K&S eyes financial year positives to build on

First half to be down on previous first half but deals are rolling

K&S eyes financial year positives to build on
K&S bosses point to a number of silver linings


K&S Group shareholders could have been despondent at its immediate financial prognosis but should then have been buoyed by longer-term expectations.

Chairman Tony Johnson was clear on what the company is facing at present.

"We currently expect underlying first half performance for FY18 to be approximately 15 per cent down on the prior corresponding period last year," Johnson says.

Though Johnson went on to accentuate the positives, his annual general meeting message was also leavened by MD Paul Sarant’s list of reasons to be more cheerful, including in the fast moving consumer goods (FMCG) sector.

"A record number of new customer contracts were signed by K&S during the year," Sarant says.

"These contracts, which are now in the process of being implemented and operationally bedded down, were across all market channels.

"They are highlighted by the new east to west transport arrangements with Kimberly-Clark, a renewal of the Laminex business and significant successes in the energy and chemical transport areas."

Western Australia remains a difficult market, "with the first half being especially challenging".

"However, positive signs emerged late in FY17 with increased general freight and heavy haulage activity," Sarant says, at a time when confidence in the state is rising.

"The general freight business continues to be very competitive, but continued differentiation through service has enabled us to increase our market revenue.

"Several new contracts were won within the Pilbara and Kimberley regions."

January’s integration of the STI general freight business into K&S Freighters in is now largely completed and has increased diesel sales through K&S Fuels.

"Importantly, this has provided new opportunities in the FMCG sector where STI had a number of contracts with major customers," Sarant says.

K&S Energy secured several new major city contracts along with new services have also been established to transport LPG and LNG in WA and transport fuel in WA and South Australia.

Chemical volumes firmed in the latter half of last financial year, but have since softened.

On the intermodal front, the company is continuing to review its rail needs after Aurizon said it would ditch freight rail by the end of the year.

Bulk coal haulage is at the mercy of the market and customer imperatives.

"Consequent to the suspension of operations at its Appin Mine, South32 Illawarra Coal volumes are materially lower than the previous year," Sarant says.

"From mid-October the Appin colliery will operate a single long wall through the remainder of FY18.

"It is expected that a two long wall operation will resume at Appin in the December 2018 quarter, at which time we expect our coal haulage fleet will again be fully utilised."

Market issues rather than internal ones also put pressure on the Aero Refuellers arm, where a mild summer resulted in lower than normal demand for fire aviation refuelling services, and "aggressive market tactics by competitors that reduced margins for jet fuel sales".

However, this was in part offset by stronger than normal aerial agricultural demand.

Meanwhile, in an indication of how far the industry has come regarding pollution, Sarant reports fleet modernisation has seen vehicle emissions at 67 per cent of 2003 levels for NoX and 85 per cent for particulate matter.

And despite an increased fleet, K&S was able to maintain its total carbon dioxide generation at 162,000 tonnes, the same total as the previous year.


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