Europe slump weighs on Mainfreight profit

Mainfreight expects a poor performance from its European operations will continue through the first half of the financial year. Photo / Sarah Ivey

Mainfreight, the global transport and logistics group, posted a 4.6 per cent drop in first-half profit as an earnings slump in Europe offset gains in all of its other markets. It kept the first-half dividend payment unchanged.

Profit was $27.7 million, or 27.9 cents a share, in the six months ended September 30, from $29.1 million, or 29.45 cents, a year earlier, the Auckland-based company said in a statement. Sales climbed 4.9 per cent to $936 million.

Earnings before interest, tax, depreciation and amortisation in Europe tumbled 50.4 per cent to 5.26 million euros as margins shrank in the face of "poor warehouse utilisation and activity, and poorly performing transport operations in Belgium and France."

"We maintain our confidence in the long-term benefits of our European acquisition although we are disappointed with the financial performance over the last six months," managing director Don Braid said in a statement.

Mainfreight acquired Netherlands-based Wim Bosman Group for 110 million euros plus earn outs last year to secure its foothold in Europe. Sales from the region fell just 1.4 per cent to 122.4 million euros while costs including labour increased.

By contrast in its biggest market of New Zealand, ebitda climbed 8.7 per cent to $24 million in the first half as sales rose 5.9 per cent to $228 million. Australian earnings gained 22 per cent to A$13 million on sales growth of 13.3 per cent to A$209 million.

In Asia, ebitda rose 19.2 per cent to US$1.37 million though in-country sales fell 4.2 per cent and European trade "remains weak."

US earnings rose 18.7 per cent to US$8.12 million as sales gained 10 per cent to $182 million, mainly reflecting a better performance from its Mainfreight USA business. Its Carotrans business lifted sales by 3.6 per cent to about US$69 million, with ebitda little changed from a year earlier.

The company will pay a first-half dividend of 12 cents a share on Dec. 14, unchanged from a year ago.

"We are confident of maintaining this growth and profitability, and expect to see improving returns from our European interests," Braid said.

The shares last traded at $10.40 and have gained 5.7 per cent this year. The stock is rated 'outperform' based on six recommendations compiled by Reuters, with a price target of $10.67.