Mainfreight said profit growth from its local transport business was below expectations, in part because the company hiked salaries in its New Zealand transport business for people at the lower end of its pay range.
Government data last week showed average hourly wages for transport, postal and warehousing workers slipped 0.2 per cent to $29.89 in the September quarter compared to a year earlier.
Mainfreight is New Zealand's biggest trucking company, although it has expanded its global transport and logistics footprint to reduce its reliance on the local market. Now, its New Zealand, Australian, European and American divisions each generate about the same level of revenue, although the Kiwi business still offers the best margin. Mainfreight's Asian revenue is about a seventh of the others.
Earnings growth in Europe and America underpinned Mainfreight's group result, more than offsetting the trade war headwinds facing its Asian arm.
Mainfreight got a foothold in Europe in 2010 when it bought Wim Bosman for 110 million euros and turned the unit around after some early setbacks. The business delivered a 6.3 per cent increase in first-half revenue to 193.8 million euros and a 33.6 per cent gain in ebitda to 13.9 million euros. The company added another 30 people to the unit's sales team and said it expected to see even more revenue growth.
Revenue at its American operation rose 2.9 per cent to US$244m ($385.4m) while earnings lifted 22.3 per cent to US$13.4m. Mainfreight noted US freight volumes need considerably more growth.
"Continuing profit improvement from Europe and the Americas has assisted overall performance, as we continue to improve margins and services in both regions," the company said.
Mainfreight's Asian operations reported smaller freight volumes, with the China-US trade war having a bigger impact on activity than the same period a year earlier. Riots in Hong Kong also sapped demand for air freight services. Revenue fell 10.8 per cent to US$36m and ebitda was down 11.9 per cent at US$2.8m.
Australia also disappointed, as economic conditions across the Tasman led to reduced freight volumes and crimped earnings and revenue growth, which were up 0.5 per cent at A$22.6m ($24.4m) and 5.5 per cent at A$360.4m respectively.
The board declared an interim dividend of 25 cents to be paid on December 13 to registered shareholders on December 6. That's up from 22 cents a year earlier.
"While our core Australasian region is experiencing slowing economic conditions, other parts of the network continue to find growth and increased profitability. This period to September 30 2019 has demonstrated the benefits of our global network strategy, and we expect an improved full year result accordingly," the company said.
Mainfreight's capital spending more than doubled to $90.4m in the period and it said it expects to spend about $170m in the full year. It forecast capital expenditure of $190m in the following financial year.
The company's shares closed yesterday at $39.76, having gained 29.1 per cent so far this year, outpacing a 24 per cent increase on the S&P/NZX 50 Index over the same period.