Transurban Signals Faster Distribution Growth in Fiscal Year 2026

By David Winning

SYDNEY--Transurban signaled a higher distribution in its new fiscal year as it captures the benefits of lower interest rates on its debt costs, staff layoffs, and greater use of its toll-road network.

Transurban reported a net profit attributable to securityholders of 133 million Australian dollars (US$85.8 million) in the 12 months through June, compared to a A$326 million profit in the 2024 fiscal year. It expects a distribution of A$0.69 per security in the new fiscal year, up around 6.2% on the payout of A$0.65/security in fiscal 2025.

Proportional toll revenue--the company's preferred measure of the performance of its roads--increased by 5.6% to A$3.73 billion across the year. Proportional earnings before interest, tax, depreciation and amortization--or Ebitda--rose by 1.0% to A$2.68 billion.

Analysts had expected Transurban to signal sharper growth in its distribution compared to fiscal 2025 after unveiling plans in May to lay off around 300 staff following a workforce review. It said the job cuts would save more than A$50 million a year when fully implemented.

Transurban's distribution is typically determined by free cash generation, which is aligned to its proportional Ebitda in any given year. So, the boost to Ebitda from cost savings has a direct impact on the company's forecast payout to shareholders.

Transurban continues to see greater use of its toll roads, despite periodic disruptions such as when tropical cyclone Alfred approached the Queensland coast and made landfall near Brisbane in March. Average daily traffic rose by 2.2% across the year, including an ongoing recovery in Melbourne which has been relatively slow to get back toward levels prior to the Covid-19 pandemic.

Lower interest rates are providing another tailwind for Transurban by lowering the amount that it needs to put toward servicing its debt. The Reserve Bank of Australia this month cut its benchmark rate for a third time this year, bringing it to 3.60%. Many economists expect more reductions to come with inflationary pressures turning benign.

Still, uncertainty about the outcome of the New South Wales government's review of tolls in the state continues to hang over the company. Transurban has said it wants to work with the government on potential reform to tolls, as long as it protects the A$36 billion investment made by Transurban and its partners in Sydney over the past two decades.

Transurban Chief Executive Michelle Jablko said positive progress was being made toward an outcome on toll reform in the state.

"The NSW Government has emphasised the importance of respecting the value of existing contracts and revenue, and we continue to work constructively with them through Stage Two of the Direct Dealing Process," she said. "We are optimistic that we are closer to a resolution that will meet the needs of government, motorists, and our investors."

Write to David Winning at david.winning@wsj.com