Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dalrymple Bay Infrastructure Ltd (ASX:DBI) reported a 7.1% increase in EA to $279.8 million and an 11.1% rise in funds from operations to $156.7 million, demonstrating strong financial performance.
• The company increased its terminal infrastructure charge by 4.4% to $3.59 per ton, indicating effective cost management and revenue growth.
• DBI operates under a low-risk business model with 100% take-or-pay contracts, ensuring revenue stability regardless of coal price fluctuations.
• The company has a significant kneecap investment program with $394 million of committed CapEx, expected to deliver an uplift in terminal infrastructure charge by $0.62 per ton by 2027.
• DBI maintained an investment-grade balance sheet with stable credit ratings from S&P and Fitch, reflecting financial stability and strong creditworthiness.

Negative Points

• DBI's cash net interest costs increased by $9 million year-on-year due to the maturity of cheaper debt and higher rate notes, impacting overall profitability.
• The company faces potential challenges in optimizing terminal capacity, with 21 million tons of capacity unutilized due to factors like weather and operational shifts.
• DBI's effective tax rate is slightly above the corporate tax rate, which could affect net profit margins.
• The development of the ADEX project involves higher costs per ton of capacity compared to previous expansions, posing financial challenges.
• Interest rate hedging strategies indicate a potential increase in the weighted average all-in interest rate to around 8% by mid-2026, which could impact future financial performance.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with ASX:DBI.

Q: Can you provide an update on the optimization of terminal capacity and its progress in the second half of fiscal 2024? A: Michael Richards, CEO: We have developed a clear model for optimizing terminal capacity, which we believe will deliver value to both existing access holders and access seekers. Discussions with key stakeholders are expected to start in the first half of this year, with potential implementation in the second half of the calendar year or into early 2026.

Q: How does the optimization of terminal capacity impact the ADEX project, and how are you managing both concurrently? A: Michael Richards, CEO: We are working on both in parallel. Unlocking terminal capacity for access seekers may reduce demand for ADEX, but with 30 million tons of capacity in the queue and ADEX delivering 15 million tons, both optimization and a full ADEX project are possible. ADEX can be staged to meet customer requirements, providing flexibility in capital utilization.

Q: Can you explain the impact of the capacity pooling mechanism on DBI's risk profile and revenue opportunities? A: Michael Richards, CEO: The capacity pooling mechanism will not cannibalize existing revenues or impact DBI's risk profile. It is designed to maintain full contracted capacity and unlock underutilized capacity. The change to a light-handed regulatory framework has created opportunities for innovation and negotiation with customers, potentially delivering additional revenue to DBI.

Q: What internal initiatives have been undertaken to improve revenue, and what are the expected outcomes? A: Michael Richards, CEO: Initiatives include renegotiating bank guarantee requirements with customers, which generated $500,000 to $600,000 in FY24 and is expected to exceed $1 million on a run-rate basis. Additionally, we will charge a margin for maintenance work done for the terminal operator during kneecap projects, with potential for further revenue opportunities with individual customers.

Q: With the step-up in interest rates to 8%, are there any strategies to mitigate this impact? A: Stephanie Commins, CFO: We have reviewed refinancing opportunities and have a hedging strategy in place, targeting 90% of drawn contracted debt to be fixed. As debt matures and is refinanced, we will explore more flexible options, aiming to manage interest rate exposure effectively.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.