Mainfreight FY profit rises 6.3%; NZ offsets weaker US, Australian trading

Thursday 26th May 2016

Mainfreight, the transport and logistics group, reported a 6.3 percent gain in full-year profit as improved trading in New Zealand, Asia and Europe was offset by weaker results in Australia and the Americas.

Profit rose to $87.6 million, or 87.65 cents a share, in the 12 months ended March 31, from $82.4 million, or 82.58 cents, a year earlier, the Auckland-based company said in a statement. Sales climbed to $2.28 billion from $2.05 billion.

The full-year results showed a continuation of softer trading in Australia and the US in the first half results announced last November when managing director Don Braid said improved revenue and margins and better cost control in the second half would lift its full-year results. That was confirmed today when Braid said better management of overhead costs and a wider gross margin helped make up for a poor first half.

"Had we managed overhead costs better in the first six months of the financial year, we would be better placed than this result portrays," Braid said. "The disappointing performances in our Australian and USA domestic operations, and the less than adequate performance of our CaroTrans business, blunted the potential of the result."

He said progress made in the second half "gives us confidence of continuing these improvements into the new financial year."

The company will pay a final dividend of 23 cents a share, fully imputed at 28 percent, on July 22 with a record date of July 15. That lifts total payments for the year by 8.8 percent to 37 cents. Operating cash flows rose to $130 million from about $114 million.

Mainfreight shares last traded at $16.47 and have gained about 3 percent in the past 12 months, lagging behind the S&P/NZX 50 Index's 19 percent gain. The stock is rated a 'buy' based on the consensus of five analysts polled by Reuters.

Sales in New Zealand, the company's biggest market, rose 3.8 percent to $563 million while earnings before interest, tax, depreciation and amortisation gained 5.5 percent to $77.6 million. New facilities in Auckland, Hamilton and Christchurch pushed up overhead costs but also lifted service levels, it said.

By contrast, a 2.6 percent gain in Australian sales to A$503 million wasn't enough to lift earnings, which fell 8.2 percent to A$34 million on weaker gross margin performance and overhead cost increases.

"We are positive about our growth prospects in Australia," the company said. "Our market share remains small in comparison to the incumbents; a focus on high-quality freight services will see further growth achieved."

Asian sales rose 6.4 percent to US$47 million and earnings gained 27 percent to US$6.4 million, driven by growth in airfreight.

"Relationships with air and ocean carriers have strengthened due to our increased volumes, further improving our competitiveness and service abilities," it said.

Sales in the Americas rose 8.4 percent to US$458 million while earnings fell 2.2 percent to US$18.7 million.

The company said "very strong" growth and profitability at Mainfreight Air & Ocean was "offset by less than satisfactory performance in our Mainfreight Domestic operations, and a mediocre financial performance from CaroTrans USA."

"Domestically, a lack of sales growth and poor ebitda performance disappointed, as we moved to more dedicated road and rail line-haul services," it said. Logistics in the US was now a stand-alone division, with warehouses in Los Angeles, Dallas and Newark. Use of those facilities was still below break-even level although it expected a quick uptake of capacity.

Its CaroTrans unit reported an 8.2 percent decline in sales, reflecting historically low ocean container rates and attempts to grow the customer base that Mainfreight described as "ineffective".

Europe, once the most difficult market for Mainfreight, reported a "less than satisfactory" 1.9 percent increase in sales to 265 million euros while earnings jumped 19 percent to 14.2 million euros on "operating efficiencies and better management of our overhead costs ".

BusinessDesk.co.nz

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