Mainfreight Annual Meeting 2018 Chairman & MD Addresses

MAINFREIGHT LIMITED

Mainfreight Lane | off Saleyards Road | Otahuhu 1062 | New Zealand
Tel +64 9 259 5500 | Fax +64 9 270 7400
PO Box 14-038 | Panmure | Auckland 1741 | New Zealand


Supporters of
MAINFREIGHT – GLOBAL
LOGISTICS





MAINFREIGHT LIMITED



S
CRIPTED ADDRESS
AND
P
RESENTATION




23
rd
Annual Meeting of Shareholders

4.00 pm, Thursday 26 July 2018

CHAIRMAN’S ADDRESS

E Te Whanau o Mainfreight, E Te Koro Ma, Et Te Kuia Ma, E Nga Tamariki Ma,
Naumai, Haere Mai, Whakataumai.

Ladies & Gentlemen, welcome to our 23rd Annual General Meeting - since our
beginnings 40 years ago in 1978, and our 22nd anniversary since floating on the
New Zealand Stock Exchange in 1996.

The year ended March 2018 produced the continuation of eight consecutive
years of records.
1. Record profits up $9M to $112M before abnormals
2. Global sales up $285M to $2.62 Billion – that represents sales in excess
of $50M per week.
3. We paid $45M in Income Tax.
4. We paid a Discretionary Bonus to our worldwide team of $21M.
5. Our annual Dividend paid to shareholders was $43M.
6. Since listing in 1996 our Compound Annual Growth Rate to date has
been 21.7%

Mainfreight is now 40 years old, and it seems appropriate to mention a couple
of the more memorable times.

Two of us were there on day one – 6th March 1978. Howard Menzie Smith,
and myself, in a rented building at 133 Morrin Road, Panmure. The landlord,
Peter Baker, had offered us ½ rent for 6 months to help us survive.

Howard had put in a leased water blaster as his 16% shareholding, and Taurus
Fork Hire (now Auckland Forklift) had loaned us a fork hoist for a year for their
16% shareholding, and I had 52% of the company by putting in $7200 cash.
The J1 Bedford you see was our first truck, and was for towing the water
blaster in case we failed with the freight business!

What a different country New Zealand was then. All freight moving within the
country over 150 km had to travel by Rail (up until October 1977 the distance
had been only 40 miles).

There were four major freight forwarders, mostly Australian controlled, which
were allowed to move freight on the N.Z. Railway at concessional rates. They

operated a price cartel between themselves with written rules. No one else
was allowed in.

The Transport unions were running at full strength, with disruptions on an
almost daily basis.

Into this scene stepped Mainfreight, who had recognised that a weekly
shipping service run by the now defunct N.Z. Shipping Corporation was exempt
from the 150km transport restriction. Graham Eddington, Operations Manager
of the Shipping Corporation, had promised us an allocation of 10 seafreighters
(a type of container) per weekly sailing.

We made a profit in our fifth week of operation; the rest is history.

With a massive, massive commitment from our people, with unyielding loyalty
from many customers, with unbelievable help from working men at the
wharves and Railways, and some sympathy from the Unions, we progressively
smashed the cartel, and either took over the individual companies, or sent
them limping back to Australia.

The removal of Rail protection in 1983, followed by the freeing up of the New
Zealand economy by the 1984 Labour Government, levelled the playing field to
begin the modernisation of New Zealand business which continues today.

What were the really big lessons of the past 40 years?

1. We have huge respect and appreciation for the commitment of our
people, teams, leaders, suppliers and customers over our lifetime.

2. New Zealand’s geography is easily upset with national disasters. We must
have a national transport system which includes Rail, Road, and Sea.

3. Our ethical standards are extremely important to the wellbeing of our
company and our people. We are not one of those companies in New
Zealand, or overseas corporations, seeking and demanding credit terms of
60, 90 and 120 days. Where on earth are their ethics?

4. We need to become better at looking ahead in our freight businesses. 10%
growth per annum means we double our volume in 7 years. With 25%
growth we double our freight volume in 3 years. Growth catches up fast.

How do we see the year ahead?
We are enthusiastic about the period ahead.

In New Zealand our sales pipelines are as full as they have ever been.
Consumers are consuming and confident, building of infrastructure is evident
everywhere, and the movement of people to areas outside of the main centres
is exhilarating to see. Our roads and cities are more well-kept than ever –
everyone is caring more, and trying to do business.

