The country’s flagship freight company is now chartering vessels to circumvent major international supply chain delays, chief executive Don Braid said in a wide-ranging interview with Newsroom Pro.
Mainfreight’s annual result this month did not disappoint.
Revenue up 14.5% to $3.5 billion, net income before tax up 27% to $262.4 million and dividend up 75 cents for the full year, also in 27% increase.
Despite experiencing one of the most disruptive challenges in its history, the nation’s largest freight and logistics company has seemingly thrived in an environment that, on the face of it, should have caused serious damage.
What do you think? Click here to comment.
At one point it did. Mainfreight’s share price plunged more than 40% in just four weeks between February and March last year, in line with the fall in its domestic business, which fell by around the same amount.
A year later, its shares are 80% above where they were trading in February 2020 when the pandemic first hit.
Chief executive Don Braid said Covid-19 had tested Mainfreight’s resilience to the full, but also required fundamental commitments.
“We were exposed to Covid-19 quite early in the room, probably earlier than many others due to our operations in China. From the outset, we were committed to protecting the health of our employees and their jobs, to keeping our balance sheet healthy, to ensuring that we had good cash flow and we relied on the ability of our employees and our decentralized structure to get us through.
Braid readily admits that protecting jobs was his biggest concern at the time, and after applying for and receiving the government wage subsidy within 48 hours, he was suddenly faced with what to do with a sum of important money.
“We stuffed it into a bank account and figured we’d leave it there in reserve.”
Within six weeks, the $10.6 million had been fully repaid. The landscape quickly began to change as the market turned around and the wave of “home-from-home” retailing began in earnest.
“The best thing we did was get the money back ASAP and then we prepared for the deluge of freight that hit us. After falling off a cliff in a matter of weeks, demand came back very quickly because everyone suddenly wanted everything fast.
Being able to tap into a global network of market information also helped.
“Our customers were telling us they were doing well and there were still orders there. That gave us confidence. I think that was an advantage we had that maybe other companies didn’t have. be not.
In the end, not a single employee was fired.
“My advice to shipping lines is that they need to think about long-term profit rather than short-term. I understand that before they probably weren’t getting the freight rates they deserved, but in this moment, it just feels like they’re taking advantage.” .”
– Don Braid, main cargo
Mainfreight prides itself on its team culture and “can do” attitude, which Braid says has equipped the company to deal with such an extreme event as a global pandemic.
“Our employees were incredibly resilient and found ways around issues and continued to meet customer needs. Our whole ethos of what we stand for, making decisions as close to the customer as possible and being decentralized has certainly helped.
“When you’re running a network of 296 branches in 26 countries, you have no hope of trying to manage this from some kind of bullshit head office process.”
The bonus is for those who earn it
Staff are expected to be generously rewarded for their efforts, with the company’s discretionary profit bonus rising 61% to $43.9 million.
But not everyone will receive the bonus.
“You have to have earned it. There will be some who haven’t performed well enough, but the reality is that if we didn’t pay a bonus, we wouldn’t earn the money to pay it.
Braid says he often wonders why more companies don’t follow Mainfreight’s lead and establish discretionary profit pools to incentivize all of their employees to improve their performance and reward them financially.
“We share the profits with those who helped us earn these profits and it feels good. We know it’s the right thing to do, but our team members also understand that we have to make a profit before we can share it. »
Companies routinely say their employees are their greatest asset, but Braid thinks too many do it lip service when it comes to financially rewarding staff.
“The pandemic should be a wake-up call for more businesses, especially those currently experiencing shortages that have relied on cheaper labor from overseas or tourists.
“Maybe if they had shared a little of their profits to retain them and give these people a career path, they might not be in the situation they are in now.”
Land, air and now sea
As the legacy of Covid begins to fade, at least commercially, there are results that Braid says aren’t going away quickly.
Skyrocketing freight rates, port congestion and supply chain disruption are the top three concerns for importers and exporters today.
Growing frustration with international shipping companies has become a particular problem.
“The problem is that they don’t have the capacity to meet the global increase in demand that they are currently experiencing. I call it “the bullwhip effect” and it’s a problem we’re going to have for some time to come.
“My advice to shipping lines is that they need to think about long-term profit rather than short-term. I understand that before they probably weren’t getting the freight rates they deserved, but in this moment, I feel like they’re taking advantage.” .”
Mainfreight recently undertook its first sea charter from Shanghai to Auckland and has two more planned to Australia and the United States.
“We need to learn from the past 12 months and use the gains we’ve made to bring some momentum back to the country. Rather than Covid-19 slowing us down, it should actually speed us up.”
– Don Braid
It’s all part of finding solutions for customers, says Braid.
“We undertook 46 aircraft charters before and during the pandemic for perishable goods, personal protective equipment and other high value goods, but we have never had to charter transport vessels before. Customers expect us to find solutions to their transport problems, whatever the pandemic, and so we constantly use our expertise to come up with new ideas.
As for the freight rate spiral, Braid expects no change for at least 12 months, if not longer.
“Some of our biggest customers in the US are planning longer than 12 months and one told me recently that they expected the current situation to be with us for another three to four years. “
The foot on the gas
As the country begins to take its first timid steps towards post-Covid normalization with the recent opening of the trans-Tasman travel bubble, Braid fears we are not moving fast enough and there is too much bureaucracy who plays on the edges rather than making bold decisions.
While he acknowledges the country has done well so far, he believes we will ultimately be judged on our recovery efforts rather than our handling of the pandemic.
“We need to learn from the past 12 months and use the gains we’ve made to bring some momentum back to the country. Rather than Covid-19 slowing us down, it should actually speed us up.
“The first step is obviously to complete the vaccination roll-out as quickly as possible to give everyone confidence.
“Then we should establish a world-class border that attracts people here as tourists or migrants because they know the country is serious about public safety.”
Get it right, and he says the country can start to regain its lost momentum.
If a company’s stock price is indeed the scorecard of its performance in the market, then Mainfreight is likely top of the charts right now.
But as its shares edge closer to $80 and remain on track to become New Zealand’s first-ever $100 stock, Braid scoffs at any share split suggestions.
“We need more high-value stocks. If you ask me, we have far too many penny dreadfuls listed on the New Zealand market.
Despite the disruption of a global pandemic, more throttle and less brake continues to be Mainfreight’s mantra as it revises its 100-year vision.