KEY POINTS:
Mainfreight managing director Don Braid says private equity firms are likely to push up acquisition prices in the logistics sector, but sees it as an opportunity rather than a cause for concern.
The New Zealand transport and logistics company has been scouring Australia and the US for suitable
acquisitions to add to its rapidly growing overseas business, but Braid said he expected private equity buyers would pay more than Mainfreight.
"We are not intending to pay any inflated prices and we have a natural advantage in acquiring a business in our industry over a private equity business," said Braid as he released another strong earnings result.
Private equity investors would probably pay too much for transport businesses and gear them up using debt, he said.
"With some patience and the likelihood of some of those [deals] failing, there may be opportunities in the future, where there may be fire sales," he said.
Mainfreight's latest results showed continued overseas expansion, but with slower growth in New Zealand.
For the nine months to December 31, Mainfreight posted a net profit after tax and before abnormals of $25.7 million, a 27 per cent increase on the same period last year. Revenue rose to $740 million, an increase of 4 per cent.
Braid said he was comfortable with the result but would have liked it to have been stronger.
A softer result for the domestic freight business in December had been the main cause of a downturn in New Zealand operations during the third quarter, he said.
New Zealand domestic revenues went up 1 per cent to $206 million and earnings before interest, tax, depreciation and amortisation increased 6 per cent to $18.7 million. New Zealand international revenues dropped 50 per cent to $114.8 million driven by foreign currency conversions and fluctuating ocean freight rates.
But Mainfreight's strong growth in international operations had offset the New Zealand downturn, said Braid. About half of its earnings before interest, tax, depreciation and amortisation were now derived from overseas, and would continue to grow.
It had short-listed international freight forwarding businesses it was interested to acquire in the US and a couple of opportunities had come to the table in Southeast Asia.
Australian domestic revenues jumped 14 per cent to $97.5 million, with earnings before interest, tax, depreciation and amortisation up 14 per cent to $7.8 million.
In the US, revenue grew 21 per cent to $87.6 million and earnings before interest, tax, depreciation and amortisation jumped 77 per cent to $3.8 million.
"Third-quarter performance was in line with last year's as a result of increased costs in the opening of two new branches in Boston and San Francisco," said Braid.
Mainfreight's shares yesterday closed down 28c to $7.60.
