Mainfreight's record FY profit on NZ, Australia units

BUSINESSDESK: Mainfreight, the biggest road transport company on the NZX 50 Index, posted record annual sales and profit on growth in New Zealand and Australia, while reporting that the Wim Bosman business missed an earn-out target.

Net profit more than tripled to $80.5 million in the 12 months ended March 31 from $25.7 million a year earlier, the Auckland-based company said. Before one-time items, profit rose 39% to $65.8 million. Sales climbed 35% to $1.81 billion.

Mainfreight more than doubled its gearing ratio to debt-fund the 110 million euro purchase of Netherlands-based Wim Bosman last year to expand its presence in Europe.

The business reported full-year earnings before interest, tax, depreciation and amortisation of 16.49 million euros, missing the level that would have triggered a 10 million euro earn-out payment, which Mainfreight has subsequently written back as a one-time gain.

Managing director Don Braid said while Wim Bosman hasn’t met expectations “we remain satisfied with our first European investment”.

“Our operations in New Zealand and Australia have become our biggest profit generators for the short term but are likely to be surpassed as we redouble our efforts in the Northern Hemisphere,” he said.

The company expects “continuing improvement across the group through 2012 and 12013, albeit with on-going vigilance towards poor economic trading conditions around the world”.

Mainfreight will pay a final dividend of 14 cents a share, fully imputed, on July 20. The record date is July 13. Total payments this year amount to 26 cents, up 30% from a year earlier.

The shares rose 1.2% to $9.57 on the NZX and have declined about 7.8% in the past six months. The stock dipped in February after Mainfreight posted quarterly results that disappointed some investors.

The stock is rated "outperform" based on a Reuters survey of six analysts, with a price target of $10.20.

Wim Bosman “had a challenging second half, where lost warehousing volume and poor Belgium freight performance affected profits”, the company said today. The business lost logistics customers to “highly competitive tenders”.

Sales in Europe rose 2.7% to 244.8 million euros.

In Australia, the biggest source of revenue, sales gained 5% to $A385 million and EBITDA rose 31% to $A26 million. The gains were driven by its domestic operations across the Tasman, which showed a 16% sales gain to $A203 million and a 43% improvement in earnings to $A18.8 million.

Its Australian international business had a 5.1% decline in sales to $A182.2 million, while earnings rose 8.2% to $A7.3 million.

New Zealand sales climbed 8.8% to $449 million and earnings rose 14% to $54.6 million. NZ Domestic sales rose 8.7% to $316 million and earnings rose 13% to $47.8 million. NZ International sales rose 9.1% to $132.9 million and earnings rose 22% to $6.8 million.

“Regardless of New Zealand’s economic conditions, we remain positive about our own performance in this market and expect a similar trend of improvement to continue into the 2013 financial year,” Mr Braid said in the commentary.

Mainfreight’s Asian operations “performed poorly” with an 8.9% gain in sales to $US28.9 million translating into a 15.9% decline in earnings as margins shrank.

“Operating gross margins declined as ocean freight rates fell, with excess capacity in key lanes, and due to an over-commitment to airfreight space as peak season airfreight volumes never eventuated,” the company said.

Mainfreight’s US business lifted sales by 7.8% to $US332 million and earnings jumped 43% to $US15.3 million.

Much of the improvement was driven by its Mainfreight USA division, which lifted sales by 14% to $US198.9 million while earnings jumped 333% to $US6.1 million.

Its CaroTrans sales fell 0.5% to $US133 million, reflecting “lower export volumes and declining ocean freight rates”. Earnings at CaroTrans fell 1.3% to $US9.18 million.