Mainfreight profit drops 18.5% as higher costs hit first-half

Mainfreight has reported its first half result.

Shares in transport and logistics company Mainfreight rallied despite reporting an 18.5% fall in its net profit to $93.4 million over the first half to September.

By mid-morning, the stock was up $1.45 (2.45%) at $60.44 based on market views that the result and future outlook were better than expected.

The previous first half result included $98.8m in revenue and $12.4m in profit before tax from project activity that had now been discontinued.

Mainfreight said it was well positioned to take advantage of improving economic conditions across its international network.

Salt Funds managing director Matt Goodson said the market was a little nervous going into the result, but the company’s outlook statement may be enough to settle investor nerves.

“Much will depend on the response to the moderately positive outlook comments and how they square with what people were thinking,” Goodson said.

Harbour Asset Management portfolio manager Shane Solly said the result was soft, “but not as bad as the market had expected”.

Shares in Mainfreight had sunk as low as $58.60 in the lead-up to today’s release.

By division, New Zealand’s profit before tax was down 7.4% at $44.1m while Australia’s pre-tax profit was down 3.8% at A$58.2m.

Europe’s pre-tax profit fell by 31.9% to €9.3m while Asia’s pre-tax earnings fell by 5% to US$5.6m.

The Americas’ pre-tax earnings slumped 128% to US$2.3m.

In its commentary, Mainfreight said its trading performance across the NZ divisions had improved as the half year had progressed.

“Property cost increases for our Transport and Warehousing divisions contributed to the disappointing profit reduction,” the company said.

Looking ahead, Mainfreight said it expected the Australian and NZ businesses would continue to see improvement over the second half.

“Sales activities in both regions are increasing market share, and we are seeing improving freight volume increases from our customers,” the company said.

Asia would continue to trade at current levels, it said.

Improvements would be dependent on the ocean freight rate and freight tonnage.

Mainfreight’s European operations had reduced labour costs as new customers were settled into its warehouses.

This should improve efficiencies and increase profitability, it said.

“In the Americas we have had a number of sales gains across all divisions, which will improve our performance.”

Looking ahead, Mainfreight said: “We remain well positioned to continue to find market share opportunities and to take advantage of improving economic conditions as they occur across our international network”.

The company - NZ’s biggest logistics firm - declared an 85c per share dividend - unchanged from the previous comparable period.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.

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