THE LOWER FUEL PRICES since late last year have lightened the cost load for logistics and supply chain management group Cargo Carriers. The group saw a pedestrian 14% revenue increase in the year to February 2009 but a 48% increase in operating profit. That the fuel prices have stayed at a third of what they were last year should bring a few smiles to the group’s shareholders.
However, downward adjustments to asset values reduced net profit to R17,2m from R40,8m in 2008.

Cargo says it expects lower volumes for its current financial year in its industrial sector, its biggest revenue earner. However, that would be offset by the good prospects in the agricultural sector. The company has moved in good time to also counter the expected slump in industrial logistics. Its aviation division’s revenue has grown threefold over the past year, with operating profit increasing from R75 000 to R4,1m.
One major advantage Cargo has over rivals is its good cash position. Operating activities brought in double the amount of cash of the previous year and interest received grew threefold to R11,5m, while its own interest bill was R9m (58%) higher.

After selling its letting arm and property within Cargo Carriers Workshop, the company boosted its cash position by R100m, to end the year with R104m in the bank (R15m previously). That amounts to 52c/share.
For the period ahead, Cargo is therefore well positioned because it’s adjusted its fleet portfolio to match prevailing circumstances. Tight cost management in the form of closer scrutiny on loads will pay off, assisted by the lower fuel costs. With its recently declared dividend of 9c/share Cargo us being prudent with cash distribution, as it earned 55c/share in the year.
At its current price of 805c/share, Cargo might be a tad expensive at an earnings multiple of nearly 15 times. However, shareholders know they’re invested in a solid operation with a proven history of profitability. With only 20m issued shares – and with 16m in the hands of directors – there can’t be much liquidity. But those investors lucky enough to lay their hands on shares will have provided wheels for their portfolios.