Mainfreight has posted a full-year net profit of $147.9 million and says it’s well positioned to tackle the ongoing supply chain disruptions brought about by COVID-19.
The result, based on the new NZ IFRS 16 accounting standard, was up 4.9% year-on-year while revenue was up 4.8% to $3 billion.
Comparing “apples with apples”, without NZ IFRS 16 its profit was up 10.6% to $156.1m.
The company says it has taken a number of actions to offset the financial impact of COVID-19.
This includes a hiring freeze and deferral of the annual wage and salary review, removal of casual labour and a 50% reduction in managing director’s salary and other directors’ fees. Capital expenditure of $120m has also been deferred.
The company has also returned its $10.61m government wage subsidy due to improved trading levels.
It applied for the 12-week subsidy to cover 1,526 people as its New Zealand transport and warehousing operations “experienced significant revenue reduction” early in the level 4 lockdown.
“We were uncertain at this time, just how bad trading would become. Uppermost in our minds was the protection of jobs for our people.
“Pleasingly, our trading levels have improved through late April and into May, and our efforts to reduce overhead costs, defer capital expenditure, and gain new business in the period, have been relatively successful. Our offshore businesses have also traded better than expected for the most part. Cash flows remain positive, and our bank debt headroom has not been needed.
“Therefore we are in a better position than many, and while qualifying under the Government’s criteria, we felt it was appropriate to return the subsidy.
“We are supportive of the Government measures taken in these extreme circumstances, with the aim to protect New Zealand employment. Our congratulations to them for those decisions,” the company says.
Trading across the global business for the seven weeks from April 1 has seen sales revenues improve 5.7% on the prior year, bolstered in part by air charter revenues.
New Zealand
New Zealand revenue for the 12 months was up 4.7% to $752.9m. It continued to expand the NZ network and gained a stronger regional presence across its businesses, it says.
“Although we have chosen to reduce capital expenditure in the 2021 financial year, we will continue with the completion of our new transport facilities for Mount Maunganui, Levin, Blenheim, Gore and Oamaru.
“Additional warehousing sites, some leased, are being considered for Auckland.
“Our air & ocean division continued to find market share and post-year end has had considerable success in gaining new customers.”
During the seven-week trading period to May 19, there was a 16% decline in NZ sales revenues and profit before tax was break-even, down $7m.
Trading improved as New Zealand moved from alert level 4 through to level 2, with some May weekly profits now exceeding those of the equivalent weeks in the prior year, Mainfreight says.
“Taking a somewhat cautious view, we expect to see transport volumes increase; delivery expectations are being met and we have good levels of sales activity. We are seeing increased enquiry for our warehousing solutions, and significant air freight volumes are being moved via air charters to and from Asia and the USA.
Australia
Australia revenue was up 6.6% to A$756.8m with a strong second half recovery led by the warehousing and transport divisions.
Its warehousing footprint increased by 18,400m2, with utilisation of 87% at year end.
The majority of volume was for the domestic transport freight network alongside regional expansion, improving profitability and an increasing number of new customers.
Its air & ocean operations were steady but “not developing similar levels of air freight activity as the other regions”.
The partial lockdown response by the Australian Government saw freight volumes continue at “more-or-less normal trading levels”.
Sales revenues for the seven-week period increased 13% compared to the same period in the prior year, and profit before tax improved to A$6m, up by A$4m
Europe
Europe revenue was up 6.7% to 401.3m euros with 93.9% utilisation across all warehouse facilities.
“As European countries begin to reopen for trading, we are seeing freight volumes improve, and pick activity in our warehouses increase. Our air & ocean operations have had more frequent import air freight shipments,” it says.
Asia
Asia revenue was down 17.6% to US$61.3m after a “disappointing finish to the year”.
This was impacted by US import tariffs which reduced volumes from China. Meanwhile, activity from Hong Kong decreased due to civil unrest.
“The pandemic coincided with the usual Chinese New Year shut down of trade, and affected freight volume to and from all regions during February and March.
“While production in China has returned, the inability of importers to receive product under the varying levels of lockdown within our other regions, has seen fluctuating freight tonnage.
“Development of our Southeast Asian operations remains a key to diversifying our Asian business and reducing reliance on China trade alone,” the company says.
The seven-week period from April 1 saw revenues up 41% on the same period last year, and profit before tax up by US$500,000 to US$1.1m. The large revenue increase was assisted by low margin air charter activity from China and Hong Kong.
“We expect this level of improvement to continue for a period of time, particularly while demand for PPE product continues.
“We continued to expand the network in Southeast Asia with the opening of our first branch in South Korea, in Seoul.”
The Americas
Revenue from North, South and Central America was down 0.1% to US$493.2m. Its warehousing division increased its footprint to 85,935m2, an increase of 44%. Utilisation across the business was 79% at year end.
In our Transport business, we continue to be focused on growing our own road line haul network, along with gaining more FMCG customers, to better complement our desire for regular, every day freight volumes.
“The air & ocean division struggled earlier in the first half year with declining revenues, particularly related to China imports. Our four largest branches have since split their air and sea operations, to allow greater focus on these two distinct modes and we have seen some early signs of improvement.
“As the USA moved into full lockdown, transport freight volume declined significantly. Stronger air freight volume has assisted air & ocean revenue to increase.
“The Americas remains a key area of development potential for us.
“Based on the weekly results and discussions with our team, the economic effects of the pandemic may well be greater and last longer in the USA than in other parts of our global network.”
Outlook
Mainfreight says the result is “satisfactory” and confirms the ongoing success of its growth strategies.
“The COVID-19 pandemic has had a significant impact, and will continue to affect economic conditions for some time. While freight remains able to cross borders, slowing consumer demand will see freight volumes and supply chain activity contract.
“In the first seven weeks of trading in the 2021 financial year, Mainfreight has adapted as well as we would have expected to the erratic trading conditions. We have been positively surprised at the levels of activity in New Zealand, Australia, Asia, and some parts of Europe, and this has been reflected in our estimated weekly profits in April and May. The Americas region has seen less activity than others, and appears to be the one region that will take more time for us to see a significant level of recovery.
“The actions taken by the business to reduce costs and adapt to the economic changes is providing a measure of assurance for the year ahead. Our sales teams are very active and we are gaining new business.
“We have full confidence in our strategies, network, customers – and most importantly, our people – to deliver improving results as we progress through a period of uncertain economic recovery.
“We remain cautiously optimistic.”
