A fatal truck crash in Mova Vale last year has cost transport group McAleese at least $19.1 million.Sydney petrol stations run dry as Cootes trucks taken off the road
McAleese will axe about 540 jobs including truck drivers and workshop staff from Cootes Transport after deciding to halve the size of the beleaguered fuel-haulage business in the wake of what it described as relentless government scrutiny.
The transport company will also sell about half of the trucks and trailers in Cootes’ fleet after losing contracts with Shell and BP, and withdrawing from supplying 7-Eleven in several states.
McAleese said the jobs would be gradually lost over the next six months as the contracts ended. The company has set aside about $13 million for redundancies at Cootes this financial year.
About 1250 of McAleese’s 2000-strong workforce nationwide are employed at Cootes, which the company bought about two years ago from private equity firm CHAMP.
The job losses will primarily include truck drivers but also workshop and clerical staff.
Two people were killed and five injured when a Cootes fuel tanker lost control on a bend in the northern Sydney suburb of Mona Vale and burst into flames on October 1.
Since then, NSW and Victorian transport authorities have issued Cootes with hundreds of defect notices.
The defects have included ineffective brakes, oil and fuel leaks, steering, axle, suspension and exhaust failures, broken engine mounts and tread peeling from tyres.
In the wake of what the company described as relentless inspections by authorities, McAleese said it had been forced to half the size of the capital-intensive Cootes business.
McAleese chairman Mark Rowsthorn said the repercussions from the Mona Vale accident, including the intense scrutiny on its trucking fleet, had caused credibility and reputational damage that it had not had an opportunity to defend give the intense government scrutiny.
‘‘It is a business that unfortunately, due to this tragedy at Mona Vale, has forced the government’s hand into inspecting our vehicles relentlessly and it has had a negative impact on us,’’ he told Fairfax Media.
‘‘It’s pretty tough with negative press, which the government officials react to and feed. Quite frankly, we have done everything we can – we have accommodated every one of their requests.’’
McAleese warned on Tuesday that it will take a $47 million hit to its full-year earnings from the crackdown on the troubled fuel-haulage business.
Shares in McAleese slumped more than 32 per cent to 74.5 cents on Tuesday after the company emerged from a trading suspension and revealed the magnitude of the impact from Cootes’ woes.
About $239 million has now been wiped from the transport company’s market value over the last month.
With authorities in NSW and Victoria heavily scrutinising Cootes’ fleet, McAleese also revealed that the head of its bulk and liquid transport division, Chris Keast, has handed in his resignation.
Mr Rowsthorn, who owns almost a third of the company, will also assume the role of interim executive chairman.
The company said the reshuffle would allow chief executive Paul Garaty to focus on sorting out the problems at Cootes and operational management.
The company said it expected the $47 million cost of the Cootes restructure – $33 million of which will be taken in the first half – would be offset by selling trucks and trailers.
McAleese has put the value of its surplus trucking fleet at $21 million.
It leaves the slimmed-down Cootes to haul fuel for Caltex and LPG for Origin Energy.
But McAleese has told investors that the restructure will be subject to Cootes holding onto the Caltex contract, which is due to expire in March next year, and the Origin deal which is under tender.
Releasing its update on Tuesday, McAleese has warned that it will post a pre-tax profit of $108 million for the year to June, excluding significant items, compared with $127 million forecast in its prospectus.
The company will also report a $38 million bottom-line loss in the first half on revenue of $389.6 million. The results are preliminary and will be reviewed by auditors before its half-year results are released on Monday.
It blamed the fall in earnings on the loss on fuel-haulage contracts with Shell and BP, and its withdrawal from 7-Eleven contracts in NSW and Queensland, as well as the loss of revenue and an increased repair and maintenance bill in the wake of the Mona Vale accident in October.
McAleese said it had also had a significant one-off hit from unseasonal weather in Kalgoorlie and Port Hedland, in Western Australia, last month in which nearly a third of shifts were lost.
Authorities made snap inspections of Cootes’ fuel tankers in Victoria on Friday, which led to the grounding of 25 of the 35 trucks and trailers inspected. Faults included defects in brakes, air bags, loose bolts and oil leaks.
McAleese also faces the possibility of law firms encouraging shareholders to pursue class actions.
Litigation funder IMF has joined law firm Maurice Blackburn in investigating McAleese for potential continuous disclosure breaches.
IMF confirmed on Monday that it was looking into McAleese but said it was ‘‘far too early to say whether there is a viable claim’’.