Mainfreight is reporting a 33% drop in profit before tax to $395.4 million for its full year 2024 result, pointing to a decline in freight volumes and normalisation of international sea and air freight rates from previous highs.
Revenue for the NZX-listed global freight giant was down 17% to $4.7b for the 12 months to March 31, 2024.
In an NZX update, the company says the result was in line with expectations and trading has improved during the second half, particularly across its Australasian businesses. Weakness in trading has continued in Asia, Europe, and the USA.
“We are satisfied with the momentum and progress in New Zealand and Australia, but remain disappointed with our performances in Asia, USA and Europe, where our market share remains small,” Mainfreight says.
On a year-on-year basis, total air freight kilos were up 4.5%, total sea freight TEUs were up 4.7%, total domestic transport tonnes were down 6.2% and total warehouse orders picked up 12.3%.
“We have grown a larger business, attracted more customers and increased our operational capacity,” the company says.
“However, our ability to convert this to more meaningful long term profitability during this past year has been disappointing. No matter the prior year’s record performance, we should have performed better.”
Operating cash flows were $505m, down from $757 million in the prior year, reflecting decreased profitability, and working capital movements.
Current debt facilities total $501m, of which $148m was drawn. Net funds at March 31 was $22 million compared to net funds of $123 million last year.
Net capital expenditure totalled $254m, with expenditure for property accounting for $128m, warehousing racking and fit-out costs of $59m, and plant, equipment, and software of $67m.
“We continue to invest in our network and the infrastructure associated with it. We expect capital expenditure through to the end of 2026 will total $509 million, of which $390 million relates to property, racking and fit-out costs,” the company says.
During the current year, the branch network increased by six to 337 branches. It opened in Mumbai, India during September 2023, taking the number of country locations to 27.
The directors approved a final dividend of 87 cents per share fully imputed, bringing the full dividend for the year to $1.72 per share, in line with the prior year.
Year-to-date, Mainfreight’s share price is down 2.8% and currently trading at $67.80 per share.
Discretionary bonuses were reduced by 68%, down to $25m from $80m the previous year. The decrease was due to a number of branches across the network contributing less profit compared to the prior year, impacting the bonuses paid to team members of qualifying branches.
Across its New Zealand operations, Mainfreight says it continues to have a “resilient business”.
“Whilst some customer freight volumes declined post their peak, we continued to grow market share and further extend our capability across New Zealand.
“New warehousing capacity has been filled with four new sites currently in plan and for construction, providing capacity for growth.
“Three new transport sites under construction in Auckland will improve our capability and efficiency, two will be operational mid-2024. Our new Auckland rail-served inland port and international container cross-dock operation has opened post year-end.
“Our transport business is a significant user of rail across the length and breadth of New Zealand. The current fiasco surrounding the future of both the rail ferry services across the Cook Strait and rail services south of the Waikato are unsettling.
“The loss of rail services between the North and South Island would see Mainfreight add 5,700 additional truck and trailer journeys per annum on the road, putting significant pressure on the already fragile roading network.
“New Zealand’s roading infrastructure will not cope in the absence of rail,” the company warns.
Current trading across all New Zealand businesses is satisfactory and is in line with the prior year, it says.
Mainfreight CFO retires
Mainfreight has also announced the retirement of Tim Williams, its chief financial officer for the past thirty years.
Williams will step down at the end of June while Graeme Illing, Mainfreight’s New Zealand financial controller, will take over as the new CFO.
Williams was first appointed CFO at Mainfreight shortly after the acquisition of Daily Freightways in 1994, and prior to that held various finance roles since 1984.
He also played an important role in the public listing of Mainfreight in 1996.
“His integrity, honesty, and attention to detail has been exemplary,” Mainfreight says.
Outlook
Mainfreight says it remains a “demanding operating environment” when compared to the prior two years and it “expected to do better”.
“Despite these challenges, the peak freight congestion of 2022/2023 has provided a period of significant growth, new customers, and improvements for our business.
“Supply chain management has emerged as a critical strategic decision among our customers. They now seek greater resilience and are diversifying their supply chains.
“Our established network across 27 countries offers good capability across the varying supply chain requirements. We continue to attract new customers across our network and are confident of ongoing growth.
“We continue to invest in land and buildings, including leased facilities where required. The total capital expenditure is NZ$255m through to the end of 2025.
“Our network expansion will continue to be carefully managed as we look to improving returns rather than expansion for the sake of it.
Trading post results is satisfactory, and we remain confident of our medium to long term growth opportunities,” it says.
Mainfreight will release its financial results for the first half of the 2025 financial year to the market on 13 November 2024.
Divisional performance:
New Zealand (NZ$)
Revenue NZ$1.12 billion Down 12.5%
Profit Before Tax NZ$148.7 million Down 12.2%
Australia (AU$)
Revenue AU$1.29 billion Down 8.7%
Profit Before Tax AU$128.5 million Down 6.1%
The Americas (US$)
Revenue US$639.1 million Down 33.4%
Profit Before Tax US$21.8 million Down 75.6%
Europe (Euro €)
Revenue €557.2 million Down 11.6%
Profit Before Tax €27.9 million Down 40.5%
Asia (US$)
Revenue US$96.5 million Down 36.8%
Profit Before Tax US$13.9 million Down 52.2%
