K&S managing director uses AGM to chart course ahead for transport and logistics firm.
K&S Corporation will focus on squeezing extra savings out of its operations as part of efforts to recover from a lacklustre 2014 financial year.
Managing director Paul Sarant used his speech at the company’s annual general meeting to outline his intentions for K&S for the year ahead.
K&S revealed in August a near-halving of its profit to $8.9 million due largely to the loss of a key contract, poor returns from the mining sector and subdued trading conditions in the manufacturing industry.
“We will continue to focus on our ongoing consolidation of operating sites, rationalisation of supporting infrastructure and the exiting of leased properties in locations where synergies are possible,” Sarant says.
K&S recently moved its Chemtrans Queensland division from a rented facility near Brisbane into the company-owned site at Coopers Plains.
“This provides a profit, cash and asset management benefit. We intend to replicate this in all states where possible,” Sarant says.
“Realising cost reductions have also been an ongoing major focus. As such we have reduced our management structure by more than 27 full time equivalents.”
Sarant says further savings are being made in areas including back office, administrative and equipment costs.
In positive news, he says K&S has picked up new contracts in the past five months with annual revenues exceeding $15 million.
“There is also potential upside within our existing contracts regarding major infrastructure spending by the state and federal governments. However, we have no certainty regarding the specific project commencement dates,” he says.
The company’s K&S Frieghters division took a substantial financial hit last year through the loss of the Australian Paper contract, which generated revenues in excess of $30 million annually.
K&S Freighters won new contracts with Schweppes and Norske to partially offset the loss, while its New Zealand operation picked up work with New Zealand Steel and Timberlands.
“The New Zealand Steel contract included the provision of a new fleet of high productivity vehicles. The Timberlands contract, which came into effect in January, involves the cartage of approximately 200,000 tonnes of woodchip per annum from the Rotorua area,” Sarant says.
He adds that K&S’s New Zealand business has historically underperformed, but the company’s fortunes are now starting to turn around.
“It is now providing satisfactory financial returns. We expect this will continue and the business will grow in scale.”
Conversely, Regal Transport continues to struggle on the back of a downturn in the mining and resources sector in Western Australia.
Sarant says lower commodity prices and a shift in mining operations from development to production hampered Regal last financial year.
“As a result, heavy haulage activity across the State reduced significantly,” he says.
“In general freight there was minor total volume growth, but this was offset by competitive market pressure which reduced market rates.”
The outlook for Scott Corporation, which K&S took over in February, is a lot more positive.
Sarant says K&S has achieved annual integration benefits of more than $3 million from the takeover and that Scott has picked up two new chemical distribution contracts with annual revenues in excess of $8 million.