Australia is still dealing with lingering effects of a particularly severe 2010-2011 storm season. So the late January crossing of ex-Tropical Cyclone Oswald over parts of Queensland and New South Wales brought further insults on top of injuries yet to fully heal.

Damage from severe weather and flooding amounted to at least AUD2.4 billion. Thousands of residents in coastal areas were evacuated ahead of the storm, while nearly a quarter of households in South East Queensland experienced power interruptions as about 2,000 power lines were brought down.

The main coastal fiber-optic cable was cut, causing widespread disruptions and failures of mobile and landline communications, broadband services, ATM machines, electronic payment systems and emergency response numbers. Six fatalities have been reported in Queensland, and one person remains missing.

Emergency officials have said that although recent flooding was severe, it’s not as widespread as the monsoon-like rains that battered Queensland and New South Wales in 2011, when 35 people were killed and an estimated AUD30 billion was shaved off Australian gross domestic product, as coal mining and transportation were knocked out for about three months.

Between 200 millimeters (7.9 inches) and 400 millimeters (15.7 inches) of rain fell over the four days to Jan. 28 on Queensland’s Bowen Basin, home to giant open-pit mines owned by resource producers including AE Portfolio Aggressive Holding BHP Billiton Ltd (ASX: BHP, NYSE: BHP).

Coal production in Central Queensland was impacted primarily because of transport disruptions. The Port of Gladstone–the largest multi-commodity port in Queensland, the fifth-largest such port in Australia and the world’s fourth-largest coal-exporting terminal–suspended ship loading for two days.

BHP said all of its sites are operating, and the company is working to go back to normal operations while assessing the impact of the floods on their production. The company will report results for the first half of fiscal 2013 on Feb. 20.

Alumina and liquefied natural gas (LNG) production suffered minor impacts, with operations returning to normal levels shortly after Oswald passed.

LNG projects planning to export from Gladstone were shut in by Oswald but have returned to operation. Work on the thousands of inland coal-seam gas wells needed to feed the Gladstone plants continued. “Initial indications suggest minimal impact on our activities,” said a spokesman for BG Group Plc (London: BG/, OTC: BRGXF, ADR: BRGYY), which is building the Queensland Curtis LNG plant.

AE Portfolio Aggressive Holding Rio Tinto Ltd (ASX: RIO, NYSE: RIO) and Xstrata Plc (London: XTA, OTC: XSRAF, ADR: XSRAY), the world’s biggest producer of thermal coal, both declared force majeure on coal deliveries from Queensland after flooding shut a key rail link to ports.

Rio Tinto invoked the clause covering events beyond its control on its contracts to sell coal from its Kestrel mine due to damage to the Blackwater rail network, which carries the second-biggest tonnages of coal in Queensland to Gladstone Port. Aurizon Holdings, the operator of the rail network, announced this week that Blackwater is back in service. A second Aurizon line used to haul coal, Moura, is still under repair.

Rio has yet to provide an update on its coal operations. Its Yarwun alumina plant was shut down temporarily, while production at the Rio-operated Queensland Alumina refinery continued at reduced rates. Rio Tinto Alcan’s operations at Weipa, on Cape York Peninsula in Western Australia, were affected when Oswald first formed but are now operating as normal. Management will report 2012 results on Feb. 14.

A spokesman for Aurizon said the Moura line could be shut down for another 10 days to two and a half weeks, with the system opening “progressively” beginning Feb. 18 and concluding Feb. 25.

The impact on miners’ bottom lines is difficult to assess at this point. Production disruptions will hurt volumes, but supplies will also be limited. Because Australia is such a significant producer of coking coal as well as thermal coal, the supply part of the equation is critical. Limitations will push prices higher, at least partially offsetting the impact of reduced volumes.

Australia is the world’s largest metallurgical coal exporter, accounting for roughly two-thirds of global trade. It also supplies thermal coal used in power generation. Spot coking coal prices recently topped USD167 per metric ton, above the most recent quarterly settlement of USD160.

The Australian thermal coal benchmark price rose 2.4 percent to USD95.04 per metric ton last week, its biggest weekly gain in nearly two months. However, miners in the Hunter Valley in New South Wales, Australia’s biggest thermal coal-producing region, weren’t hit as hard by Oswald as miners in Queensland.

