K&S profit zig-zag looks set to continue

Listed operator issues profit warning as floods combine with east coast economic doldrums

April 11, 2011

K&S Corporation will look to the west as east coast operations continue to be smothered by a combination of a high dollar and softening demand exacerbated by natural disasters.

The Mt Gambier headquartered industry heavyweight issued a profit warning on Friday saying that, despite the tough operating conditions and volumes remaining "flat", the road and rail transport market shows signs of stabilising.

"The position in the March 2011 quarter was exacerbated by floods in Queensland, New South Wales, Victoria and the Nullarbor, as well as by Cyclone Yasi, all of which impacted on operations and underlying volumes," Managing Director Legh Winser says.

"K&S is now seeing road volumes strengthening and rail volumes stabilising in its east coast operations.

"K&S is also seeing domestic steel volumes recovering on the back of several infrastructure projects.

"However, the outlook for the domestic economy remains far from certain with the high Australian dollar and interest rates impacting on Australian manufacturers."

The upshot, however, is that underlying net profit after tax (NPAT) for the 2011 financial year was likely to be 15-20 percent below that of the previous financial year.

Underlying NPAT for 2010 was $19.4 million, up from $16.4 million the year before, $19.7 million before that and $16.5 million in 2007.

"K&S remains confident that we have strategically positioned the business to benefit from the increased activity in the oil and gas and resources sector in Western Australia," Winser added.

"K&S will continue to focus on the identification and implementation of longer-term growth initiatives which include opportunities in the oil, gas and resources sectors in Western Australia."

K&S bought WA firms Pacific Transport and Regal Transport in January and July last year with a view to tapping into the resources boom in that state.

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