K&S Corporation Provides Earnings Update; PBT to Range between $3m to $4m

K&S Corporation Limited (ASX: KSC) aims to be a leader in providing transport and logistics solutions to its target market of New Zealand and Australia. It is also referred to as Kain & Shelton. The company was formed in 1945. Recently in 2017, the company acquired Scotts Transport Industries (STI).

K&S Energy (Image Source: Company report)

On 27th May 2019, the company released its Earnings Update. Based on the current available information, it has anticipated:

  • The underlying profit before tax to be in the range of between $3.0 million and $4.0 million, for FY19.
  • The statutory profit before tax would range between $9.0 million and $10.0 million.
  • Statutory results will be inclusive of a $9.5 million (before tax) accounting gain. This would be with regard to the settlement of claims from the close of Aurizon’s intermodal business in December 2017, along with other known one-off business restructuring costs.

Furthermore, the company has been incurring increased costs in its rail transport operations. This was in relation to deals with Pacific National, made in January 2018, after the close of Aurizon’s intermodal business.

Chemtrans, KSC’s chemical transport division witnessed a reduction in market demand. K&S Energy, the company’s fuel cartage division faced strong margin pressure. Both these divisions were severely affected by the floods that hit northern parts of Queensland early this year in February.

Chemtrans (Image Source: Company’s report)

Amidst this, other contract logistics operations and the New Zealand market along with the company’s fuel divisions, generated better results in FY19.

As part of the strategy, the company has been implying cost reduction strategies across its businesses. The review of its industry segments and services offered in the market are ongoing. Currently, KSC is focused on the general freight businesses across Western Australia, South Australia and the Northern Territory.

In February, the company announced its first-half result for 2019. The statutory profit before tax was recorded at $13.8 million. This result was 105.8% higher than the pcp. The statutory profit after tax amounted to $9.6 million. This was up by 108.4% from the pcp figure of $4.6 million. The operating revenue amounted to $471.5 million, up by 12.9% from pcp.

The underlying profit before tax was $4.3 million, which was 19.2% less than its pcp. The operating cash flow was $26.9 million, which was up 97.7% from pcp.

Both the DTM and New Zealand businesses underwent improvement in terms of finances and volumes. Aero Refuellers, KSC’s specialised aviation refuelling business, has performed well along with K&S Fuels, the company’s fuel trading business. Western Australia experienced poor trade margins. The K&S South West too downsized its raw timber transport operations, resulted in exit of the cartage of various timber-based customers. South32 coal volumes depicted improved financial results. However, the company would be exiting this contract by the end of FY19.

The company was unable to provide any earnings guidance, given that the reviews are in pipeline.

Share Price Information:

At market close on 27th May 2019, the stock of KSC was trading at $1.660 on ASX, marginally down by 0.3%, with a market cap of $211.92 million. The YTD return has been 12.12%.


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