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Freightways signals further price hikes

Thursday 31st October 2019

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Freightways has more price hikes on the cards for its express package arm as the courier and information management firm aims to fatten margins. 

The company raised express package prices in the first quarter and has a smaller increase flagged for the fourth quarter of the current financial year, which it expects to lift both revenue and widen margins. 

In a  presentation at today's annual meeting, the company said revenue - excluding a new accounting standard for leases - rose $156.7 million in the three months ended Sept. 30 from $155.1 million a year earlier. However, net profit fell to $13.9 million from $15.1 million. 

Operating revenue in the express package and business mail business was $116 million, versus $114 million a year earlier, while earnings before interest, tax, depreciation and amortisation were $20 million versus $19 million.  Among other things, however, the division was impacted by some aircraft disruptions which led to $750,000 of costs.

Freightways raised its average residential price per item by 55 cents in the quarter and plans to hike it by another 20 cents later this year to achieve an annual average price of $8.25, up from $7.50 in the June year.

Chief executive Mark Troughear said the organic growth trend - which is growth from customers excluding the impact of pricing - has "decreased steadily throughout the past 12 months as the New Zealand economy has slowed." 

Within the information management segment, operating revenue was unchanged at $42 million and ebitda dipped to $8 million from $9 million. Freightways cited around $400,000 in relocation costs and said paper sales were adversely impacted by $250,000 due to lower paper prices. 

Yesterday, Freightways said it would buy Bill Chill Distribution, which operates a fleet of more than 200 refrigerated trucks and trailers. It is paying $117 million upfront, representing 80 percent of Big Chill's enterprise value, with the balance to be paid in 2022 based on its earnings performance. Freightways will fund the acquisition through existing and new bank debt, and the purchase will start contributing to earnings once the deal settles in the first half of next year.

The shares recently traded down 2.6 percent at $7.74, trimming their gain this year to 8 percent. 


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