Mainfreight Ltd: Full Year 2010 Profit Analysis

Mainfreight Ltd [MFT.NZ] has had a very good 2010 full year profit result considering the state of the world economy and the subsequent slow down in world trade. The result is up 2.5% on the 2009 full year announcement.



Key Points

1. Total revenue (sales) decreased by 10.5% to $1.13 billion, from $1.26 billion last year

2. A net surplus after taxation and abnormals of $36.37 million for the twelve months of the 2010 financial year; an increase of 2.5% on the previous year’s result of $35.48 million.

3. Second half of year up more than 11% in revenue indicating a possible return to growth.

4. A big focus on cutting operating costs over the period of downturn in the business/economy, with more than $32 million cut.

5. A huge decline in North American revenues of nearly 25% in the first half but importantly showing signs of a recovery in the second half.

6. Australian operations steady.

7. New Zealand operations down in first half but improving in second.

8. Asian business under intense competitive pressure.

9. Cashflow down.

10. Debt decreased significantly from $115.28 million to $80 million.

Management have done well to come in with a higher full year profit. They did this by cutting back fat in the business and delaying capital expenditure and that is a testament to how responsive management are to trading conditions for them and the economic situation. Other listed NZX companies have continued to operate without these sort of economy measures and shareholders are paying the price.

Mainfreight have indicated to the market that while business for them is improving, any improvement could be tentative at best given the continuation of global economic problems and problems in Europe and elsewhere with high state debt levels.

I have to concur with these sentiments and I see any - if there is to be growth - short to medium term growth for Mainfreight that it comes for reasons of market share protection and that will impact on margins and therefore profit.

Hopefully that means there will be more expenditure cuts until the economic slowdown is a real one (the current "rebound" could be fueled by more State funded debt through stimulus packages) and sustainable growth and increased margins will once again be the order of the day for Mainfreight.

9 out of 10.


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