At the same time, the potential for more rain and flooding during an Australian cyclone season that will continue through April 30, 2013, could be enough to lift prices for producers’ coal contracts with Japan. Xstrata typically sets the price with a major Japanese utility, often Tokyo Electric Power (TEPCO), negotiating on behalf of Japanese buyers, setting the precedent for the rest of the industry.

The annual contract begins at the start of the Japanese financial year, on April 1, and is the largest of the year in terms of volume. Long-term contract prices are typically a few dollars above the Australian coal benchmark price, a premium usually explained by security of supply.

Xstrata is probably in position to push for a price above USD100 per metric ton for thermal coal shipments to Japan. Concern about further supply disruptions could also carry met coal prices past USD170 per metric ton.

Communication Breakdown

AE Portfolio Conservative Holding Telstra Corp Ltd’s (ASX: TLS, OTC: TTRAF, ADR: TLSYY) major lines in Queensland were cut, completing isolating several towns from communications technology. Services were largely restored within 24 hours.

Customers throughout the affected region, in Queensland as well as New South Wales, continued to report service problems five days after Oswald passed due to power outages caused by flooding.

“With repairs made to cable damage caused earlier in the week as a result of the severe weather and flooding, technicians are now contending with access issues and power outages in many locations, which continue to impact services,” Telstra said in a statement.

The financial impact on Australia’s dominant telecom will likely by negligible, as management on Feb. 7 affirmed full-year earnings guidance. We have a full report on Telstra’s fiscal 2013 first-half results in The Roundup section of this week’s edition of Down Under Digest, which is available exclusively to subscribers of Australian Edge.

The Roundup

AE Portfolio Conservative Holding Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY) posted an 8.8 percent increase in net profit after tax (NPAT) for the first half of fiscal 2013 to AUD1.597 billion. Total revenue for the six months ended Dec. 31, 2012, was up 1.7 percent to AUD12.711 billion.

Strong customer growth drove bottom- and top-line results, as Telstra added 607,000 new customers in Australia and 321,000 international mobile subscribers during the period.

Mobile revenue grew by 4.6 percent to AUD4.56 million, as total mobile customers grew to 14.4 million, including 6.9 million postpaid subscribers and 3.3 million mobile broadband users.

Fixed-line revenue continued to decline, coming in at AUD3.7 billion, 4 percent lower than the prior corresponding period despite an increase in broadband Internet customers.

Digital media revenue fell 7 percent, as sales for the Sensis directory business declined by 12.5 percent.

Sensis digital revenue growth was 11 percent, accelerating from 2.5 percent a year ago. Adjusted for the timing of book sales, the print revenue decline was consistent with declines in recent periods. The majority of print revenue will be recognized in the second half of the fiscal year. Management noted that it “will continue to restructure Sensis as it transitions from a print to a digital business.”

Network Application and Services (NAS) revenue was up 10.6 percent to AUD636 million, with growth driven by several long-term contracts were signed during fiscal 2012. Telstra’s NAS unit houses its “cloud” computing operations and manages core telecommunications products for businesses.

CEO David Thodey noted during management’s conference call to discuss results that cloud computing posted 25 percent revenue growth for the first half of fiscal 2013. Mr. Thodey, who continues to talk up the operation as a key growth area for Telstra, told analysts that cloud services had registered 16,000 users to date, with 3,000 more companies signing up over the last six months. He also noted that significantly more “seats”–or unique company employees–used the service.

The company has pushed for several years to introduce cloud services to large enterprises and government in Australia and has now inked contracts with Japan-based construction giant Komatsu Ltd (Japan: 6301, OTC: KMTUF, ADR: KMTUY), Australia Post, the trading name of the government-owned Australian Postal Corporation and a contract to host the federal government’s personal e-health records.

It also resells Microsoft Inc (NSDQ: MSFT) software from Singapore data centers to small and medium businesses, an area Mr. Thodey said had seen particularly strong growth.

Telstra attributed some of the AUD1.8 billion capital expenditure budget for the first six months of the financial year to efforts to refit existing buildings to be used as data centers. It also bought a 31 percent stake in IPScape, a software-based call center business, through its venture capital arm.

Cloud services–which offer online access to computer hardware or software from Telstra-managed infrastructure–were “no longer a gleam in our eye.”

