30 May 2013

Mainfreight's profit up, but Europe business struggles

9:19 am on 30 May 2013

Record sales helped push Mainfreight's full year profit higher, but the logistics firm reported a sharp decline in earnings in its European business.

Net profit has risen to $68 million in the year to the end of March, 3% higher than the previous year, after sales of $1.9 billion.

However, operating earnings fell 0.5% to $137 million, dragged down by a 43% fall in earnings in Europe, where its business has struggled with a loss of customers and tough trading conditions.

Abnormal items after tax of $2.1 million mainly relate to brand name protection in Europe.

Mainfreight's Australasian units remained strong, although the Australian domestic operations were weaker than expected in the three months to March, due to a squeeze on margins.

The American and Asian operations continued to grow.

Mainfreight managing director Don Braid says trading into the first two months of the new financial year are similar to the previous year, reflecting a softening of the economies in which it operates.

But he believes Mainfreight's investments in infrastructure in Australasia will position it for stronger growth.

Mr Braid says the slow start to the new year is a concern, but it is only two months of trading and the months heading into winter are usually more difficult.

He says despite the poor financial result in Europe the company has expanded its network and it will continue to drive down costs.

Mr Braid says investments in infrastructure should address growing pains in Australia where the facilities had not been able to cope with 20% growth each year for the last four or five years.

Construction is starting on a new Brisbane facility this week, the company has a conditional offer on 11 hectares of land in Melbourne, work is starting on extending the Adelaide facility and Mainfreight is also looking to extend its Sydney operation.

"The near to medium term for Aussie is looking very good. We've found a good niche in that market, we've just got to make sure we get over these growing pains."

Mr Braid says Mainfreight has had 10% growth in New Zealand year on year.

Mainfreight's shares rose 3.6% to $10.05 on Wednesday.