Linfox pessimistic after big win

Linfox has achieved a major milestone in its five-year plan with a $1 billion Coles contract, but is pessimistic about the Australian economy.

The Linfox board drew up a five-year plan in March 2006, where it decided to build the business to a $2 billion-a-year revenue operation before finding a partner. The company yesterday announced a further strengthening of its stranglehold over the Coles distribution business, with a five-year, $1 billion contract that it had won ahead of arch-rival Toll.

But speaking to The Sydney Morning Herald yesterday, Linfox MD Michael Byrne said Linfox was starting to see the signs of a slowing of economic activity in Australia.

"There are the beginnings of some sort of slowdown. There’s definitely a lot of cost pressure from customers," he said.

Expressing a contrary view, Toll Holdings MD Paul Little sees no slowdown yet.

"We have no reason think there has been any change from what we announced in our half-yearly statement," he said.

In last month’s statement, the company said it did not expect a significant downturn in its major markets, and the outlook remained positive.

The latest Westpac Bank-Melbourne Institute Leading Index of Economic Activity appears to agree with Linfox’s view. The index showed Australia’s annualised growth rate was 4.1% in January, down from 6.3% last November.

"We expect domestic demand growth to slow from the strong 5.7% in 2007, to 3.8% in 2008 and 1.9% in 2009," Westpac chief economist Bill Evans said.

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