DON’T YOU JUST hate trucks? Especially those that insist on trying to overtake each other on a hill, blocking the lanes behind. Or sugar cane trucks on the East Coast that often seem to manage to lose half their overloaded cargo and dump it on the road? But we’re sure that’s not true of Cargo Carriers. It’s an established company and seems well run. What stands out, in the current economic climate, is its balance sheet strength.

That puts the mainly transport group, say joint CEs Murray and Garth Bolton, in the fortunate position of being able to fund organic growth amid an industry showing signs of competitive weakness and in a position to buy quality businesses at relatively low earnings multiples.

Gearing tells the story. At 6,5%, it’s at its lowest level since 2006 and comfortably below its longer-term average. An idea of the conservative debt structure of Cargo Carriers is that borrowing are at 13% of its set borrowing capacity of 50%.
As important is that in the current climate of anal fixated non-lending bankers, the group’s debt is cheap. Notes to its annual report show that secured loans are all up to 2,25% below the prime lending rate. One of the objectives of capital management is to ensure the group maintains a strong credit rating, directors say.

Coupled with cash holdings – that have increased sixfold to R104,1m – this group shouldn’t have any problems raising reasonably priced debt despite being a small cap share should it decide to pounce on a quick acquisition.
Adding to balance sheet strength is that, despite a dip in earnings, Cargo Carriers has maintained its dividend payout at the previous year’s level.
The CEOs say that, like most logistics groups, it’s in “the hand of the gods with respect to underlying demand”. Perhaps so, but Cargo Carriers looks well placed for when demand picks up. ~ Shaun Harris