Mainfreight's full year profit rises

Mainfreight [NZX: MFT] had a 6.3 % 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 87.65c a share, in the year ended March, from $82.4 million, or 82.58c, a year earlier, the company says.

Sales climbed to $2.28 billion from $2.05 billion.

The results showed a continuation of softer trading in Australia and the US. 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," Mainfreight managing director Don Braid says.

"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 says 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 23c a share, fully imputed at 28%, on July 22 with a record date of July 15. That lifts total payments for the year by 8.8% to 37c.

Operating cash flows rose to $130 million from about $114 million.

Mainfreight shares last traded at $16.47 and have gained about 3% in the past 12 months, lagging behind the S&P/NZX 50 Index's 19% 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% to $563 million while earnings before interest, tax, depreciation and amortisation gained 5.5% to $77.6 million. New facilities in Auckland, Hamilton and Christchurch pushed up overhead costs but also lifted service levels, the company says.

By contrast, a 2.6% gain in Australian sales to $A503 million wasn't enough to lift earnings, which fell 8.2% to $A34 million on weaker gross margin performance and overhead cost increases.

"We are positive about our growth prospects in Australia," the company says. "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% to $US47 million and earnings gained 27% to $US6.4 million, propelled by growth in airfreight.

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

Sales in the Americas rose 8.4% to $US458 million while earnings fell 2.2% to $US18.7 million.

The company says strong growth and profitability at Mainfreight Air & Ocean was offset by less than satisfactory performance in it 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 says.

Logistics in the US is now a stand-alone division, with warehouses in Los Angeles, Dallas and Newark. Use of those facilities is still below break-even level although the company expects a quick uptake of capacity.

Its CaroTrans unit reported an 8.2% drop 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 % increase in sales to 265 million euros while earnings jumped 19 % to 14.2 million euros on "operating efficiencies and better management of our overhead costs ".

(BusinessDesk)