New Zealand bellwether freight and logistics company Mainfreight, has released full year results to March 2013.
Full year profit was $67.98 million for year ending March 31, 2013 – 3.4% up on the previous year’s record profit.
Overall sales income was $1.88 billion, also a record.
Mainfreight says it will continue to monitor global trading conditions, manage costs and pursue sales growth.
In spite of record sales, earnings growth has stalled over the last financial year as the group attempts to settle its European business in low-demand European markets.
Mainfreight’s European expansion saw it acquire the Wim Bosman Group in 2011, with the new business expected to lift earnings. But Mainfreight has actually struggled in Europe, losing key accounts and operating in recessionary conditions.
European sales revenue was steady, however, at 244.7 million euros, but earnings before interest, tax and depreciation (EBITDA) fell to 9.46 million euros, an alarming 43% decrease.
In Australia, performance was ‘satisfactory’ with total revenue for Australian business units up 12.4% to A$433.23 million, and EBITDA improved at 16.6% to A$30.46 million.
Growth in the volume of parcel traffic, however, was considered detrimental to Mainfrieght’s overall service quality and margins, attracting additional labour, facilities and escalating owner-driver costs.
Mainfreight ‘s response to that was to provide customers with a dedicated parcel provider, and take parcel freight out of its network to enable it to “concentrate on ensuring that Mainfreight provides its freight customers with the best possible service levels.”
The statement accompanying the results says growth in the Australian domestic sector had highlighted inadequate operating facilities and the need for considerable investment into new Australian infrastructure and facilities.
Improvements to the Adelaide facility are imminent, with additional Sydney facilities under construction. Land has been purchased in Melbourne also, for development.
In the Americas, revenues grew 7.6% to US$357.49 million and EBITDA lifted 10.5% to US$16.92 million. Again, Mainfreight describes the result as satisfactory but with caveats: “Our expectations (in the Americas) have yet to fully materialise. The majority of the financial improvement was within the Mainfreight business, while CaroTrans was flat, with minimal growth in tougher than expected conditions.”
Mainfreight describes Europe as its most challenging business unit: “Where we confront a series of issues including customer losses, poor trading conditions and the transition (of Wim Bosman) from private ownership to a member of the Mainfreight Group.”
Despite lost customers, revenue loss was “minimal”, with increased sales helping to replace lost customers. Total European sales revenues were €244.74 against €244.80 million for the previous year prior.
However, high fixed costs helped contribute to an EBITDA decrease of 42.7%, to €9.46 million.
Mainfreight regards these European results as poor, saying they do not reflect the effort from the European team as it struggles to position the business for growth.
Still in Europe, Mainfreight expects to have its first Mainfreight-branded vehicles this month after a lengthy legal challenge in the Netherlands (culminating in a settlement of €1.5 million). The results also show a cost of NZD $415,000 set against a “brand defence” in Singapore.
Asian operations saw a revenue increase of 3.6% to US$29.90 million and EBITDA improve 21.7% to US$2.60 million.
Again, improvement is satisfactory, but below top-table expectations. Group HQ says that “China/Asia offers plenty of opportunity; however growth rates have been slow for us as we develop a small business by market standards.”
In New Zealand, all operations performed at “satisfactory” levels over the year with business units increasingly aligned and customers benefiting from a suite of supply chain services.
Total revenues for the New Zealand group of businesses increased 5.5% to $473.87 million. EBITDA improved 9.8% to NZ$59.92 million and further revenue and EBITDA performance is expected for the home-based businesses.
In the last year, construction has been completed on two additional rail-served terminals, at Palmerston North and Invercargill, with land also bought in Hamilton to provide a railhead there by late 2014.
Work has also begun on the reconstruction of Mainfreight’s Christchurch facilities, which will see a new 12,000m2 rail-served facility and 17,000m2 of food-grade warehousing come on-line.
Financial result for the twelve months ended March 31, 2013 (unaudited) :
Preliminary full year report announcement – year-ended March 31, 2013:
