KEY POINTS:
Mainfreight says it is on the road to becoming a billion-dollar company after posting a rise in half-year profit.
The listed transport operator has bought and sold a number of businesses and net profit for its continuing operations for the six months ending September 30 was up 9 per cent at $15.7 million.
The gain on the sale of interests in Lep and Pan Orient, plus trading from those operations during April and May, pushed the final net profit result to $77.2 million, up from $34.9 million the previous year.
Managing director Don Braid said the result did not include any contribution from US company Target Logistics - purchased for US$57 million, including costs.
"Certainly with the businesses that we have now, on a year-for-year basis the revenues will be in excess of a billion dollars, there's no doubt about that," Braid said.
Performance at Target Logistics - which had an annual revenue of US$180 million - was in line with expectations and would make a positive full-year contribution.
The balance of overseas earnings, which accounted for 53 per cent of revenue, would grow further following the inclusion of Target.
"New Zealand will continue to become a smaller part of our overall global operations but that doesn't mean to say that we've finished in New Zealand," Braid said.
Shares closed down 2c yesterday at $7.10.
Goldman Sachs JBWere analyst Marcus Curley said the result was in line with expectations.
Mainfreight's business model had been shown to work in Australia, Curley said.
"There's no reason, in my view, why it can't be successful in the US. It's a more competitive market but a larger market so I think expansion of a successful business model which adds value is a good thing."
Mainfreight said first quarter trading conditions had been challenging but had improved during September, while third quarter performance had been considerably stronger and was expected to continue to the end of the year.
"Everybody's saying that the economy is quiet right now," Braid said. "We're not seeing a big evidence of that, we're seeing quite strong tonnages."
New Zealand domestic sales for the half year were down 1.4 per cent at $134.1 million, with trading profit (earnings before interest, tax, depreciation and amortisation) up 6.4 per cent to $15 million.
Australian domestic revenue was up 15.1 per cent at A$61.2 million, although trading profit fell 4.9 per cent to A$4.4 million as the company invested in warehousing and logistics capacity to meet increased demand.
Australian international revenue rose 8.6 per cent to A$59.5 million, with trading profit up 15.7 per cent at A$2.3 million.
Revenue from Asian operations was up 17.7 per cent at US$10 million, although the group result only included full trading from August and September, with the full consolidation of Mainfreight Express effective from August 1.
The exchange rate had not really affected Mainfreight, which had a natural hedge through imports and exports and from trading in US currency.
Meanwhile fuel costs had been an issue for everybody, he said.
"You only have to look at what the diesel price is at the pump - it's double what it was probably two years ago."
However, fuel prices did not have a detrimental affect on Mainfreight's profit because the company was able to pass fuel costs onto customers.
The company had been learning everyday as it grew offshore, Braid said.
"But it's a hell of a lot of fun and it's going to be, I think, very beneficial to the shareholders and to the people of Mainfreight to see this business become a global business."
EARNINGS UP
Six months to September 30
Mainfreight
Revenue
2007 - $415.8m
2006 - $486.5m
Net profit
2007 - $77.2m
2006 - $34.9m
Dividend
2007 - 8c
2006 -7c
