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Mainfreight profit jumps as sales growth returns

Thursday 19th August 2010

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Mainfreight posted a 148% gain in first-quarter profit as sales growth returned in most markets and it avoided one-time charges that marred the year-earlier result.

The biggest trucking firm on the New Zealand stock exchange said net profit rose to $6.8 million in the three months ended June 30, from $2.75 million a year earlier. Profit in the same period last year included a $1.28 million restructuring expense. Sales climbed 21% to $315 million in the latest period.

Freight volumes have been recovering in the past nine months after weakening as a consequence of the global financial crisis and ensuing recession. In the latest three-month period, the company stemmed losses at its Mainfreight USA unit, which broke even, and said that business is being helped by continued strong sales growth. Trading in New Zealand and Australia in July and August was ahead of last year but “a little inconsistent”.

“We expect to maintain similar momentum for our first-half result as seen in this first quarter,” managing director Don Braid said in a statement.

“We are cautious around the fragile and slower economic improvement, particularly in Australia and New Zealand.”

Mainfreight’s shares have been a standout on the NZX 50 Index, climbing almost 18% this year while the benchmark declined 8%. In the past five years the gains have exceeded 100% while the NZX is down 10%. The stock traded unchanged at $6.51 when the market opened today.

The company flagged growth in earnings before interest, tax, depreciation and amortization of around 30% at its annual meeting on July 29. EBITDA rose 32%.

Braid said the company is “focused on maintaining our disciplines and cost initiatives of the past eighteen months”.

In its New Zealand domestic business, EBITDA climbed about 18% to $6.94 million as sales rose 8% to $67 million. Volumes so far in the second quarter, though, have been inconsistent. The company will introduce new freight rates by November 1.

New Zealand international revenue rose 22% to $28 million and EBITDA rose 16% to $920,000, with “strong volumes growth across both import and export sectors” and a continuation of that trend in the current quarter.

Australian domestic revenue rose 19% to $50 million and earnings jumped 22% to $2.39 million. Some slowdown associated with the Australian federal elections, to be held this weekend, partly offset improved trading in July and August. Logistics operations eroded earnings though a positive contribution is expected going forward.

Australian international sales rose 28% to $56 million though EBITDA dropped 22% to $1.2 million as margins were squeezed by “intense competition” in the Asia to Australia freight market. A return to EBITDA growth is expected “as the year progresses”.

Asia international lifted revenue by 63% to $8.7 million, for a 74% gain in earnings to $890,000.

In the US both is CaroTrans and Mainfreight USA units benefited from improved trading, the company said. Mainfreight USA revenue rose 22% to $58 million to break even at the EBITDA level from a year-earlier loss of $1.7 million. CaroTrans sales climbed 26% to $46.7 million and earnings lifted 16% to $3.18 million.

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