Transurban says lighter traffic in Melbourne as workers stay away from the city has hurt income on the West Gate Tunnel, forcing the toll road giant to ditch forecasts for when its new $10.2 billion asset will break even.
The company had forecast average daily traffic through the tunnel would rise to 67,000 vehicles by 2031. On Thursday, it said only 36,000 cars and trucks were using the road every day in the six months to June 30.
Those figures on the West Gate Tunnel came at the same time as key Transurban roads in Sydney also recorded poor traffic numbers, which the company blamed on high petrol prices and strained family budgets.
But cost-cutting enabled Transurban to more than double its net profit over the past year to $432 million, despite the sluggish growth in road usage.
While total traffic across Transurban’s roads in Australia and the United States rose 2.2 per cent in the 12 months to June 30, it declined on Sydney’s Lane Cove Tunnel, Cross City Tunnel and Eastern Distributor.
NRMA spokesman Peter Khoury said the popularity of Transurban’s WestConnex toll road and increases in CBD parking costs in Sydney, along with better public transport, had reduced use of some roads in the city.
In Melbourne, traffic rose just 0.7 per cent on CityLink, which connects Tullamarine airport with the CBD and is the company’s key motorway in the city. Transurban blamed low usage by cars – trucks, which are banned from driving on nearby streets, accounted for 63 per cent of traffic in the West Gate Tunnel – on broader declines on its Melbourne network.
Transurban chief executive Michelle Jablko said that “people’s patterns of driving have changed in Melbourne over the last few years”, as she pointed to “office occupancy data … we’ve seen that for quite some years”.
“We’ve always seen it as a bit of a pressure release valve to the West Gate Bridge, but with background network volumes down, the pressure on the bridge hasn’t been as great as perhaps it would have been,” Transurban chief financial officer Henry Byrne said after the results on Thursday.
Investors have previously been told the West Gate Tunnel would be free cash neutral – meaning income from toll fares would offset expenses – by 2031. On Thursday, it said the break-even point would come later.
Despite the poor traffic numbers, rebounding flows in Melbourne and Sydney in June and July gave Transurban confidence to forecast a 72¢ per share dividend this financial year, up from 69¢ per share last year.
But while last year’s dividend was 98.1 per cent covered by free cash, Transurban warned the cash contribution to this year’s dividend could be below its targeted range of between 95 per cent and 105 per cent. Investors prefer 100 per cent of dividends to be paid out of cash, so the company does not have to tap into its debt facilities to finance the payments.
Transurban’s revenue slid 1.5 per cent year-on-year to $3.89 billion, but the company cut construction and corporate expenses, boosting profits. Its direct workforce dropped to 3957 people, down from 4100 a year earlier.
In the US, Transurban has dropped out of a tender for a new express lane project in Atlanta, Georgia but is pursuing another tender in Nashville, Tennessee as a minority partner in a consortium.
Its top priority in the US is a proposal to expand lanes on its existing 95 Express motorway in Virginia. But approvals are not expected to be secured until 2029, and the lanes would not be completed until the early 2030s.
Jablko’s pay rose to $5.8 million, up from $5.1 million a year earlier, including a $1.14 million short bonus, the company told investors on Thursday.
Transurban shares closed 7¢, or 0.5 per cent, lower at $14.56.