Announcement
MKTUPDTE: MFT: Mainfreight Trading Update 8 April 2020
08:43am
MFT
08/04/2020 08:43
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REL: 0843 HRS Mainfreight Limited
MKTUPDTE: MFT: Mainfreight Trading Update 8 April 2020
NZX MARKET RELEASE
8 April 2020
MAINFREIGHT LIMITED - TRADING UPDATE
Mainfreight Limited (NZX: MFT) provides this trading update as the effects of
COVID 19 lockdowns, across the five regions of the world where Mainfreight is
located, begin to impact current trading patterns.
Mainfreight is deemed an essential service provider across all our global
operations, however differences in COVID-19 response levels, and in customer
profiles, are providing varying financial results by region.
Financial Year Ended 31 March 2020
As noted in our last release dated 17 March 2020, we expect to complete the
full financial year to 31 March 2020 ahead of the prior year at revenue and
profit levels.
Trading from our regions remained consistent into the year end, with just New
Zealand experiencing a downturn in the last week due to the full lockdown
implemented from 25th March 2020.
April 2020 Trading
Having just completed our first full week of trading for April, we have
experienced a mix of trading results across our five regions.
Total sales revenues for the week declined globally by 7% year on year (12%
excluding foreign exchange), with New Zealand substantially impacted by a 40%
reduction. This provided a positive global PBT (profit before tax) figure
for the week. However, short trading weeks due to the Easter and ANZAC
holidays, together with deteriorating trading conditions expected in all
regions, will likely see the April month results significantly impacted.
Regional Overview
New Zealand
Lockdown 25th March 2020 | Essential product delivery only
While freight volumes and trading were strong ahead of the lockdown
restrictions, the limitations in place for the movement of essential goods
only, has impacted New Zealand trading substantially during the first week of
April.
Transport sales revenues declined significantly as non-essential freight was
no longer available for distribution. As the definition of "essential
products" broadens, we expect to see volumes improve.
Warehouse storage revenue continues, however pick activity has decreased to
essential products only. Food and food-related product activity remains
consistent with prior weeks.
In our Air & Ocean operations, normal air freight volume has been replaced
with air charter opportunities. The majority of these are committed, with
important export volume into China, and with returns of PPE supplies.
Australian air charters are currently under negotiation. Sea freight imports
are variable in volume, with only essential supplies able to be delivered.
This may pose medium-term equipment supply issues for the shipping industry
for important exports.
Our New Zealand operations expect a difficult month of trading through April,
however are well positioned for post-lockdown developments.
Australia
Partial lockdown: developing | Essential and non-essential supplies moving
Freight volumes remain reasonable across all of our divisions within
Australia, with a number of new customer gains assisting.
Inter-State distribution continues for our Transport operations, and with a
high level of exposure to supermarket and hardware retail sectors, volumes
are ahead of the year prior.
In our Warehousing operations, products related to the retail and restaurant
sectors are slowing, however food and food-related products continue to trade
at regular levels of activity.
For Air & Ocean, our import sea freight volumes have risen as Chinese exports
commence again. How long this demand will continue is uncertain. Air freight
volume is consistent, however charter activity disappoints.
Performance from Australia through late March and into April has surprised,
and while Easter trading may see a decline, if Australia's state of partial
lockdown remains in place, we expect similar trading levels to continue after
Easter. The first week of April trading saw sales revenues up 9%.
Asia
China lockdown easing / Southeast Asia lockdowns more substantial with tight
border restrictions
Our China air freight volumes are improving as demand for air charters
increases, particularly to USA and Europe for PPE supplies. Air freight
pricing is increasing ex China, but normalising ex Hong Kong.
Sea freight volumes ex China have increased, although forward orders now
appear to be cancelling due to delivery difficulties in the country of
destination.
Southeast Asian operations vary from country to country, dependent on the
severity of lockdown restrictions in place.
While the April outlook for Asia is reasonably positive, with blank sailings
rising and shipping orders declining for May shipments, we expect an impact
in our May financials. Asian revenues were in line this week with the prior
year.
Europe
Lockdowns differ by country: some partial, some full (eg Italy, Spain, UK)
Borders remain open for freight
Financial performance has remained relatively consistent through March and
now into April. However declining freight tonnage for Italy, Spain and now
the UK is having some impact.
Our Transport volumes have continued strongly through the Netherlands and
Germany, with just high-end retail product declining. Various industries
remain open and able to export and receive imported supplies.
Our Warehousing operations have seen a similar decline in "High Street"
retail volume, but continue to receive storage revenue. Pick activity
remains consistent for supermarket-supplied product.
In Air & Ocean, sea freight volumes have been impacted by the earlier Asian
shutdown, but are slowly re-emerging. Air freight enquiry levels are
improving with charter activity from Asia underway.
Our outlook for Europe remains positive, with some manufacturers expecting to
increase production through April. The first week of April saw revenues
decline just 7.8%.
Americas
Lockdown restrictions differ by State: moving to full "stay at home" status
Freight volumes were strongly consistent through March, only slowing as State
lockdowns have come into effect in the last two weeks.
Transport volumes have declined about 20%, with health care and home use
products still relatively strong.
In our Warehousing division, new customer implementation has continued, and
activity levels are reasonably consistent.
In the Air & Ocean sector, sea freight import volume has improved, however it
is expected to decline through April and May as the impact of lockdowns
increases. Air freight charters are underway, dominated by PPE supplies from
Asia.
In our CaroTrans sea freight business, demand for LCL capacity has increased.
Revenue has held stronger than expected, and our outlook for April and May
for the Americas is not as bad as expected. The first week of April saw
revenues decline 8%.
Operating Expenditure
A number of initiatives have been put in place to reduce and/or eliminate
unnecessary operating expenditure:
o Our usual annual wage and salary review has been deferred, and a hiring
freeze is in place. Elimination of the use of casual labour has also been
implemented globally.
o Holiday leave is being utilised where appropriate, and in discussion with
team members.
o Managing Director's salary and other Directors' fees reduction of 50% in
effect for the foreseeable future.
o Government employment subsidies are under review with likely application in
New Zealand and some European countries.
o All unnecessary discretionary expense reductions have also been actioned.
o Assistance to owner operators with both financial lease and government wage
relief negotiations has been ongoing.
Our People
o The safety of our people while operating as an essential business is our
highest priority.
o New Zealand Government COVID-19 health measures have been implemented and
used as a blue-print for our operations in other regions.
o Also a priority is the retention of employment for our people, as we
implement team rotation, combined with working at home where possible.
Debt / Capital Expenditure
Debt facilities are satisfactory and well supported by our six banking
partners. Current debt facilities total $500 million, of which $230 million
remained undrawn at 31 March 2020. An amount of $415 million matures in
April 2024, the balance of $85 million in April 2022. Net debt at 31 March
2020 is approximately $160 million.
Capital expenditure of $120 million has been deferred. Committed capital
expenditure amounts to $78 million for current construction projects in the
2021 financial year.
Outlook
Trading through April is expected to be significantly reduced from the prior
year, albeit shielded somewhat as our global locations provide a measure of
sanctuary from a single country exposure.
Additional financial leverage remains available to us if needed. Our balance
sheet and debt facilities provide sufficiently strong coverage at this time.
We remain well positioned for economic recovery.
Further updates will be provided when appropriate.
Ends
Don Braid
Group Managing Director
Mainfreight Limited
2 Railway Lane, Otahuhu, Auckland 1062
PO Box 14038, Panmure, Auckland 1741
Email: don@mainfreight.com
End CA:00351434 For:MFT Type:MKTUPDTE Time:2020-04-08 08:43:03
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