Mainfreight Limited — Investor Presentation 2020

Oct 13, 2020

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MAINFREIGHT: INVESTOR DAY, TAURANGA 14 OCTOBER 2020

Agenda

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•	9.00am	Welcome	Don Braid
•	9.15am	New Zealand	Craig Evans
•	9.30am	Europe	Ben Fitts
•	9.45am	Australia	Rodd Morgan
•	10.00am	Americas	John Hepworth
•	10.15am	Asia	Cary Chung
•	10.30am	Group Update	Q&A
•	11.00am	Site Tour
•	12.00pm	Lunch with Team

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Kaitaia

Whangarei

New Zealand Craig Evans

Auckland

Hamilton

New Plymouth

Thames

Tauranga

Rotorua Taupo Gisborne

Napier

Whanganui

Palmerston North

Levin

Masterton

Wellington

Nelson

Blenheim

Greymouth

Christchurch

Ashburton

Timaru

Cromwell

Oamaru

Dunedin

Gore

Invercargill

Trading Conditions – New Zealand

• Market actively challenging existing supply chains – flight to quality and efficiency

• Increase in outsourcing

• Our suite of services and network continues to improve quality

Variance (YTD September Est)

• Revenue

• PBT

4.4%

• 8.9%

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Covid Impact – New Zealand

• Loss in traditional international tourism offset by increased domestic tourism and returning New Zealanders

• Overall volumes are on the increase

• Mainfreight well‐positioned to convert outsourcing and supply chain enquiry

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Segment Overview – New Zealand

Transport

• Gaining market share

• Network expansion has assisted market share

• Margins holding up

• Levin branch opened during COVID‐19; Tauranga new build completed; 3 others in design/construction in Gore, Spring Creek & Whakatane

Warehousing

• Increased levels of outsourcing enquiry

• Good gains, especially in larger customer groups

• Three new warehouses opened since March – 2 in Auckland, 1 in Hamilton

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Segment Overview – New Zealand

Air & Ocean

• Courageous effort during COVID‐19 coordinating PPE imports – air charters

• Converted new business as competitors went missing during the height of the pandemic

• Localized customer relationships proved invaluable; regional development continues

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In Summary – New Zealand

• Ongoing trading improvements from established customers, and increasing market share sees all three divisions busy

• Seasonal increases in trading (pre‐Christmas) are expected / new customer activity

• Remain cautiously optimistic

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St. Petersburg
Europe
Ben Fitts Moscow
Manchester
Hamburg
Amsterdam Zaltbommel Poznań
Warsaw
Rotterdam ‘s-Heerenberg
London Tilburg Pruszków
Ostend Antwerp
Brussels Born Kiev
Katowice
Genk
Frankfurt
Paris
Cluj-Napoca
Bacau
Timisoara
Lyon
Milan
Ploiesti
Barcelona
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Trading Conditions – Europe

• Steady. Large customers recovered well & optimistic

• High sales / low inventory, impacting warehouse utilisation

• Normal inventory levels expected by end of calendar year

• Sales team winning new business in a challenging sales environment

• Increasing number of Brexit‐related enquiries

Variance (YTD September Est)

• Revenue

• PBT

• 0.2%

• (11.2)%

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Covid Impact – Europe

Effects

• Impact of short‐term illness

• Inventory rollercoaster as customers balance supply chains in uncertain times

• Capacity constraints for air and ocean freight

• Covid measures constantly changing (regions/countries)

Opportunities

• Increased focus on efficiency, doing more with less has assisted margin performance

• Regular, useful communication appreciated by customers

• More hustle, particularly airfreight

• Mainfreight culture further embedded – No job descriptions

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Segment Overview – Europe

Transport

• Continues to strengthen

• Network development – Netherlands, Romania, Italy

• Sales growth a high priority, focus on freight that feeds the network

• Synchronised approach toward measurement of quality and efficiency

Warehousing

• Zaltbommel (NL) 2nd phase opened in March – 26,000sqm (total site = 52,000sqm)

• First UK warehouse will be operational December 2020, in time for Brexit

• Temporary inventory lull due to delayed or cancelled replenishment orders

• Focus on pushing more freight into the Mainfreight network and improving utilisation

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Segment Overview – Europe

Air & Ocean

• New branches in Manchester and Barcelona. Nordics on the radar

• Focus on consolidation growth for air/ocean

• Improved profit necessary to enable move network development

• Sales growth top priority

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In Summary – Europe

• A healthy amount of new business trialling or committed for early 2021

• Expect revenue performance to improve through the second half of this year

• Sales culture developing, plenty of energy, improved in‐country cross‐selling

• Network expansion and intensification to continue

• Covid‐related uncertainty. Overhead control remains critical

• The ball is bouncing now, it just needs to bounce higher!