2019 will be our 30th year in Australia. The last two years have seen us come
of age in this country – earning A$50M EBITDA in the March 2018 year. With
our talented hardworking teams, the opportunities to pursue are significant –
in the development of a more intense internal network, international
perishable freight and greater interaction with our own Global network, and
the expansion of Chemcouriers as in New Zealand.

We have the same confidence with Europe, USA, and Asia – which together are
responsible for 29% of our Global EBITDA, but we are yet to be the market
leaders in these markets, and our name is less well known than in the Southern
hemisphere. However, be assured, our Northern hemisphere competitors
know our name, as do the shipping lines and airlines. As shareholders it is
important to realise how vital these areas are to the profits and possibilities of
our businesses in New Zealand and Australia.

Some of our largest New Zealand and Australian customers were gained
because of our Northern hemisphere presence.

We will continue to develop in these areas and other countries, but we need to
understand that they will take years to develop.

Make no mistake, Mainfreight is bustling globally with good leadership,
enthusiastic energetic people, and future leaders, with excellent facilities,
excellent systems, and world class information technology.

In closing, I would like to acknowledge our shareholders. Many of our larger
investors have been faithful supporters, and we have come to recognise quite a
number of long-term smaller shareholders. We appreciate your loyalty, and
emphasise that we have a total commitment to remaining a New Zealand listed
and domiciled business.

Group Managing Director’s Presentation

Please refer to separate PowerPoint slide presentation.



For further information, please contact Don Braid, Group Managing Director,
telephone +64 9 259 5503, +64 274 961 637 or email don@mainfreight.com.

---

MAINFREIGHT LIMITEDANNUAL MEETING OF SHAREHOLDERS26 JULY 2018MAINFREIGHT LIMITEDANNUAL MEETING OF SHAREHOLDERS26 JULY 2018

Welcome

Welcome to our 23
rd
Annual Meeting of
Shareholders, in our 40
th
Anniversary year
... we love having you here!

Then ... Now
People
2

Branches
1

Revenue $23,184

Profit/(Loss) $(5,992)
Auckland

People
7,532

Branches
252

Revenue $2,618,806,000

Profit $112,219,000
... and it only took 40 years!
1978
2018

Mainfreight Strategy
We are a global supply chain logistics provider

With an intensive network –globally, regionally, and within cit
ies

Focused on freight, utilizing:

Air & Ocean,

Warehousing, and
Supply Chai
n Management

Domestic Transportation

Supported with:

High quality service
– Measured and shared

Highly engaged people
– Our culture counts

Effective technology
– Ensures visibility

Decision making closer to our customers

Decentralisedmanagement structure& responsibility
... it’s different to the others’!

Customers
Our customers are predominantly in

Food, beverage, retail, consumer DIY industries

They are trading regionally and across borders

They use Mainfreight across our three core products
... ‘coz they are important to us
Mainfreight Top 50 Customers:58% using us across all 3 core products(Air & Ocean, Logistics, Transport)

Result Summary
TOTAL DIVIDEND
45.0¢
9.8%

DISCRETIONARY BONUSSHARED WITH GLOBAL TEAM
$20.7m
7.4%

GROUP OPERATINGREVENUE
$2.62b
12.2%

GROUPEBITDA
$215.4m
9.0%

GROUP NET PROFITBEFORE ABNORMALS
$112.2m
8.8%

10.6%
EXCL FX IMPACT

7.9%
EXCL FX IMPACT

7.7%
EXCL FX IMPACT

... the “big” numbers

To Summarise the Financial Results
A satisfactory performance assisted by very good results from New Zealand and Australia, and improvement in Europe

We would expect to see Asia and the Americas improve markedly during this coming year
... just saying!

Capital Expenditure
Last Year F18
Current Year F19
Land & Buildings
$20.1 million
Land & Buildings –NZ
$35million
Technology
$17.7 million
Land& Buildings –AU
$57 million
Other
$26.9 million
Land & Buildings –EU
$13 million
Other –Technology, etc $45 million
Total
$64.7 million
Total
$150 million
... there is a bit needed!

Group Property Strategies
High quality facilities, leased and owned, increasing our netwo
rk
intensification

Understand size and location before owning

New Zealand and Australia well understood

Europe and Americas require a greater level of understanding, a
nd
business improvement

In Asia we are likely to lease for some time to come

Endeavouringto be better prepared to assist growth trajectory
... we love land & buildings!

Mt Maunganui
... where the sun shines
6.11 hectares, and option on another 5

Hobsonville, Auckland
3.6 hectares
... we love Westies!

Adelaide
Dandenong
5hectares
12 hectares

Epping, Melbourne Kookaburra Rd, Sydney
Adjoins existing site; to be developed as
a Hazardous warehouse –22,500 m
2
26,000 m
2

Born, NL – Warehouse
26,000 m
2
... so proud of our Europe team

Ghent, BE – Cross-Dock
... a great “green” city
8,500 m
2

Zaltbommel, NL
... jeez, that’s a lot of shampoo!
Warehouse under construction for Henkel contract
25,000 m
2
complete Nov-18; option for further 25,000 m
2

Network Development
Intensification will continue; by city, by country as growth pe
rmits

Expect to open in Japan and Malaysia by calendar year end

Others under consideration: Scandinavia, Middle East, further E
urope development

New Zealand

Additional facilities in Auckland, Wellington and Hamilton

Expansion to and/or replacement of facilities in a number of ot
her regions

Australia

Greater regional development underway

Expansion to and/or replacement of facilities in a number of lo
cations

Increasing the number of branches and warehouse sites in major
eastern seaboard
cities
... it’s part of the strategy

People
Discretionarybonus: paid across allprofitable branches in all c
ountries

Addressed lower end of NZ/AU salary range; now well above minim
um or
living wage level, and improving starting salaries

Providing careers, not just jobs

Structure and culture provides environment for

Promotion from within –succession

Training and development to progress men and women to roles wit
h
P&L responsibility; has high priority

Our female Branch Managers now number 38, up from 27 two years
ago
... they are Mainfreight!

Trading Update
April to June has seen strong revenue growth; profit has improv
ed accordingly

Australia not as healthy, offset by all other regions

Quietly positive that this improvement will be sustained throug
hout FY19

Expect an improved first half; prior period was slow

External factors

Brexit

May have some effect for us on Europe to UK trade

Presents opportunity to assist customers with customs services
... the analysts love this stuff!

Trading Update ... continued
External factors –continued

US trade sanctions

China/US trade lane

Already seeing customers ordering early to beat deadlines

May lift domestic US trade as manufacturing increases within US
A

European effect

May increase trade for China to Europe –Belt & Road initiative

Auckland regional fuel tax; creates complexity and we will have
to recover
costs from our customers

Fuel prices increasing; a pass-through cost to customers reimbu
rsed to our
owner operators

New Zealand

Increased vigilance on quality

Continued interest from customers for services across supply chain

Intensification of network across regions for all products

Warehousing and Air & Ocean branches increasing our competitive advantage

Profit and revenue improvement continues
... ‘tis home!


Warehousing enquiry and gains strong, requiring more facilities

Transport to focus on quality and multi-modal strategy; rail of high interest

Air & Ocean division being urged to improve returns

Profit improvement subdued in April and May

Domestic software platform implementation

Overhead cost increases

Improvement through June and July
Australia
... we love Aussies!

Asia

Return to core business principles has brought marked profit improvement

More energy in Southeast Asian business development

Singapore & Vietnam improvements

Development of Malaysia & Japan

Our teams are becoming more commercial in their approach through inspired leadership
... so important no matter what Trump says!

Europe

Customer gains in Logistics business requiring additional facilities –short-term profit impact

Air & Ocean expect to further develop network, and continued revenue/profit improvement

Greater contribution from Forwarding/Transport via improved operations & Mainfreight disciplines

Revenue and profit improving

Reinforcing the strength of Mainfreight culture and strategy disciplines throughout region
... so much history ... and opportunity!

The Americas

Domestic Transport performing better as truck utilisation and customer growth assist

Logistics growth has warehouses well-utilized; efficiencies needed for profit gains

Air & Ocean trading behind year prior; revenue increased, however margins require focus

Improved results from CaroTrans due to better focus on business operations and sales growth

8 months of continued profit improvement

Much-improved leadership
... Donald who?

To Close

We have a growing confidence due to improved trading results

Capital investment will enhance our competitive advantage, improve services to our customers and prepare us for continued growth

We intend to continue to manage and lead for the long term –100 years starts every day

A large thank you to our people and leadership team around the world

As shareholders, we should all be very grateful for their efforts
... so soon?