Leaner K&S emphasises cost reduction efforts

Current approach seen as primer for improved second half

Leaner K&S emphasises cost reduction efforts
Some of K&S's Scania fleet


Cost reduction strategies and the sale of Regal General Freight underscore K&S Corporation’s half-year results, delivering a modest profit but greater optimism for future performance.

The half-year ended December 31 results in a statutory profit before tax of $4.2 million from operating revenue of $422.6 million, down 69.7 per cent and 9.3 per cent respectively on the prior corresponding period (pcp).

While lacklustre on the surface, K&S notes its underlying profit before tax of $5.6 million was actually 31.9 per cent higher than the pcp.  

"Included in the statutory profit after tax for the current period was $1.0 million (post-tax) of costs relating to the sale of Regal General Freight," the company explains in its report.

"The statutory profit after tax in the prior comparable period included a non-recurring benefit of $6.6 million (post-tax) relating to finalisation of the Aurizon rail claim."

Meanwhile, a focus on cost reduction initiatives is seen as having a "positive impact", with expenses down from $466.1 million to $421.4 million over the pcp.

"Cost reduction strategies have continued to be implemented across the business, in particular, operational efficiencies, supplier re-negotiations, and the rationalisation and replacement of specific fleet," the firm notes.

This is illustrated by a decrease over the pcp in employee expenses (from $152.4 million to $134.5 million), contractor expenses ($111.9 million to $99.4 million) and fleet expenses ($91.2 million to $77.7 million).    

Read K&S prior reflections on its operational outcomes, here

In this time, the sale of the Regal General Freight business to Centurion Transport has "now been finalised and we are now realising underlying financial improvements as a consequence"; recoveries relating to the sale are listed as $663,000 and costs $2.1 million.

It notes remaining contributions from Regal’s contract logistics and heavy haulage arms were also positive.

Further, along with steel volumes from major customers remaining strong, K&S name-checks its K&S Energy, Chemtrans, K&S Fuels and Aero Refuellers arms as performing well, offsetting a sluggish rail division, "which continues to be negatively impacted by the increased rail network costs, and the bulk division which underperformed following the recent loss of a significant contract".

"However, we currently anticipate that our performance in the second half of FY2020 will be better than the prior corresponding period," the company notes.

"We believe the business is well positioned for growth as economic conditions improve."


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