Mainfreight posts record annual profit, warns of slowdown ahead

Thursday, 25 May 2023

Mainfreight posted a record annual profit but said the second half of the year was weaker.

Transport and logistics firm Mainfreight posted a record annual profit, but warned activity has started to slow from the highs reached during the pandemic.

Mainfreight reported a 20% increase in profit to $426.5 million in the year to the end of March as revenue rose 8.8% to $5.68 billion.

The company notched up record profits during the Covid-19 pandemic as freight rates soared. But slowing economic growth, weaker demand and improving supply chains is now weighing on the company, with pre-tax profit down 6.8% in the second half. Analysts expect profit to decline this year.

“During this past year we have seen extraordinary levels of freight volume, particularly during the first six months, a reflection of a difficult and over-heated logistics market,” the company said in a statement.

But it said trading in the second half fell short of expectations against a very strong comparison period as international freight congestion unravelled, with a swift reduction in sea and airfreight rates.

While that provided much-needed space availability for customers, it had also impacted Mainfreight’s revenue growth, the company said.

The company said macroeconomic conditions were expected to deteriorate further, reducing freight volumes across all its logistics operations.

In the latest year, its international air freight kilos fell 8%, while container freight slid 7%.

Mainfreight's newest truck runs on electricity - and rather than waiting a long time to charge up, the truck swaps an empty battery for a fully charged alternative.

“Whilst short-term freight demand has eased, we expect that normalised trading levels will resume over time,” the company said.

Increasing inflation was also impacting the company, leading to a re-pricing of freight rates.

The company said trading in the new financial year had continued to show weakness in volumes and activity.

“Whilst management of overhead cost structures and the implementation of freight rate reviews have been successful, it is expected to be a challenging first six months of trading,” the company said.

Still, Mainfreight said it remained confident of its medium to long term growth prospects.

The company will pay a final dividend of 87 cents, unchanged from last year. That takes its full-year dividend to $1.72, up from $1.42 last year.

However the company said it will pay out a lower discretionary profit bonus to staff for the year, down 15% to $79.9m.

“This decrease reflects the declining rates of improvement across some of our branch networks, particularly during our second half,” it said.

Mainfreight said it would focus on managing margins and overhead costs.

The company’s decentralised structure gave branch leaders responsibility for their profit and loss accounts and that had seen recruitment reduce significantly over the past three months across all regions, it said.

Mainfreight shares fell 2.2% to $69.17 in mid-afternoon trading on the NZX on Thursday, although it remains the most expensive stock on the market.