the same old story, page-8

firstly bhp & rio's railways are not run commercially as AIO does,now i will show you why AIO cant make any money.

08/09...
revenue:...$2810m,-4.0%
expenses:...$2155.1m,-4.2%
ebit:...$382m,margin is good at 13.60% for a monoply.BUT
pretax:...$25.4m,-31.6%...
net:...-$244.1
net margin:...0.3

so where is all the money going from the $356.9m in ebit?
its going in interest to service the huge billions to buy the company.the company is eating itself.the loan is taking the 13.60% ebit to below a 1% margin.

lets look at other monopolies such as brambles which is a great company.

brambles 08/09
revenue:$5071.9m...+7.5%
expenses:$3539.8...+12.3%
ebit:$1008.8m...-7.2%...margin:19.88%,
pretax:$859.7m...-7.8%
net:$557.8m...-17.2%...BUT GET THIS,23% LESS REVENUE THAN TOLL BUT 49.40% MORE NET PROFIT THAN TOLL... BRAMBLES IS A MONOPOLY CASH MACHINE.

aio is a near thing monopoly like brambles but the loan interest is absolutely murdering its earnings.

08/09...toll
revenue:$6514.2m...+15.7%
expenses:$5888.8m...+16.1%
ebit:$433.2m...6.65% margin
pretax:$408.2m...+13.8%
net:$275m,net margin:4.5%

now you know why little wants brambles so bad...its a licence to print money!

AIO has turned out to be nothing but a TOLL debt vehicle,toll paid $6.2b for patricks & what you all forget is that it only included 50% of pac nat as toll already had the other 50%,so $6.2b for half the rail,the ports & 62.4% of virgin which was worth $1.5b.hands up who reckons it was worth $5.8b?

so at the split AIO gets the rail,the ports for $5.8b,toll gets the virgin stake worth then $1.5b after sending the $600m for 50% of pac nat into AIO to pay for.so swap the $600m for $1.5b virgin stake with the intention to sell off quick,but the GFC caught little with his duds down.eventually toll paid virgin out in a speccie divvie which conserved cash,toll didnt pay for it AIO IS!!

pac nat was worth $1.2b when bought from the government in 2002,in 2004 its half year revenue $683m,ebit $93.8m,NPAT $55.9.so double it & probably get around its numbers now.

id say on a rough guess thats still what its producing & only on a -4.0% revenue this full year,BUT AIO has a value of at least $2b for the rail.

dont forget either the first bid was worth $4.6B THEN LITTLE UPPED IT TO $6.2B...AIO IS NOW PAYING THAT.

AIO has the potential to make & keep large earnings BUT they have to pay off the rest of the $2.5b+ loan very soon otherwise the same will happen,earnings eaten up by the interest on the loans.

ive got no doubt it will be pumped for another cap raising as its the only way they can pay off the loan,even with less interest to pay this year & the costs from the brambles disaster,they have still lost $425m in 2 years.

costs have to be cut right back to give some real earnings,AIO expenses to revenue is 76%,must rip it down to at least 66%,so about $220m to find,see railways are very expensive assets to run much like airlines.AIO's best way is to cut down the cap ex where possible...otherwise they will go on losing money which they now how to do.

solution...2010,take out the loan with another cap raising & yes it will hurt but if not you will suffer another 2 years of losses, look at elders boss what hes done,made the hard decisions & that company will be better in the long run.

cut the fat off the bone at AIO by not paying bonuses to MR for losing AIO money,what sort of attitude does that foster in a company?lose & win?

this company needs a complete overhaul in management & it should have happened when AIO still owin $5.8b & just listed,paid millions for brambles shares & had to sell for giant losses,i cant believe management wasnt shown the door.