K&S reports profit in challenging first half

Snakes-and-ladders interim results sees firm remain in the black

K&S reports profit in challenging first half
The K&S bottom line is complicated


K&S Corporation has seen its net first-half profit more than double compared with the same result last year, with the national infrastructure spend boosting steel transport and fuel transport operations providing solid returns.

Last year’s interim result of $4.6 million soared 108 per cent to $9.6 million in this first half on a more modest 13 per cent revenue rise from $417.6 million to $471.5 million.

However, stripped of one-off items, the underlying profit after tax fell 18 per cent, from $3.7 million to $3 million.

The Australian Transport division saw revenues rise from $350 million to $380 million, with profit after tax up from $2.2 million to $6.5 million.

"Steel volumes from our major customers remain buoyant on the back of various infrastructure projects that have been announced by state governments," K&S says.

"This has contributed positively to the performance of our K&S Freighters business on the eastern seaboard."

The fuel haulage arm had a solid first six months, with revenues up from $84 million to $115 million and after tax profits up from $1.3 million to $1.5 million.

The New Zealand Transport segment revenues rose from $417 million to $520 million with after tax profits up from $4.6 million to $9.6 million.

Read about the excellent previous annual results for K&S, here

Western Australia continues to provide difficult conditions for the company even with indications of a mining and resources rebound

"Trading margins in Western Australia remain poor," K&S says.

"K&S South West also down-sized its raw timber transport operations, exiting the cartage of several timber based customers."

Despite that, while the company fails to flag business purchases, any acquisitions are likely in less populated mainland states.

And changes in the rail and intermodal market are also being felt.

"We continue to incur increased costs in our rail transport operations under new arrangements with Pacific National following the closure of Aurizon’s intermodal business [in December 2017].

"The Adelaide-Darwin corridor has also experienced subdued market demand."

Operating cash flow was $26.9 million, up 98 per cent "driven by the receipt of $25 million in settlement proceeds from Aurizon".

Costs rose generally, including:

  • fleet expenses up from $80 million to $91 million
  • contractor expenses up from $106 million to $112 million
  • employee expenses up from $137 million to $152 million
  • fleet plant and equipment purchases up from $37 million to $43 million, the latter offset somewhat by sales of $2.4 million, up from $1.6 million.

"Cost reduction strategies have continued to be implemented across the business, in particular, operations efficiencies, supplier re-negotiations and the rationalisation and replacement of specific fleet," K&S says.


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