“It is actually a very critical part of our business,” Mr. Thodey said.

International businesses, including Telstra’s investments in Asia, grew revenue by 10.8 percent through customer growth in the Hong Kong mobile services business (CSL), global connectivity and NAS products (Telstra Global).

Telstra recognized revenue of AUD176 million from National Broadband Network (NBN) agreements during the period, including AUD94 million amortization of payments received during fiscal 2012 as well as AUD82 million for “public interest services” such as the Universal Service Obligation and the provision of access to infrastructure.

Management confirmed full-year earnings guidance, though the company is likely to incur significant costs from the renewal of spectrum licenses. Fiscal 2013 total income and operating earnings growth will be in the low single digits, while management expects free cash flow to be between AUD4.75 billion and AUD5.25 billion. Telstra forecast total capital expenditure for the year to be around 15 percent of sales.

Telstra will have to shell out “significant costs” during fiscal 2013 to renew existing spectrum licenses, and new licenses will also come up for auction later in the year.

Telstra will pay a fully franked dividend of AUD0.14 per share on March 22 to shareholders of record on Feb. 22. Management still plans to pay AUD0.28 for the full year.

Telstra–as it has consistently since mid-2012–is trading well above our recommended buy-under target of USD3.50, or USD17.50 using the American Depositary Receipt (ADR) listed on the US over-the-counter market, which is worth five ordinary shares.

Australand Property Group (ASX: ALZ, OTC: AUAOF) posted a net profit of AUD179.9 million for 2012, a 28 percent increase over 2011. Total revenue was up 33 percent to AUD918.8 million.

Australand declared a total distribution of AUD0.215 per security, in line with the previous year. Operating earnings per security were AUD0.246 in 2012.

Earnings from its investment properties were up 8 percent, and the value of its portfolio rose by AUD51.3 million. Australand has AUD2.3 billion in investments in residential, commercial and industrial properties and also develops large-scale residential projects.

Earnings from the A-REIT’s development business increased by 7 percent year over year due to strong sales at several medium density projects.

Despite the generally cautious market sentiment, our residential earnings increased 16 percent and contracts on hand at year-end were up by 24 percent, providing good momentum into 2013,” Managing Director Bob Johnston said in a statement. Management noted that market conditions are expected to remain challenging in the year ahead, but Australand expected its operating earnings per security to rise.

During a conference call to discuss results Mr. Johnston said he was confident Australand’s investment portfolio would underpin further growth in 2013, after earnings in this area grew to AUD51.3 million. “That will be the primary driver of growth for the group,” he said.

Mr. Johnston was reluctant to comment on speculation that fellow A-REIT Mirvac Group (ASX: MGR, OTC: MRVGF) was considering a takeover bid. In December Australand rejected a bid from GPT Group (ASX: GPT, OTC: GPTGF). “I won’t speculate on anything like that,” he said.

Mr. Johnston did describe Australand as “a quality business,” and added that, because the A-REIT “continue[s] to show significant improvement,” he’s not surprised rivals are showing interest in his company.

Singapore-based real estate company Capitaland, which holds a 59.3 percent stake in Australand, announced in January it would be reviewing its investment in the Australian firm. Australand has appointed financial and legal advisers for the review.

“There is no guarantee that any proposal will be forthcoming,” the company noted in a slide presentation. Australand–up significantly in the wake of the GPT offer–is now a hold.

Transurban Group (ASX: TCL, OTC: TRAUF), a toll road operator with assets in Australia and the US, posted solid results for the six months ended Dec. 31, 2012. Proportional toll revenue was AUD491.8 million, an increase of 3.8 percent on the prior corresponding period. Proportional earnings before interest, taxation, depreciation and amortization (EBITDA) were up 6.9 percent to AUD416.9 million.

Proportional EBITDA reflects the contribution from individual assets to operating performance. Statutory EBITDA does not include the EBITDA contribution of the M5 and M7 toll roads in Sydney, both of which are 50 percent owned, or the DRIVe unit, which is 90 percent owned and houses the US toll road assets.

Transurban recorded a statutory net profit after tax of AUD81.1 million, down from AUD96.6 million in the prior corresponding period. Free cash was up 4.6 percent for the half year to AUD192.8 million, covering the previously declared AUD0.155 distribution per stapled security for the period. Transurban’s board also confirmed distribution guidance for the full year of AUD0.31.

