Mainfreight shares drop as Europe earnings slump hits first half

Mainfreight, the global transport and logistics group, posted a 4.6% drop in first-half profit as an earnings slump in Europe offsets gains in all of its other markets.

It kept the first-half dividend payment unchanged.

Mainfreight shares (NZX: MFT) dropped 1.44% to $10.25 just before 11am.

Profit was $27.7 million, or 27.9 cents a share, in the six months ended September 30, from $29.1 million, or 29.45 cents, a year earlier, the Auckland-based company says in a statement. Sales climbed 4.9% to $936 million.

Earnings before interest, tax, depreciation and amortisation in Europe tumbled 50.4% to 5.26 million euros as margins shrank in the face of "poor warehouse utilisation and activity, and poorly performing transport operations in Belgium and France".

"We maintain our confidence in the long-term benefits of our European acquisition although we are disappointed with the financial performance over the last six months," managing director Don Braid says in a statement.

Mainfreight acquired Netherlands-based Wim Bosman Group for 110 million euros plus earn outs last year to secure its foothold in Europe. Sales from the region fell just 1.4% to 122.4 million euros while costs including labour increased.

By contrast in its biggest market of New Zealand, ebitda climbed 8.7% to $24 million in the first half as sales rose 5.9% to $228 million. Australian earnings gained 22% to $A13 million on sales growth of 13.3% to $A209 million.

In Asia, ebitda rose 19.2% to $US1.37 million ,though in-country sales fell 4.2% and European trade "remains weak."

US earnings rose 18.7% to $US8.12 million as sales gained 10% to $182 million, mainly reflecting a better performance from its Mainfreight USA business. Its Carotrans business lifted sales by 3.6% to about $US69 million, with ebitda little changed from a year earlier.

The company will pay a first-half dividend of 12 cents a share on December 14, unchanged from a year ago.

"We are confident of maintaining this growth and profitability and expect to see improving returns from our European interests," Mr Braid says.

The shares closed last night at $10.40, after starting the year at $9.90. The stock is rated "outperform" based on six recommendations compiled by Reuters, with a price target of $10.67.


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