Mainfreight punished by market

Third quarter trading of Mainfreight has fallen below expectations. Photo / Supplied

Investors punished Mainfreight yesterday after the global freight and logistics operator revealed third-quarter trading, including in its new European business, had fallen below expectations.

With a share price that more than tripled between early 2009 and August last year, when it hit a high of $10.72, the Auckland-based company became one of the darlings of the NZX.

But in what was the biggest sell-off of the stock in more than a decade, according to Bloomberg, shares tumbled 9.2 per cent to close at $9.40 last night.

The fall reversed a rally that saw Mainfreight shares climb almost 10 per cent between January 17 and Monday, when they hit $10.35.

Mainfreight yesterday reported a record net profit of $46.75 million for the nine months to December 31, a 35 per cent increase on the previous year's result.

Earnings before interest, tax, depreciation and amortisation (ebitda) also reached record levels for a nine-month result, breaking the $100 million mark for the first time, reaching $101.02 million, a 50 per cent increase on the previous comparable period.

But the company said its third-quarter performance was "poorer than expected" and volumes and returns only matched levels seen in the previous year.

"December trading, in particular, was below our expectations," Mainfreight said.

Group profit for the third quarter dipped slightly, dropping 2.7 per cent on the same quarter the year before to $17.7 million.

Craigs Investment Partners analyst Geoff Zame said the market had had "aggressive" expectations for Mainfreight, and the fact that they had not been met had driven yesterday's sell-off.

Europe was the biggest concern, he said, although it was difficult to gain a clear understanding of what was going on in the Wim Bosman Group - the Netherlands-based freight business Mainfreight acquired last year - as prior comparable period information for that part of the company was not available.

Mainfreight said trading for the Wim Bosman Group, which delivered a revenue of €181.79 million and ebitda of €12.65 million for the nine months to December 31, had not met its expectations during the second and third quarters.

The company said poor performance in its Belgium transport operations and Air & Sea International business, as well as reduced utilisation in its 's-Heerenberg logistics facilities, were also contributing factors.

Mainfreight managing director Don Braid said the result for the Wim Bosman Group had been affected by the loss of two accounts the company knew it would lose when it acquired the business.

"We have gained new business [in Europe] - quite a lot of new business, but it won't start until June/July 2012," Braid said.

"So we've got a period of time there where we don't have our facilities utilised as well as we would like."

He said Mainfreight still felt confident about its European business, despite the ongoing economic turmoil in that part of the world.

"We're still excited by it and still very happy to be there."

Mainfreight's New Zealand domestic and international divisions, as well as its Australian domestic unit, posted increases in earnings and revenue in the nine months to December 31.

Its Australian international arm saw a 5.7 per cent fall in revenue to A$137.93 million, while earnings also declined 3.3 per cent to A$4.48 million.

The company said a disappointing peak season from Asia and intense competition in the shipping sector forced a decline in freight rates, which had hit revenue and margin performance.

In the United States, total revenue lifted 8.9 per cent to US$249.78 million, while ebitda for its combined US operations grew 37.2 per cent to US$10.52 million.

Forsyth Barr analyst Rob Mercer said yesterday's result had taken the gloss off Mainfreight's momentum.

"Expectations have been reset to a lower level, but [expectations are] still for growth, and for substantial growth."