Aussie woes cause Mainfreight profit plunge

By Phil Boeyen, ShareChat Business News Editor

Wednesday 13th June 2001

Mainfreight's (NZSE: MFT) troubled domestic Australian operations continue to cast a dark shadow over the company's finances with full year profit dropping more than 70%.

For the year ended March the transport group made a net profit of $2.44 million, down from $8.97 million previously. Sales increased $100 million to $410 million.

In a business nightmare scenario Mainfreight has detailed how it took on the loss-making business K & S Express in Australia only to find itself squeezed by increasing costs and a tough market.

However when it tried to increase prices it faced a backlash.

"In October 2000, after giving our customers only very ordinary service, we attempted to recover long overdue fuel costs with a general price increase. This was not successfully implemented," the company says in a statement.

Mainfreight says at the time of purchasing K & S Express - now called Mainfreight Distribution - it estimated the business was losing some A$4 million per year, although exact numbers weren't available because it was part of a larger company, K & S Freighters.

Mainfreight implemented a new computing system for the acquisition and has also been working on improving customer service but says benefits are only now starting to accrue and the business still has a long road to travel.

"... it is important that our shareholders understand that the establishment of this business is going to take time, money and much human effort, and we are not in a position yet to predict when it might be profitable."

"Our presence in Australia remains important to our growth and future and forms an important extension to our network to provide our customers with global supply chain solutions."

While it will be hard for Mainfreight to extricate itself from the negative investor sentiment over its Australian difficulties the latest news isn't all bad.

New Zealand domestic sales grew 8% to $139 million in the year and operating profits rose 15% to $14.9 million, and Mainfreight International in New Zealand returned to profit after three consecutive years of reducing losses.

In the United States the company says that after a tough two years its 49.5% owned CaroTrans business is making progress and begins the current year operating profitably.

A final fully imputed dividend of 3.5 cents per share has been declared. The Directors of Mainfreight have approved a final dividend of 3.5c per share
fully imputed.

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