Wednesday, August 1, 2007

Mainfreight keeps on Truckin

I'm a very recent convert to the Mainfreight Ltd [MFT.NZ] convoy but shareholder or not one cannot help but be impressed by this company.

It all starts at the top with great management. Don Braid, Managing Director and Bruce Plested, Executive Chairman, along with a great team locally and globally help drive this company forward.

Management are decisive, show strong leadership, and have very clear goals about where the company is going and significantly how they are going to get there:

"As we grow to become a world player we must maintain our culture and style of business by keeping a strong grip on our policy of being anti-bureaucratic; continuing to allow branch managers to make bold decisions; being energetic and entrepreneurial; and so continue to grow our business.

We expect to double the size of our business over the next 3-5 years."


Don Braid, GM, 2007

Mainfreight's management "style" then starts at the top and filters through all aspects of the business. Local decision making is crucial to the smooth running of the business and a smooth running business is more efficient, grows faster and makes more money.

One of the first things Warren Buffett looks at when buying into a company is the quality of its leadership. The management of Mainfreight and its people set it in a class above all, in my opinion, of listed companies in New Zealand and if it was large enough I believe Buffett would put this company in his portfolio because it is a well run, with a business that is easy to understand, revenues that continue to grow and an efficient use of shareholders capital, with good returns to shareholders. Certainly Mainfreight's historical financial background would attest to how well run the company has been.

The company is not afraid to ruffle political and financial analysts feathers either:


"To the financial analysts and other scaremongers who downgraded us in the early part of the 21st century as we put together our offshore strategy, you were wrong, and we were right. Stop discouraging New Zealand companies from expanding offshore – of greatest risk is the low growth available in New Zealand.

More and more the New Zealand economy slides down the OECD economic rankings as we milk our productive sector in the hope of remaining a first world country with taxpayer funded hospitals, education and social welfare.

There needs to be a clear understanding that the productive sector is the only means by which a country can prosper – interesting, challenging enterprises earning profits are the mechanism which creates opportunities for people to do well for themselves, the enterprise, and for mankind".
Bruce Plested, Mainfreight, annual report 2007


The same approach is used when dealing with shareholders. Information in company reports is straight to the point with little or no "corporate speak", so one can actually read their company report and understand what the hell is going on. A rarity but an essential ingredient. Shareholders must know how their investment is doing and they must be able to do that easily.

The focus by the company on global growth has enabled Mainfreight to slowly assemble a network of operations around the globe that encompass a wide number of countries. With bases now in Australia, Asia and various states in the USA, Mainfreight is starting to have the ability to lever its logistics capabilities off an increasingly enlarged network and customer base.

Their current expansion goals have largely been met and medium term goals have already been mapped out and management are working towards achieving theses goals. Acquisitions have been a cornerstone to Mainfreight's expansion but once purchased and integrated, organic growth is a feature of these add-ons.

Mainfreight intend to have "global significance" in international logistics in the US, Europe, China and Australasia, with an aim to double revenue growth from the present 1 Billion NZ dollars. With full year profit of 55 Million NZ Dollars for 2007 the future for profit growth also looks good if margins can be maintained or even improved as logistical costs come down as the company grows.

In Bruce Plested's closing remark in his 2007 Chairman's report he takes a swipe at New Zealand's current economic decline and unfriendly business climate:

"In summary, we do not have a large enough or vibrant enough business sector in New Zealand. Economically, New Zealand has been on a long slow decline relative to other OECD countries for close to forty years, and this decline has accelerated in recent years. Surely with the benefit of hindsight, New Zealand governments can recognise that our productive sector is not performing to the level necessary to ensure this nation’s future health and prosperity.

Right now we need bold new initiatives and inspirational leadership. Other countries have found ways to reverse economic decline, and that has involved low company tax rates as in Singapore and Ireland and a reduction in the weight of compliance costs.

Whatever the outcome, Mainfreight has a determination to remain a New Zealand owned and operated business while continuing to pursue global aspirations".


Like many New Zealand businesses and business people, Bruce seems to be implying that Mainfreight exists in spite of what the current Labour government are doing to screw our economy and is clearly annoyed at the impediments that his business faces.

While it would be nice to have a government being "business friendly" we all know that the opposite is more than often the truth.

It is to Mainfreight's obvious advantage then that they see global expansion as their way to grow. They clearly cannot easily expand in their country of origin.

As I write this Mainfreight are in discussions with 3 freight forwarding companies with a view to purchase, with one company already in the hole.

I own shares In Mainfreight and I am looking to buy more for the long-term portfolio at any weakness.

The closing price of MFT shares today is $NZ 7.40, 1c above my original purchase price.


Disclosure I own MFT shares in the Share Investor Portfolio.


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c Share Investor 2007