Freightways crushing it in downturn
Growth of disposal work helps prop up profit expectations
Used coffee cups, defunct computer gear and medical waste are helping Freightways weather a recent slowdown in the local economy. The company — better known for delivery than pick-up — is still expecting earnings growth in the current financial year.
Yes, it is lifting prices, but the firm is also using its delivery fleet and facilities expertise to collect and process a growing range of products for disposal.
“We are pretty nimble. We think we can grow a really effective, highquality destruction and niche recycling business,” chief executive Mark Troughear told BusinessDesk.
The delivery business is still Freightways’ cornerstone, bringing in about 70 per cent of group revenue, and it is expecting further growth after recent price increases.
“There are not many mail businesses anywhere in the world that are growing and making money,” Troughear said.
But he sees significant potential in the information management side of the business. Revenue from destruction activities alone rose 13 per cent in the June year, outstripping a group revenue lift of 6 per cent.
Information management basically stores, crunches and safeguards data.
“We do a huge amount for district health boards and hospitals over in Australia where they don’t have the real estate to store all of those pages and files themselves,” Troughear said.
In New Zealand, Freightways digitised part of the Census data.
“We are doing big jobs like that now in Australia and targeting more of that work.” Freightways’ business is already the biggest digitalisation bureau in Australasia, yet it is using only about 67 per cent of its facilities in Australia, he said. Troughear wants to get that to at least 82 per cent over the next two years.
Jarden analyst Andrew Steele lowered his net profit expectations for Freightways slightly for the next few years but noted “further improvements in facility utilisation will support margin gains in the information management division”.
Document destruction had long been on Freightways’ radar. It bought the Queensland-based Shred-X business in 2007, with its six bright orange vans.
“Today we are Australia’s biggest document destruction business, all grown as a Kiwi company from those six vans,” Troughear said.
It was that business that sparked Freightways’ foray into other areas of destruction.
“We had this really good business and we started to think what else can we do with that,” he said.
The first area was electronic destruction, which catered for hard drives, computers tapes, mobile phones and anything else that held data.
“We built the capability to destroy the data in a certified, secure way and then [pass all the by-products, which are now in] tiny little pieces, to metal recyclers who separate out precious metals and plastics,” he said.
Up to 26 different minerals are used in every smart phone, according to mining lobby group Straterra. With an estimated one billion iPhones in the world, they contain around 7800 tonnes of copper, 2720t of nickel, 8140t of silicon and 300t of titanium.
Medical waste was next. The MedX business services everything from vets to tattoo parlours in Australia. “There’s no recycling angle in medical waste. The challenge is to pick it up, treat it so you kill all the bugs, and then shred it and dispose of it.”
Once the company turned its attention to destruction, it’s started to see “heaps of potential”, Troughear said.
They were approached by a company in Australia that managed to create a disposable cup that didn’t contain a plastic polymer.
“We shred them and mix them with office paper and then that fibre can be used up to seven times.”
Coffee cups led to coffee waste, which it also picks up and sends to worm farms and compost farms.
It is also looking at the thornier issue of plastic cups and is doing a trial. Ultimately that plastic could be made into fence posts.
More immediately, Troughear is focused on textiles and potentially food waste.
“These are things we are uniquely qualified to do. The key is you run a really efficient logistics network. You really focus on quality processing — shredding, bailing, not mixing things up — and then finding a buyer for the product.”
We had this really good business and we started to think what else can we do with that.
Mark Troughear