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Mainfreight 1Q profit falls 15% as Europe dents global sales

Thursday 9th August 2012

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Mainfreight, the biggest road transport company listed on the NZX 50 Index, posted a 15 percent decline in first-quarter profit as ailing European economies offset strong growth in sales in the rest of the world.

Profit fell to $12.4 million, or 12.5 cents per share, in the three months ended June 30, from $14.6 million, or 14.4 cents per share, a year earlier, the Auckland-based company said in a statement. Sales advanced 3.4 percent to $465 million.

"Financial performance improved in all regions other than in our European operations, where, as signalled, our first-quarter performance is impacted by trading conditions and customer losses post-acquisition (of Wim Bosman)," the company said.

"It is expected that the poor performance from our European operations will continue through the first half of our financial year until the European summer holiday season is behind us and new customer revenue is trading fully," it said.

Last year Mainfreight bought Dutch-based freight forwarder Wim Bosman to gain a foothold in Europe, which has under-performed to date, hit particularly by the loss of three customers. Two of those losses were expected, though the third was a surprise to the New Zealand transport firm.

Forsyth Barr analyst Rob Mercer was looking for a strong first-quarter result from Mainfreight on double-digit growth in its Australasian domestic freight business and a better result from the US unit, according to its earnings season preview. The broking firm didn't forecast earnings for the quarterly result.

Trading remains in line with expectations, and it will "vigorously" pursue sales growth while continuing to manage its cost structures, the transport company said.

Mainfreight's European unit reported a 53 slump in ebitda to 3.1 million euros, with a 4.8 percent decline in sales to 62.8 million euros.

"Our strategy of strengthening the links between our operations in all countries provides competitive advantage and opportunity for much stronger growth than we have been capable of in the past," the company said.

The firm's New Zealand unit boosted ebitda 12 percent to $11.3 million on a 7.4 percent lift in sales to $111.9 million, with July and August trading showing similar growth, it said.

The Australian business boosted earnings 20 percent to A$5.1 million on a 12 percent increase in sales to A$97.5 million, while its Asian unit increased ebitda 30 percent to US$630,000 with a 17 percent lift in revenue to US$8.6 million.

"We continue to focus on stronger in-country sales to find more growth to and from this important market. European trade lane growth has not yet reached anticipated levels," Mainfreight said.

The US business raised sales 12 percent to US$91.6 million with a 34 percent boost in ebitda to US$4.1 million.

The quarterly result is Mainfreight's last before switching to half-yearly reporting.

The shares dropped 1.6 percent to a three-week low $9.20 in trading yesterday, and have shed 5.6 percent this year. The stock is rated an average 'outperform' based on five analysts' recommendations compiled by Reuters, with a median target price of $10.525.

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