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Australia
Townsville
Rodd Morgan
Narangba
Toowoomba Brisbane
Gold Coast
Perth
Newcastle
Bunbury Adelaide Sydney
Albury Canberra
Bendigo
Ballarat Melbourne
Geelong
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Trading Conditions – Australia

• Strong. Nice mix of customers, trading well

• AU economy resilient – targeted Government support and pent up consumer demand diverted to local goods and services

• Good new business acquired – increased customer enquiry

• Warehouse utilisation steady overall

• Overheads and cash collection managed well

• Domestic margin improvements

Variance (YTD September Est)

• Revenue

• 11.8%

• PBT

• 99.1%

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Covid Impact – Australia

• Constantly changing Covid requirements across states – Victoria an outlier

• Better business discipline & focus – more hustle & intensity

• Branch Manager is king – gives us great agility & local decision making/knowledge

• No travel has led to increased internal communication

• Deeper more regular communications with customers

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Segment Overview – Australia

Transport

• Strong profit performance through pleasing sales, margin growth & overhead cost control

• Big branches going well & regional branches showing significant improvement

• Network growth is key: 3 new branches opened recently with 6 more planned by mid next year

• Owens (wharf operator) showing good profit progress in a tough environment. New IT platform will help service quality/efficiency

• New facilities in design phase for owned land in Adelaide & SE Melbourne

Warehousing

• Good profit & revenue growth continuing; average 90% utilization over last 6 months

• New 20,000m2 purpose built warehouse at Epping. Third 15,000m2 Sydney warehouse imminent

• Continued focus on customers with high value, complex needs that feed our broader networks

• Mainfreight “Mobile” started in Sydney to handle container devanning and broader needs

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Segment Overview continued …

Air & Ocean

• Good revenue growth but we are working hard to improve margins

• Focused on global LCL air/ocean growth opportunities

• Improvement required in the growth of export air and sea freight

• Adding Air & Ocean sales team to our regional locations is important

• Good sales growth progress in Perishable airfreight branches

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In Summary – Australia

• New business performance and sales pipeline pleasing

• We are a better business in all areas than a year ago

• Heading into a period of network growth

• Cautiously optimistic about the trading environment next year. Big business seem confident but small business will struggle – especially Victoria

• We have good business momentum

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Seattle
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Toronto
Portland Minneapolis
Albany
Boston
Milwaukee
Detroit
Americas
Hartford
Newark
Cleveland
Philadelphia
Chicago
John Hepworth Columbus
San Francisco Indianapolis Baltimore
Salt Lake City
Cincinnati
Norfolk
Charlotte
Los Angeles
Memphis
San Diego Charleston
Phoenix
Atlanta
Dallas
Austin
Houston
San Antonio
Miami
Laredo
McAllen
Queretaro
Santiago, Chile
Mexico City
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Trading Conditions – Americas

• After slow 1[st] quarter, business has improved

• Asian imports increasing; sea and air carrier allocation at a premium

• Port congestion and chassis shortages becoming a serious issue

• Revenue

• PBT

Variance (YTD August)

• 1.4%

• (13.1)%

Mainfreight Var

4.1%

11.1%

CaroTrans Var

(6.9)%

(55.6)%

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Covid Impact – Americas

Effects

• While effects of Covid and racial tension have divided the nation, business is returning to “new normal”

• Transport sector struggling to find drivers

Opportunities

• e‐Commerce continues to increase and is assisting growth, particularly in Warehousing and Air & Ocean

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Segment Overview – Americas

Transport

• Larger players struggling with driver shortage

• Mainfreight still managing to attract Owner Drivers to service our 8 key line‐haul hubs

• Our LTL network in US/Canada growing – 145 moves both inbound/outbound weekly – with increased volumes improving truck utilization

• Strong focus on service quality and on‐time performance

Warehousing

• Currently 7 Warehouses – 110,000 sqm capacity – at 81.5% utilisation

• 64% of freight moving through our Transport network

• Expansion likely in Chicago (2[nd] site), Atlanta, Toronto, Miami, Philadelphia/New Jersey, Dallas (2[nd] site) due to strong enquiry levels

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Segment Overview – continued …

Air & Ocean

• Asia/USA remains key trade route; ocean rates increasing, lifting revenue

• Separating Air Freight out at 4 main branches has seen strong growth in product

• Increasing ocean consolidations – export/import – improving gross margin

• Customs brokerage division continues to expand; 4 new sites brings total to 16

• Capacity constraints ex Asia

CaroTrans

• Wholesale LCL trade impacted globally as freight forwarders protect volume

• Strengthening sales team numbers and offering more direct services for export LCL

• Key customer focus – small to medium sized forwarders

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Growth Initiatives & Expectations

Our focus in the Americas remains on:

• Every day freight – high value, fast moving, essential freight profiles

• Core products and services: LCL/LTL, Mainfreight‐to‐Mainfreight consolidations

• Intensified efforts to win group customers to feed the Mainfreight network

• Leveraging global customer relationships

• Continuing to grow our sales team

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In Summary – Americas

• Difficult first 6 months in the USA

• Recovery underway, business returning to “new normal” activity levels

• Expect second half to reflect improvement and growth

• Wholesale market will remain difficult for CaroTrans

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Beijing
Tianjin
Seoul
Asia
Qingdao
Japan
Cary Chung
Shanghai
Ningbo
Xiamen
Taipei
Shenzen
Guangzhou Khaosiung
Hong Kong
Thailand
Vietnam
Malaysia
Singapore
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Trading Conditions – Asia

• Good improvement overall, led by

• Charter flights

• Stronger Europe trade‐lane volumes

• Growth of “in‐country” sales

Variance (YTD September Est)

• Revenue

• PBT

21.1%*

• 61.4%

• Including inter‐company revenues – increase of 44.0%

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Covid Impact – Asia

Effects

• 9 Asian countries where Mainfreight is based still have 14‐day quarantine

• Japan, Hong Kong, Singapore and Thailand in discussions to allow essential business travel (conditional on clear Covid test)

Opportunities

• Expect to expand further in China, with branches in Chongqing and Dalian; will defer opening in India and Indonesia

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Sales & Growth Initiatives – Asia

Airfreight

• Additional BSA or fixed consolidation services to/from European and Intra‐Asia main airports

• Japan, Malaysia, South Korea, Thailand and Vietnam now IATA certified

LCL

• Mainfreight and CaroTrans to increase consolidation services

• Buyers and Sellers consolidations

Sales

• Focus on every‐day freight for airfreight and LCL customers across all branches

• Continue to expand in‐country sales branches in:

• South Korea: Pusan

• China: Suzhou, Hangzhou and Zhongshan

• Target verticals with high Asia demand: Food & Beverage, Healthcare, Hi‐Tech

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In Summary – Asia

• Ongoing in‐country development assisting growth

• Airfreight growth as a consequence of:

• Covid opportunities

• Branch separation bring focus to Air vs Ocean

• Expect current growth and profit trends to continue

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Mainfreight Group Don Braid

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Trading Update: Estimated Revenue

August actuals plus September “weeklies” 26 weeks of trading (1 Apr to 30 Sep)

NZ$000	THIS YEAR	LAST YEAR	VAR %
New Zealand NZ$ 378,655 362,571 4.4%  Australia AU$ 403,032 360,423 11.8%  Asia US$ 43,586 35,991 21.1%  Europe EU€ 194,097 193,766 0.2%  Americas US$ 247,466 244,039 1.4% 
Group NZ$	1,609,143	1,500,466	7.2%* 

* Excluding FX: 5.2% over last year

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Trading Update: Estimated PBT*

August actuals plus September “weeklies” 26 weeks of trading (1 Apr to 30 Sep)

NZ$000	THIS YEAR	LAST YEAR	VAR %
New Zealand NZ$ 37,330 34,266 8.9%  Australia AU$ 30,482 15,307 99.1%  Asia US$ 4,030 2,497 61.4%  Europe EU€ 7,146 8,046 (11.2)%  Americas US$ 8,487 9,769 (13.1)% 
Group NZ$	102,212	82,848	23.4% 

* Post‐NZ IFRS 16

# Excluding FX: 21.7% over last year

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Trading Update: Total Company

• Outlook remains positive with:

• Increasing domestic Transport volumes

• Improving customer sales and demand, increasing pressure across sea and air freight capabilities

• Increased enquiry for Warehousing solutions

• Customer expectations for quality/efficiency

• However:

• Remain cautious on pre‐Christmas volumes

• The effects of secondary Covid infection rates impacting economies further

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Capital Expenditure

• Continue to be conservative

• Necessity vs “nice to have”

• However, land opportunities in Auckland and Nelson being explored

• Leased warehouse facilities as required

• New Zealand / Australia / USA

• Tauranga site an example of continued investment in network and high quality facilities – helps attract customers

• Likely to increase capital spend in F22

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Current Net Debt

NET DEBT

Net debt of $115 million Undrawn facilities of $250 million

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Global Supply Chain Status

• Air freight:

• Improvement in space availability as flights increase

• Rate structures more consistent but still high

• Sea freight

• Delays as space allocations tighten / equipment shortages

• Freight rates increasing as a consequence

• Warehousing

• Enquiry continues to strengthen

• Inventory levels impacted due to stronger sales, uncertainty, shipping and manufacturing issues

• Transport

• Domestic freight volumes strong in New Zealand / Australia

• Improving in Europe / USA

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Priorities and Actions

• Continuation of strong sales focus

• High standards of quality services; flight to quality remains

• Volume improvement brings greater certainty

• Confidence to further intensify domestic networks

• Increased capital expenditure in F22

• Emphasis remains on managing overheads

• Cash flows / cash collection / cost and margin management

• European wage/salary review applied from 1 October

• Directors’ fees and Managing Director salary restored to full levels from 1 October

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To Close …

• Satisfactory half year result (to be reported 11 November)

• Remain cautiously optimistic that trading conditions will continue to improve

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THANK YOU

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