Mainfreight shares slip as first-half earnings growth lags estimates

Profit rose to $87.6 million, or 87.65 cents a share, in the 12 months ended March 31, from $82.4 million, or 82.58 cents.

Mainfreight shares, which have jumped by a third this year, fell after the NZX-listed transport group posted first-half earnings that disappointed some investors, with mixed results in the US and more work to do to lift profits in Europe.

The stock dropped 1.6 percent to $15.80 after the Auckland-based company posted a 17 percent gain in first-half earnings before one-time items and foreign exchange movements to $33.7 million on a 3.6 percent increase in revenue to $987 million. Net profit fell 20 percent to $33.5 million, reflecting a year-earlier gain from the settlement of a dispute with the former owners of its European business.

Mainfreight shares have climbed more than 50 percent in the past two years although the company has struggled to bolster returns in Europe, where it faces a moribund economy, while contending with a weaker Australian market, where the investment boom for mining has fallen away. Australian rival Toll Holdings last month told shareholders that the first quarter had been tougher than it had expected, with weaker trading from the government, defence, mining and energy sectors.

Toll did affirm its guidance for full-year profit and today Mainfreight said it expects profit to grow in 2015 and for revenue to top $2 billion.

Manfreight's result "just looks a little softer than market expectations," said Matthew Goodson, managing director at Salt Funds Management. "They have moved ahead in most markets. I would not expect anything too major in terms of downgrades."

The company said at its annual meeting in July that it expected growth across its businesses this year although today it said the strongest gains of the first half were achieved in the first three months of the year, "with performance falling below our expectations in August and September." Still, it sees "plenty of growth opportunities".

Mainfreight will pay a first-half dividend of 14 cents a share, up 1 cent from a year earlier, on Dec. 12, with a record date of Dec. 5.

The company said it was seeing some improvement in its European business, with sales rising 4.1 percent to 129.8 million euros and earnings before interest, tax, depreciation and amortisation climbing about 31 percent to 5.2 million euros.

The majority of the increase came in the first quarter, with some gains given up with the onset of the European holiday period in July and August. While trading improved in October and November, it was still below expectations.

"Our most challenging area remains Belgium, where management changes and restructuring continue to dominate our focus as we look to improve returns," the company said.

In New Zealand, sales rose 5.3 percent to $255.9 million and Ebitda rose 8.1 percent to $29.9 million. It said domestic freight volumes "remain strong and are anticipated to increase as we enter the pre-Christmas peak." New Zealand Air & Ocean volumes were ahead of year-earlier levels although sale were impacted by declining ocean freight rates, it said.

Results in Australia were below expectations, with sales climbing 5.3 percent to A$236 million and Ebitda up 9.4 percent to A$15.4 million.

"Margins are recovering in our domestic operations and while revenues continue to increase, our expectations are for stronger sales growth into the new financial year," it said.

In Asia, Mainfreight reported a 17 percent jump in sales to US$21.8 million and a 23 percent gain in Ebitda to US$2.2 million.

Its Americas division produced mixed results. Sales rose 16 percent to US$207 million and Ebitda gained 19 percent to US$10 million, although this was all driven by its Mainfreight USA unit, which recorded 24 percent sales growth and 70 percent Ebitda growth.

The CaroTrans business had "a disappointing first six months" as margins shrank and Ebitda fell 14.3 percent.

"We have seen some improvement in CaroTrans' results for October, however we are not confident of regaining lost ground by year end," it said.

Salt's Goodson said Mainfreight "is clearly on a mission to build a global transport and logistics company".

Read Mainfreight's results commentary here: