This small but long established company is reporting EBITDA up eight per cent in the first quarter of 2020-21.
Given the typical small margins in surface freight transport, that's excellent news.
The company also seems to be doing well with its hugely increased investment in refrigerated rail containers, growing to 450 within the next eight months. These are a common sight on Pacific National's intermodal freights between Sydney and Brisbane, Adelaide and Brisbane, and Brisbane and Melbourne, as well as Melbourne to Adelaide and Perth. If you live in Epping, Gosford or Campbelltown in Sydney, look out for them if you see a freight train!
Like the company's trucks, the new rail containers (most if not all were purchased secondhand from entities like Boxcar, and repainted) are very attractively liveried and so distinguishable from competitors such as the ubiquitous Linfox containers.
Perhaps as Lindsay expands its profitable rail offering it can, with increased scale, negotiate slightly better rates per container on Pacific National or SCT freight trains.
While the company says the declining availability of international air freight (due to far fewer passenger aircraft having space in their bellies, as so many international flights have been cancelled) will not be 'material', it's correct to assert that this negative will continue for a while. Thankfully it's not enough to wipe out profits from surface transport.
I was unable to attend the virtual AGM this morning, otherwise I would have asked whether the good agricultural season in NSW and Victoria is on balance a positive for LAU. Much of their exposure in that sector seems to be from Queensland which while I'm a long way from it doesn't seem to have had as good a season as the two southern states.
The company is probably understating how its increased emphasis on rail use will allow it to diversify the types of products it carries. Historically my impression of LAU has been it's very much connected to the 'fresh produce' horticultural area of the rural economy but it looks like it is widening its position in the marketplace.
Given coronavirus, it's quite a positive report. If the State Premiers would open up their economies more, this would help to increase demand for freight transport and indirectly assist LAU to grow in real terms including in revenue and hopefully profit. The sooner companies like this in very competitive sectors don't have to bear a raft of coronavirus-related costs, the better.
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