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Strong domestic economies defy Covid-19 impacts for Mainfreight half-year performance

Mainfreight has weathered the Covid-19 storm well. Photo / Sarah Ivey

New Zealanders with money burning a hole in their pockets due to low interest rates and Covid-frustrated overseas travel plans have helped drive up half-year profit and revenue for freight and logistics company Mainfreight.

Net profit for the six months to September 30 nudged $73 million, compared to $59m for the same period last year while revenue lifted 7.2 per cent or $108.3m to $1.6 billion.

The company will pay an interim dividend of 30c per share, 20 per cent up on last year’s interim dividend. It expects its full-year result to be “much improved” on last year’s.

Managing director Don Braid said the highlight of the result was strong performances in the New Zealand and Australian operations, where consumer demand for goods was driving a very contested supply chain and challenging handling capacity.

Strong domestic and international volumes in the New Zealand operation had redressed the impact of the Covid-19 level 4 restrictions in April and May.

Profit before tax in the Australian business was up 104 per cent or AU$15.6m at AU$30.5m.

Braid said economists’ “doom and gloom” projections for New Zealand had not played out.

Domestic economic activity in countries served by Mainfreight was strong – “provided you’re in the right industry”, which Mainfreight was with fewer aircraft operating and shipping companies downsizing due to the pandemic.

Group operating cashflows were $188.5m, up from $123m in the prior year, reflecting increased profitability and strong cash collection.

Net debt dived $41.9m to $115.4m, with gearing ratios falling to 10.4 per cent from 14 per cent in March this year.

Capital expenditure was also trimmed to $54.8m. The company expects capital expenditure for the full year ending March 31 to be in the range of $103m. A further $114m was estimated for capex in the 2022 financial year.

Profit before tax in the New Zealand business was up 8.3 per cent at $37.5m, and revenue rose 4.5 per cent to nudge $379m.

Trading in October and into November continued the improvement with pre-Christmas freight volumes expected to increase further and new customer numbers on the rise.

Space constaints continued to be frustrating, but revenue was improving, in part lifted by increased freight rates from shipping and airlines.

Strong domestic transport performance across the Tasman lifted revenue there 11.9 per cent to AU$403.2m.

Ongoing market share growth and better network efficiency swelled sales revenues and improved net margins, the company said.

Warehousing growth continued, with utilisation at 90 per cent despite international supply chain congestion.

A further freight increase was expected in the lead-up to Christmas, and with the state of Victoria reopening after 112 days of Covid-19 lockdown.

In Asia, profit before tax rose 59.2 per cent to US$3.98m and revenue was up 19.3 per cent at US$42.9m. Air freight growth was helped by Covid-related tonnage and new specialised air freight branches within Mainfreight’s network.

Asia business profit and revenue trends were expected to continue.

Covid-19 had impacted the Americas and European businesses.

The Americas business posted a 1.6 per cent lift in revenue to US$248m with profit before tax down 13 per cent or US$1.27m to US$8.5m.

Domestic transport operations and the wholesale sea freight business CaroTrans had produced an overall disappointing result in the Americas, the company said.

But there had been good signs of improvement in the past month in the transport operations business as Americas’ customers opened manufacturing and warehousing.

Improved performance in the warehousing business had produced good revenue growth and increased warehouse utilisation. Additional warehouse sites were being planned for Chicago and Dallas due to increased customer inquiry.

CaroTrans was the most disappointing performer with revenue and profit well down on the same period last year.

While trading had seen small improvements in the past month, this division’s year-end result will be behind last year’s, the company said.

In Europe, revenue at Euro193.7m was flat on last year, and profit before tax down 12.1 per cent at Euro7m.

This was a poorer-than-expected result for the European operations which were struggling from the economic hit of Covid-19.

Low inventory levels due to high consumer demand and constrained supply chains impacted warehousing profitability. Intra-European transport volumes were steady but a rise in short-term illness impacted efficiency and margins.

An improved performance was expected through the balance of the financial year.

Braid said the half year result was pleasing considering the slow start to the year due to various Covid lockdowns.

“We expect to see ongoing improvement across all of our regions as we continue to grow market share and adjust our businesses to the fluctuating economic climate.

“In Australasia, the normal pre-Christmas volume increase is expected and is likely to be level or ahead of trading experienced last year.

“Strong consumer demand and congested international supply chains are proving challenging for our customers and people alike. The current conditions are however providing opportunities for more growth and attracting new customers….this confidence provides us with greater certainty to further invest in our network with more regional expansion under way and to increase our commitment to more land and buildings where appropriate.”

Mainfreight will post its 2021 full-year earnings on May 26.

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