Contact reports increased earnings, Freightways takes 5.8% hit to net profit

A Tesla Megapack 2 XL battery storage system next to a solar array farm. Contact Energy and Tesla are collaborating to build a similar 100-megawatt plant at Glenbrook, south of Auckland, expected to be operational by March 2026 Photo / Supplied

Contact Energy reported a net profit of $235 million for the 12 months to June 30, up from the previous year’s $211m.

Operating earnings (ebitdaf) of $675m were up 16% to $663m.

The earning figures include a $12m onerous contract provision relating to the Ahuroa Gas Storage facility ($5m within net profit after tax and interest).

Excluding the movement in the provision, underlying net profit was up 9% on FY23 to $230m.

One-off write-offs of $36m hit net profit after tax relating to damage to peaker assets, remediation work required at the Tauhara geothermal plant and software projects not continuing as planned.

Chief Executive Mike Fuge said hydro volatility characterised operating conditions throughout the period, and gas supply tightened, with flow-on impacts to wholesale pricing from more thermal generation.

Growth capital expenditure was $470m as Contact invested twice its net profit for the year in renewable development.

“The result has been a demonstration of strength in our underlying performance as we managed through market volatility while keeping the momentum to deliver existing and new renewable developments,” Fuge said.

The board declared a final dividend of 23 cents per share, taking the annual dividend declared for FY24 to 37 cents per share.

The results come as the sector grapples with an energy shortage caused by dwindling gas and low hydro lake levels.

Freightways hopes ‘worst’ economic conditions have passed

Logistics and courier company Freightways has recorded a 5.8% decrease in net profit after weathering what its leaders believe to be the worst of the economic cycle in New Zealand and Australia.

Freightways announced its 2024 results to the NZX this morning.

It reported net profit after tax (Npat) of $70.9 million, a reduction from its 2023 result that the company said was largely due to higher interest expenses. Earnings before interest, depreciation, tax, and amortisation (ebitda) were $229.1m, up 6.6% from 2023.

Like other companies, Freightways was hit by the decision to remove tax depreciation deductions on commercial buildings, incurring a one-off $1.5m hit.

Operating revenue was up 7.8% to more than $1.2 billion, with Australia accounting for 35% and the remainder coming from the NZ market.

In commentary accompanying the result, which Freightways characterised as resilient given the challenging macroeconomic environment, chief executive Mark Troughear said NZ and Australia both had improved outlooks for 2025.

“We are hopeful that we have seen the worst across both economies. As always, we are cautious while being poised to take advantage of merger and acquisition opportunities that benefit shareholders,” he said.

Existing customer activity was down 5% across the year in NZ, with temperature-controlled business Big Chill reporting a larger 8% fall.

Freightways attributed this to consumers changing their food choices and said the division’s profitability was also affected by the new 13,000 square metre Big Chill facility at Ruakura, which is now open.

Troughear said the temperature-controlled network had intrinsically fixed costs, meaning impacts were higher when volumes dropped. However, he said the model could also be leveraged to quickly restore margins when volumes improved.

“Overall, we are pleased that our ability to continue to build market share in core and new niches while maintaining service levels and appropriately pricing products against the effort has protected our bottom line.”

In 2022, Freightways made a major play across the Tasman, acquiring Australian business Allied Express – which specialises in larger deliveries over 22 kilograms – for A$160m (NZ$170m) in cash and shares.

Before the acquisition, Allied was owned by the McDowell family and was one of Australia’s largest independently-owned courier and express freight providers, with 450 staff and 700 contractors.

While existing customer volumes were flat, Freightways said Allied had healthy revenue growth for the year, and the business had performed well, with new automated sortation systems in Sydney and Melbourne delivering efficiencies.

“Our investment in Allied Express has delivered on our business case expectations, and with our reliability and reputation leading to market gains in the local Express Package (courier) businesses, we are well placed to go the extra mile as both markets recover,” Troughear said.

Freightways also outlined details of ‘Project Evolve’, which it said would allow it to implement more flexible pricing, billing and courier pay systems across its Express Package business, comprising brands such as NZ Couriers.

Freightways CEO Mark Troughear (left) and Big Chill general manager Phil Clarke at the opening of the Big Chill Distribution site at Ruakura, Hamilton. Photo / Stephen Barker, Barker Photography

The company said average local delivery rates in NZ had only increased modestly over the past 25 years, despite city boundaries and costs increasing significantly.

It said the average Auckland rate was a third of the price charged in Sydney, Melbourne, and Brisbane.

A presentation accompanying the results said Freightways’ solution was to charge based on distance, size, and complexity. This would allow it to maintain margins and ensure pricing reflected the effort and resources required to make local deliveries.

Freightways expected to stagger investment on the project over several years, estimating spends of $5m each in the 2025 and 2026 financial years.

-BusinessDesk