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Mainfreight lifts profit by 2.5%, takes less in charges as freight volumes fall

Thursday 27th May 2010

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Mainfreight, the trucking firm whose shares have performed twice as well as the NZX 50 Index in the past 12 months, posted a 2.5% gain in profit, reflecting cost cuts and a drop in one-time charges.

Net income rose to $36.4 million, or 36.93 cents a share, from $35.5 million, or 36.38 cents a year earlier, the Auckland-based company said in a statement today. Sales fell 10.5% to $1.1 billion. The company achieved savings of $32 million through cost-cutting initiatives, helping make up for a weaker performance in key markets such as the US.  It described the latest year as “exciting and challenging” with freight volumes deteriorating in most of its business units.

“Our response to this decline was to manage our cost structures better, improve margins, aggressively expand our market share by increasing our sales activities and, importantly, continue to improve our quality and levels of services,” said managing director Don Braid.

Shares of Mainfreight fell 2.3% to $5.85 and have advanced about 23% in the past 12 months while the NZX 50 rose about 10%.

Sales and earnings improved in the second half compared to the first six months of the year, growing by 11% and 58% respectively. Momentum in the fourth quarter has carried through into the first quarter of the 2011, it said, without giving a forecast for the current year.

The company will pay a final dividend of 10 cents a share, bringing payments for the year to 18.5 cents, unchanged from the previous 12 months.

Offshore sales revenue now accounts for 67% of total sales and is expected to increase as overseas markets develop.

Mainfreight’s US operations recorded the biggest drop in EBITDA in the latest year, falling 59% to $7.3 million. Its Mainfreight USA unit posted an EBITDA loss of $4.2 million and its CaroTrans unit had a 16% decline in earnings to $11.5 million.

In Asia, where the company has continued to open more branches in China, EBITDA fell 21% to $2.1 million, even as sales rose 8%. Margins “were compromised with intense competition in a difficult market,” Braid said.

Australia was the brightest spot among its businesses, reflecting a resilient economy that skirted recession on continuing export demand for that nation’s raw materials. EBITDA jumped 57% to $22.5 million. New Zealand earnings fell 5.1% to $44 million.

The results included $2.1 million after tax in bonuses for Mainfreight’s workers under a scheme that rewards teams that exceed the previous year’s performance. The company didn’t pay the discretionary bonus in the previous year in the face of deteriorating economic conditions.

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