market-Cap-M/Aurizon-Holdings-Ltd

Harris, C. (2014). Fixed and Variable Costs: Theory and Practice in Electricity. United Kingdom: Springer.

Hutchen, G. (2017, August 17). Australia's unemployment rate falls to 5.6% as jobs grow for 10th month. Retrieved September 17, 2017, from https://www.theguardian.com/business/2017/aug/17/australias-unemployment-rate-falls-to-56-as-jobs-grow-for-10th-month

Janda, M. (2017, January 6). Australia's economy: The Murphy's Law forecast for 2017. Retrieved September 17, 2017, from https://www.abc.net.au/news/2017-01-06/murphys-law-guide-to-australian-economy/8163918

Janda, M. (2017, July 26). Inflation eases, Reserve Bank 'sidelined', Australian dollar falls. Retrieved September 17, 2017, from https://www.abc.net.au/news/2017-07-26/inflation-consumer-price-index-cpi-abs-june-quarter/8744750

Levinson, M. (2015). The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, Second Edition with a new chapter by the author. United Kingdom : Princeton University Press.

McCauley, D. (2017, June 29). Interest rates could rise eight times in two years, former RBA board member John Edwards predicts. Retrieved September 17, 2017, from https://www.news.com.au/finance/economy/world-economy/interest-rates-could-rise-eight-times-in-two-years-former-rba-board-member-john-edwards-predicts/news-story/25db488a9f4f9f2eab87b46e3b72333f

Metal Bulletin . (2017). 2017 Preview . Retrieved September 17, 2017, from https://www.metalbulletin.com/Article/3649828/2017-PREVIEW-Chinese-stainless-steel-production-capacity-cuts-environmental-pressures-will-put-brakes.html

Mutikani, L. (2017). U.S. job growth slows; unemployment rate drops to 4.3 percent. Retrieved September 17, 2017, from https://www.reuters.com/article/us-usa-economy/u-s-job-growth-slows-unemployment-rate-drops-to-4-3-percent-idUSKBN18T0BT

Regan, J., & Freed, J. (2017, April 18). UPDATE 2-Aurizon coal loss estimate seen keeping coal price up. Retrieved September 17, 2017, from https://www.cnbc.com/2017/04/18/reuters-america-update-2-aurizon-coal-loss-estimate-seen-keeping-coal-price-up.html

Stat Bureau . (2017). Inflation Rate in United States of America 2017. Retrieved September 17, 2017, from

https://www.statbureau.org/en/united-states/inflation

Treausry Direct . (2017). August. Retrieved September 17, 2017, from

https://www.treasurydirect.gov/govt/rates/pd/avg/2017/2017_08.htm

Viellaris, R. (2017, May 8). Aurizon snubs Australian steel for Japanese, Swiss product. Retrieved September 17, 2017, from https://www.couriermail.com.au/business/aurizon-snubs-australian-steel-for-japanese-swiss-product/news-story/15c772fc4eee45f11952a97b7c8d44b1

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