Freightways finds growth beyond fuel-driven revenue

Fuel Prices Interrupt Freightways’ Volume Recovery

Freightways Corporation Limited (NZX:FRW, ASX:FRW) is entering FY27 with a healthy earnings base but a less comfortable demand picture. The courier and logistics group reported a 17.6% rise in unaudited first-quarter revenue to NZ$408.3 million and a 12% increase in net profit after tax to NZ$26.2 million, yet higher fuel prices and softer demand for premium services pulled margins lower.

Management said activity across New Zealand had been recovering before fuel prices rose, after three years of subdued economic conditions. That recovery then stalled, with customers favouring lower-priced road express services over premium offerings such as overnight airfreight and temperature-controlled delivery. Freightways expects same-customer volumes in New Zealand and Australia to remain subdued, with improvement dependent on a sustained decline in fuel prices.

FY26 Growth Extends Across Revenue and Profit

The FY26 result was materially stronger. Revenue climbed 13.5% to NZ$1.464 billion, EBITA rose 14.6% to NZ$181.6 million and NPAT increased 17.3% to NZ$94 million. Basic earnings per share reached 52.4 cents, up from 44.7 cents, while the full-year dividend rose 12.5% to 45 cents per share, including a final dividend of 24 cents.

VT Freight Express helped lift the top line after joining the Australian business from 1 February, although Freightways said revenue growth would still have been 11% without the acquisition. Australia increased its contribution to 39% of group revenue and 38% of EBITA in FY26, compared with 36% and 34% respectively a year earlier. The transaction had already been identified in the VT Freight acquisition as a key expansion of Freightways’ Australian B2B footprint.

Express Margins Narrow as Information Management Improves

Express Package and Business Mail generated most of the first-quarter growth, with revenue up 20.1% to NZ$346 million and EBITA up 9.9% to NZ$42.1 million. The division’s EBITA margin fell from 13.3% to 12.2%, reflecting weaker premium-service demand and fuel levies that recover costs but do not add margin. In New Zealand, parcel items rose 2.9%, with net market-share gains accounting for 2.6 percentage points and same-customer volumes contributing 0.3 points. eCommerce items increased 24%, while retail and health volumes declined.

Information Management supplied the cleaner margin story. Revenue increased 5.6% to NZ$63.9 million, while EBITA rose 17.5% to NZ$9.4 million and the margin expanded 150 basis points to 14.7%. Shred-X’s IT equipment and product-destruction revenues increased 40% and 28% respectively, supported by pricing and what Freightways described as the Shred-X reset.

Australian Growth Comes With Uneven Demand

Allied Express revenue increased about 8% in the quarter, helped by pricing, fuel recovery and a larger average item profile. Volumes were broadly flat, however: a 6% organic decline was offset by a 6% gain from new business. Allied secured a further A$11.2 million in annualised new-customer revenue during the quarter, while some eCommerce customers reduced their online activity and down-traded by 8%.

Freightways said a large Allied customer had re-contracted its work, with additional volumes expected, but the company did not provide a timetable or quantify the contribution. The Australian economy has also slowed amid higher interest rates and weaker growth, leaving the pace of recovery there dependent on broader economic conditions rather than volume momentum alone.

Capacity Investment and Acquisition Headroom

Freightways finished FY26 with net debt to EBITDA of 2.4 times, including lease liabilities, against a capital management policy range of 3 to 4 times. That leaves stated capacity for further investment and complementary Australian acquisitions, although management has not disclosed a specific target or transaction.

The near-term operating programme includes expanding regional hubs in Christchurch and Palmerston North, assessing Auckland capacity options and investing in Evolve, a new billing and rating system. Freightways also plans to pursue market-share gains in Australian business-to-business and business-to-consumer freight, while continuing margin work across the group. The unresolved question is whether those investments can keep converting market-share gains into profit while fuel costs continue to distort both reported revenue and customer demand.