By David Winning
SYDNEY--Transurban Ltd. (TCL.AU) said its half-year profit fell by 56% despite higher traffic on its toll roads in Australia, and it signaled a delay to completion of its NorthConnex highway project in Sydney.
Transurban said its net profit totaled 145 million Australian dollars (US$102.4 million) in the six months through December, down from A$331 million a year ago. Proportional toll revenue--the company's preferred measure of the performance of its roads--increased by 9.3% to A$1.29 billion in the half-year period.
Directors had earlier declared an interim distribution of 29 Australian cents a share and reaffirmed guidance for an annual payout of 59 cents a security, implying growth in the 2019 fiscal year of 5.4%. Transurban has said it intends to grow distributions in the mid-single digits in fiscal 2020.
Transurban is in the midst of a major expansion in Australia and North America, with large investments in projects ranging from the WestConnex highway in Sydney to an extension of the reversible I-95 express lanes in Virginia and last year's 840 million Canadian dollars (US$631.4 million) purchase of the A25 toll road and bridge in Montreal.
Late last month, Transurban agreed to a development framework with Virginia's Department of Transportation for an extension of the 495 Express Lanes by 3.2 kilometers toward the Maryland border. Together with the I-95 express lanes extension, Transurban expects to spend around US$1 billion in the Greater Washington Area.
Transurban's expansion isn't without its challenges, however. Household budgets in countries such as Australia are increasingly stretched and consumers must balance toll road fees with outgoings that include energy bills and health-insurance costs. The risk is that traffic forecasts on new toll roads may prove optimistic, squeezing returns on investment, while local communities grapple with congestion as car drivers seek alternative routes on roads that are free.
The company has experienced delays to some major projects. On Tuesday, Transurban said the opening of the NorthConnex project was now expected to happen some time in 2020, having previously targeted a completion date of the end of this year.
"At NorthConnex, all tunnelling works are now complete with paving and mechanical-and-electrical works underway," Chief Executive Scott Charlton said.
Transurban has also faced regulatory scrutiny. In bidding for WestConnex, the Melbourne-based company and partners in the Sydney Transport Partners consortium needed a court-enforceable agreement to publish road-traffic data to overcome the Australian Competition and Consumer Commission's concerns. The deal entrenched Transurban's position in Sydney, where it already owns seven of nine toll roads, including the Lane Cove Tunnel and NorthConnex.
The WestConnex sale was the latest move by an Australian state or territory government to sell infrastructure assets to pay for the construction of roads, rail lines, hospitals, schools and other developments. Transurban raised nearly A$5 billion, mostly through an entitlement offer, to help to fund its half-contribution of the A$9.3 billion cost of acquiring WestConnex.
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