22 February 2008

Financial Results for the Nine Months Ended December 2007 (unaudited)

The Mainfreight Group is pleased to report a net profit after taxation and before non recurring items of $29.37 million for the first nine months of the 2008 financial year. This represents a $4.38 million or 17.5% increase when compared to the same period last year.

The total net surplus for the period, including the abnormal gains on the sale of Mainfreight's interests in LEP International and Pan Orient, is $89.80 million.

The continuing businesses (including our Asian acquisition, and Target Logistic Services Inc, our latest acquisition in the United States) contributed an EBITDA of $52.69 million, an improvement of 14.9%. After taking foreign exchange effects into account, this increase is 18.4%.

Total revenue from continuing businesses was $645.37 million. Excluding acquisitions, sold businesses and foreign exchange movements, this represents an improvement of 8.83%.

Trading conditions during the third quarter were much improved on the prior year. Strong performances in our domestic operations in both New Zealand and Australia and the international operations of CaroTrans were the highlights.

Divisional Performance

New Zealand Domestic
With strong third quarter sales, revenues for the nine-month period improved 2.1% to $210.54 million. EBITDA year-to-date increased 13.0% to $27.40 million.

This quarter provided the first opportunity for prior year comparison at the newly developed Auckland super-sites for the Mainfreight and Owens brands which both showed markedly improved performance.
Overall for the New Zealand domestic business, third quarter activity saw sales improve 8.9% for the three months compared to the previous year, and EBITDA performance increase by 22.1% to $12.47 million.

Domestic freight volumes including Logistics activity improved during the period, particularly in December as market share grew, alongside increased trading from established customers.

A shortage of rail equipment during the period hampered opportunities to move increased volumes on rail, and is of ongoing concern.

New Zealand International
Export revenue levels continue to be affected by the high New Zealand dollar, particularly in the perishable sector. In addition, a recent decline in shipping rates has seen reduced revenue levels, particularly out of Asia and on trans Tasman routes.

On the positive side, our ongoing focus on import services saw EBITDA improve to $3.29 million from $2.96 million in the same period last year, an increase of 11.0%.

Australian Domestic
Strong domestic growth saw revenues increase 19% to AU$98.62 million. EBITDA performance improved 4.5% to AU$8.51 million from AU$8.15 million in the same period last year. (EBITDA for the third quarter improved 16.8% over the same quarter in the previous year.)

This strong turnaround from a disappointing reduction in EBITDA of 4.5% in the first half of the year is attributed to strong transport performance leading into December.

The Logistics business has also experienced continued growth, however at the EBITDA level results were lower than the previous year, as costs associated with expanded warehousing capacity to cope with higher demand continue to increase. It is expected that EBITDA will improve as costs are contained in 2008, and as we fill increased warehouse space.

Occupation of the new Sydney super-site is expected from 1 March providing improved service standards, better linehaul utilisation for Domestic distribution and, in all likelihood, enhanced profitability, as has been experienced in Auckland.

Purchase of the Clayton facility in Melbourne was completed in February for the consideration of AU$10.0 million. This facility will undergo further development during 2008 to assist with the increased domestic freight volumes in this region.

Australia International
Revenues improved 6.2% from AU$89.81 million to AU$95.39 million. EBITDA also continues to improve, up 13.2% to AU$4.10 million.

Growth from the Asia region remains steady as new branches and import freight opportunities are developed alongside our China operations. European and Airfreight development remain a high priority.

United States - CaroTrans
Revenues improved 26.2% to US$71.23 million and EBITDA continued to improve to US$3.91 million from US$3.04 million, an increase of 28.4%.

Export seafreight growth is very strong as the US dollar weakens. Imports are steady, and opportunities to further grow inbound freight continue to be explored.

United States - Target Logistic Services
The results from Target Logistics were consolidated into the Mainfreight Group from 1 November 2007. Trading for the two months of November and December was satisfactory. Revenue for the two-month period was US$28.90 million and EBITDA totalled US$0.74 million.
This performance is in line with pre acquisition expectations. We do, however, expect further improvement for revenue growth and margins as Mainfreight's strategies and capabilities are introduced to the business; in particular the opportunity for improved International capability and range of services. While speculation surrounds a US domestic recession, we expect Target to continue to grow market share and take advantage of better linehaul opportunities to improve margins in both our domestic and international operations.

Debt funding for this acquisition remains via our US facilities, and a new reduced interest rate of 3.5% applies from 30 January 2008.

Asia - Mainfreight Express
Trading revenues continue to improve, up 19.1% to US$15.92 million. EBITDA also improved to US$1.70 million from US$1.37 million. (These results reflect the full nine-month performance whereas the Mainfreight Group consolidation results only include full trading from 1 August 2008.)

The new Guangzhou operation has commenced trading and is expected to provide positive contributions immediately.

Opportunities presented through the Target Logistics acquisition are being actively explored and, where appropriate, arrangements are being made to transfer nominated freight volume to Mainfreight's Asian operations. These synergies will improve profitability in our operations in both the United States and Asia.

Group Operating Cash Flows
Operating cash flows were $34.2 million compared to $29.8 million last year.

Net capital expenditure was $16.8 million with $6.9 million spent on property development.

Borrowings of US$56.30 million for the acquisition of US-based Target Logistic Services occurred in the quarter.

The positive results for the quarter, despite variable world economic conditions, demonstrate the continuing effectiveness of the Mainfreight Group's strategies across the logistics markets that we operate in.

Our market share remains small relative to the size of each offshore market, providing significant opportunities for further development in excess of GDP growth in each country. For example, the declining US dollar has seen the start of significant export growth from the United States which will assist export volumes for our American operations.

Trading during January and February has been encouraging, being both ahead of expectations and the previous year's results. This is expected to continue as the year progresses.

For further information, please contact Don Braid, Group Managing Director.

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