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Freightways profit gains as interest payments fall

Freightways first-quarter profit edges higher on lower interest payments

By Paul McBeth

Oct. 29 (BusinessWire) – Freightways Ltd., the courier firm that sold stock at a discount this year to strengthen its balance sheet, posted a 2% gain in first-quarter profit after the capital raising allowed it to repay debt and reduce interest payments.

Net profit rose to $7 million in the three months ended Sept. 30, from $6.8 million a year earlier, the company told shareholders at their annual meeting today. Revenue fell 5% to $81.8 million, reflecting a decline in total package volumes. Earnings before interest, tax, depreciation and amortisation fell 5% to $15.1 million. The shares declined 2.2% to $3.08 and have edged down 3.4% this year.

“Proceeds from capital management initiatives executed during 2009 have been used to reduce debt and strengthen Freightways’ balance sheet so that the company is more strongly positioned,” managing director Dean Bracewell said. “Newly renegotiated finance facilities which provide certainty through until August 2012 were implemented during September” though these will incur higher interest charges as banks have increased their own margins, he said.

Earlier this year, Freightways raised about $50 million in a discounted share placement to institutional investors. In August the company announced an underwritten dividend reinvestment plan with Forsyth Barr to boost its balance sheet and preserve cash that would otherwise have been paid out in dividends. The dividend was cut to 8.5 cents per share, from 9.25 cents a year earlier.

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Bracewell said the economic recovery is still “fragile” and warned that if “recent improvement cannot be sustained and augmented with positive organic volume growth, then the express package and business mail division’s near-term performance will continue to track below the prior year.”

Last month, Freightways signed a deal with Australia Post to deliver the postal service’s international inbound express mail service, air parcels and courier products through its DX Mail and New Zealand Couriers units.

The company expects its information management division to improve as the year continues, with paper revenues likely to “react positively to global economic improvement.”

The company expects capital expenditure of about $13 million in 2010, which is “significantly lower” than this year.


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