Mainfreight shares lift as offshore divisions drive 1H growth

Wednesday 14th November 2018

Mainfreight's shares lifted 4.2 percent after its offshore divisions kicked into gear, driving growth in the first half of the year.

Net profit rose 32 percent to $55.7 million in the six months to Sept. 30, versus $42.2 million in the prior year, the Auckland-based global transport and logistics company said. Earnings before interest, tax, depreciation and amortisation were $108 million, up 22 percent.

The shares last traded at $29.95, up from around $25 at the beginning of the year, and close to 2018 highs reached at the end of September.

"We have always known that our offshore growth will surpass New Zealand," Mainfreight managing director Don Braid told BusinessDesk. "Rather than looking at it country-by-country, it is important to see that our offshore ebitda is now 58 percent and revenue is 76 percent. A billion dollars was earned offshore in terms of revenue in this first half alone," he said.

While revenue from offshore has been hovering around the 70 percent mark, "what is changing is that we have had good contributions at the ebitda level from all five regions. No longer are we lagging in Europe or the Americas or Asia. Those businesses have now got some good forward momentum in terms of ebitda performance," he said.

First NZ Capital was upbeat about the result, which it said was ahead of expectations "with the positive surprise driven by the Americas and Europe segments that are key pillars of MFT's growth option strategy. We expect to positively revise earnings forecasts."

Braid said other trucking companies in the sector are benefiting from the improving global economy, in the US in particular.

"I think what is different for us is that we have actually found our own mojo. We have actually got ourselves a bit better sorted and we are attracting new customers to our businesses" rather than just getting a lift from economic activity.

Braid said the new customers tend to be in the small freight space.

"They are looking for improved services, better quality services. We are different. Perhaps they have had to put up with the giants of trucking in America over many years and we've got this little guy with blue trucks that's a bit different. We are attracting freight to our business," he said.

Regarding plans to expand into Japan, he said initially it will be in the air and ocean space rather than on-the-ground trucking. Mainfreight has been moving quite a bit of freight with an agent based in Japan and "there is enough of that freight to open our own office and dispense with the agent". Domestic trucking in Asia would be some way down the track, he said.

Looking to the future, Braid said Mainfreight has ordered some electric trucks from the bigger European producers and will begin deploying them in Europe. He noted, however, the trucks still have a limited range of kilometres.

"Certainly electric trucks are on our radar screen and when they become more and more efficient we will look to introduce them across the whole network," he said.

Braid also underscored that while the company is becoming increasingly global, it has no intention of moving offshore.

"We are proud to be a New Zealand listed company and we can run this business the way we run it from here. We don't have to move offshore."

(BusinessDesk)

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