KEY POINTS:
Mainfreight yesterday announced plans to boost its presence in Asia and the US as it delivered an attack on the Government, which it says is making life increasingly difficult for businesses on their home turf.
Group managing director Don Braid told shareholders at the company's annual general meeting
in Auckland yesterday that a deal had been struck to take full control of its Chinese freight-forwarding business at a cost of $9.5 million.
The purchase of its Chinese partners' shares would "grow the business at a faster pace than that of the past few years". But it would incur a tax expense of $2.7 million and require clearance from Chinese authorities that could take a year, Braid said.
The move would enable Mainfreight to merge any interests in China that resulted from the potential acquisition of three US retail freight forwarders. Mainfreight was conducting due diligence on an offer for one of those, he said.
Mainfreight's Asian business - with operations in Shanghai, Ningbo, Shenzhen and Hong Kong - reported earnings before interest and tax of US$1.7 million ($2.24 million) in the year to March on revenue of US$17.48 million.
Although growth in China had helped Mainfreight boost net profit after tax 25 per cent to $7.4 million last year, Braid described the performance of its Chinese business as "well below our expectations in what is the largest freight market in the world".
Operations in China, Australia and the US had contributed the bulk of that profit, with just $900,000 coming from New Zealand.
Executive chairman Bruce Plested said interest rates higher than its trading partners, and an exchange rate that was spiralling out of control were making it "uncomfortable to be part of the New Zealand productive sector".
He also slammed the Government for its "internationally uncompetitive tax rates" and increased spending.
"A growing bureaucracy at local and national levels [is] feeding off valuable GDP growth and slowing our ability to react quickly and efficiently to world markets."
Despite criticism and the risks, Mainfreight would continue to expand overseas, but the company was committed to remaining New Zealand owned, he said.
The company expected first quarter ebitda (earnings before interest, tax, depreciation and amortisation) - to be announced on August 21 - would be similar to the same period the year before. However, the net surplus would be lower due to the sale of the Hirepool, LEP and Pan Orient businesses and an increased tax cost after the full utilisation of tax losses.
Braid said the company would report an abnormal gain of more than $60 million from the sale of LEP and Pan Orient.
Mainfreight's revenue grew 9 per cent in the year to March 31 to $968 million, and profits were up 25 per cent.
Shareholders at the meeting approved a 200,000 boost in overall director remuneration, which equated to a 55 per cent pay rise from $45,000 to $70,000.
Plested's salary as executive chairman rose from $90,000 to $140,000.
Shareholders also approved the issue of 500,000 ordinary shares to Braid.
Shares closed up 4c at $7.58.
Growing pains
* Mainfreight is buying out its partners in its Chinese freight forwarding business for $9.5 million, and is in talks to buy three US businesses.
* Chinese growth has not met expectations, despite contributing to a 25 per cent increase in profit for 2007.
* With just $900,000 of the company's $7.4 million profit coming from New Zealand operations, executive chairman Bruce Plested is angry at the effect of Government spending and "internationally uncompetitive" tax rates on the business environment.