This is the fourth consecutive year of distribution growth for Transurban.

Management expects revenue to “progressively” increase as upgrades to its existing toll roads are completed and new projects come on stream. The upgrade of the Hills M2 toll road in Sydney is 84 percent complete, with work on track for completion by mid-year. Work is 22 percent completed on widening of the M5 motorway in Sydney, with completion expected by the end of the year.

The 495 Express Lane “hot” toll road project in Virginia was completed and open to traffic last November, though initial traffic is below expectations. Construction has started on the 95 Express Lanes project, connecting to the 495 Express Lanes, and is now 23 percent complete.

“Hot” (high-occupancy toll) lanes isn’t a concept used in Australia. These lanes run alongside existing free-access highway lanes on the Capital Beltway, the notoriously congested ring road that runs around Washington, DC.

Hot lanes give users the option of paying a variable toll in exchange for faster travel. The toll charges are uncapped and rise and fall in relation to the amount of traffic at the time.

Toll road operators in Australia aren’t allowed to charge variable tolls, but Transurban has long urged that changes–such as distance-based tolls, peak hour and off-peak pricing or demand pricing–will be needed to tackle congestion. Australia’s Bureau of Transport and Regional Economics has estimated the cost of congestion to the Australian economy is expected to be AUD20 billion by 2020.

Transurban has successfully refinanced AUD1 billion over the past six months, giving it ample liquidity to complete ongoing projects and take on new ones. Transurban remains a buy under USD6.50.

Here are dates for the next round of reporting season, which for most companies will be for the first half of fiscal 2013. We’ve noted where the reporting period differs. We’ve also linked to discussions of results for those companies that have already reported.

Please consult the Portfolio tables at www.AussieEdge.com for current advice.

Conservative Holdings

• Aberdeen Asia-Pacific Income Fund (NYSE: FAX)–N/A (fund, reports holdings on a quarterly basis)
• AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY)–Feb. 27, 2013 (confirmed)
• APA Group (ASX: APA, OTC: APAJF)–Feb. 20, 2013 (confirmed)
• Australand Property Group Ltd (ASX: ALZ, OTC: AUAOF)–Feb. 7 Down Under Digest
• Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY)–Feb. 15, 2013 (fiscal 2013 second quarter trading update, confirmed)
• Cardno Ltd (ASX: CDD, OTC: COLDF)–Feb. 13, 2013 (confirmed)
• CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY)–Feb. 13, 2013 (confirmed)
• Envestra Ltd (ASX: ENV, OTC: EVSRF)–Feb. 21, 2013 (confirmed)
• M2 Telecommunications Group Ltd (ASX: MTU, OTC: MTCZF)–Feb. 25, 2013 (confirmed)
• Ramsay Health Care Ltd (ASX: RHC, OTC: RMSUF)–Feb. 24, 2013 (confirmed)
• SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF)–Feb. 20, 2013 (confirmed)
• Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY)–Feb. 7 Down Under Digest
• Transurban Group (ASX: TCL, OTC: TRAUF)–Feb. 7 Down Under Digest
• Wesfarmers Ltd (ASX: WES, OTC: WFAFF, ADR: WFAFY)–Feb. 14, 2013 (confirmed)

Aggressive Holdings

• Amalgamated Holdings Ltd (ASX: AHD, OTC: None)–Feb. 25, 2013 (estimate)
• BHP Billiton Ltd (ASX: BHP, NYSE: BHP)–Feb. 20, 2013 (confirmed)
• GrainCorp Ltd (ASX: GNC, OTC: GRCLF)–May 21, 2013 (estimate)
• Mineral Resources Ltd (ASX: MIN, OTC: MALRF)–Feb. 18, 2013 (estimate)
• Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY)–Feb. 8, 2013 (confirmed)
• New Hope Corp Ltd (ASX: NHC, OTC: NHPEF)–Mar. 26, 2013 (estimate)
• Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY)–Feb. 26, 2013 (full year 2012, confirmed)
• Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY)–Feb. 21, 2013 (confirmed)
• Rio Tinto Ltd (ASX: RIO, NYSE: RIO)–Feb. 24, 2012 (full year 2012, confirmed)
• WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY)–Feb. 13, 2013 (confirmed)