Disaster over the Tasman hits net outcome

By Dita De Boni

A disastrous performance from Australian operations contributed to a slide in earnings for transport company Mainfreight in its March financial year.

Overall profits slipped 5 per cent to $6.8 million for the year, down from $7.3 million a year earlier.

Much of the drop was due to a loss on the group's Mainfreight distribution division across the Tasman, which was restructured during the year. The Australian domestic transport company suffered a loss of $887,000 before interest and tax, swinging from a profit of $128,000 a year earlier.

General manager of Mainfreight's international division, Chris Dunphy, said the company had to pay more than $200,000 in severance payments after replacing some managers in Australia.

Mainfreight's international operations in Australia were also hit by the waterfront dispute and the lingering effects of the Asian economic crisis.

"We were trying to run the operation [in Australia] too lean - and found out the hard way we needed an overkill of management."

The company had also acquired some new business in Australia over the past couple of years and integration had been difficult. But the company had taken those losses "on the chin" and was now in good shape to move forward.

"We have to be Australia - if we aren't we'll be exposed to competition cutting us off at the pass."

In New Zealand, the company's freight forwarding operations had grown strongly, with after-tax earnings from domestic business up $1.6 million.

Mainfreight's total revenue for the year surged 36 per cent to $286.3 million, with earnings before interest and tax rising 10 per cent to $16 million.

The rise in sales was due to the inclusion of recently purchased businesses, including warehousing and distribution company LEP Australia, which made a loss of $388,000 for the year.

Mr Dunphy forecast LEP Australia would make a profit in the current financial year. This, coupled with an expected increase in market share in New Zealand, meant Mainfreight was optimistic of an earnings improvement.

The company will pay an unchanged final dividend of 3c a share. Mainfreight shares were unchanged yesterday at 150c.