Sunday, February 24, 2008

Mainfreight drives excellent results through prudent management

The performance of Mainfreight (MFT) the New Zealand niche global logistics player, over the last 9 months to the end of December 2007 has been excellent in the light of slowing global economic conditions.

Key results:

*after tax profit of $NZ29.37 million, a 17.5% increase on last year.
*revenue up 8.83% on 2007, to $645.37 million.
*strong revenue increases from New Zealand, Australia, Asia and the USA.
*new acquisitions either performing to plan or exceeding expectations.

Full MFT, NZX profit announcement

Like Michael Hill International(MHI) and divisions of other New Zealand business operators who have a global reach, Mainfreight's New Zealand growth pales by comparison to their foreign business.

Freightways(FRE) the New Zealand courier company, has found the domestic conditions tough going in their latest profit announcement. Mainfreight has done better than many to manage the economic downturn here though, their opening of a large logistics "supersite" in the South Auckland area, NZ's largest market, has helped focus costs and given them better economy of scale in that important industrial area.

The Labour backed, Government owned, rail service seems to be having an impact on the company though:

"A shortage of rail equipment during the period hampered opportunities to move increased volumes on rail, and is of ongoing concern".

Clearly a state run rail service is going to be an ongoing source of pain for the company.

Management are positive with their long term outlook for the company as far as foreign markets are concerned though:

"Our market share remains small relative to the size of each offshore market, providing significant opportunities for further development in excess of GDP growth in each country. For example, the declining US dollar has seen the start of significant export growth from the United States which will assist export volumes for our American operations. "

It is encouraging to see a positive view of their business, in the light of uncertain global economic conditions, and their management seems prudent in the face of tougher economic conditions, domestically and internationally.

In the first 2 months of this year, indicators are that growth has continued along the lines of the last 9 months and exceeded previous years in respect of revenue growth.

Shareholders have excellent management to thank for driving the results of the company over the last 9 months.

Disclosure: I own MFT shares

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