Oz shocker for Mainfreight

By DANIEL RIORDAN transport reporter

A horror time in Australia has slashed transport operator Mainfreight's March-year profit to $2.4 million, 73 per cent down on last year's $8.9 million, with an end to the company's woes across the Tasman still some time off.

The struggle there overshadowed a strong performance from the company's New Zealand operations.

Mainfreight's Australian subsidiary - K&S Express, now trading as Mainfreight Distribution - was acquired in April last year for $A9.4 million ($12 million).

The company said yesterday that several factors had contributed to its dismal performance. Pre-tax and pre-amortisation figures showed that the Australian domestic business, lumped in with its American operations, lost $10.6 million over the year, while its New Zealand domestic operations made $14.9 million (up 14 per cent). Asked to respond to one analyst's comment that Mainfreight had been sold a pup in K&S, managing director Bruce Plested said: "It was a dog rather than a pup.

"We knew that we were buying a poor-quality business but it was there, it was available and it gave us national distribution and we are struggling to come to grips with it."

At the time Mainfreight bought K&S, it estimated its net losses at $A4 million ($5 million) a year, although exact figures were not available.

In October, after giving its customers what it admits was "only very ordinary service," Mainfreight Distribution put up all its prices, with negative results.

These were compounded by July's introduction of GST in Australia and the beginning of an economic slowdown that has continued to today.

Mainfreight general manager Don Braid said the Australian operations had improved in recent months, although it would take most of the rest of this year to become profitable.

He said yesterday that the company remained committed to Australia.

While the company struggled in Australia, its New Zealand operations performed well, with good business from the rural sector.

Forsyth Barr analyst Ian Graham said the result was a shocker, and well below market expectations. "It can't be encouraging to shareholders to hear that the company doesn't know when Australia is going to be profitable."

Mainfreight declared a fully imputed final dividend of 3.5cps, payable on July 20. The company in December paid an interim dividend of 3cps (also fully imputed), making this year's total dividend of 6.5cps, the same as last year's.

Mainfreight shares fell 10c to $1.05 on the profit result.

That market reaction to the profit result was a far cry from the response to competitor Owens Group, whose shares have risen 24 per cent, from 75c to 93c, since it announced its profit on June 1.