Carrier expected to post boosted earnings

Double-digit profit-after-tax profit growth is expected by brokers of Freightways when it reports next week, reflecting building momentum in its revenue earnings recovery.

For its first-half trading result for 2013, to be released today, brokers at Forsyth Barr and Craigs Investment Partners are forecasting a strong result, with after-tax profit up respectively up by 15% and about 11% - in a range of $20.2 million to $21 million.

The performance of carriers, either domestic or international, provides an economic litmus test from increased or decreased levels of freight movements. Freightways carries about 200,000 items each business day, or about 50 million each year.

Freightways is the country's largest express package business, with brands including NZ Couriers, PostHaste, CastleParcels, Now and DX mail; its Information Management storage operations cover New Zealand and all of Australia; the latter under brands Archive Security, Filesaver, DataBank and Shred-X.

Forsyth Barr broker, Peter Young, expected underlying after-tax profit up 15% to $21 million and earnings before interest, tax, depreciation and amortisation up 11% at $40.5 million, compared to the corresponding period last year.

''Freightway's double-digit profit growth is being driven by an improvement in operating margins and a lower effective cost of debt,'' he said.

Craigs broker, Chris Timms, said he expected the ''solid momentum'' of 2012 to have continued into Freightways first-half result, albeit with the second-quarter results having to compete with the Rugby World Cup boost last year.

''The key domestic indicators, although mixed, are still supportive of a gradual earnings recovery,'' he said.

Mr Timms expected sales for the ''core express package'' business to grow 3.8% for the first half and 3.6% in the second, but noting higher costs would detract from earnings before interest and tax' margins, lower at 1.8% and 1.6%, respectively per half.

Mr Young said that to offset the soft trading environment, Freightways will see market share gains and price increases, with forecast revenue growth of 4% and earnings before interest and tax up 3%, for the half-year.

Mr Timms identified the Information Management division to continue with its strong performance, with sales growth at 21% for the first half and 18% during the second quarter.

- simon.hartley@odt.co.nz [1]