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Setting A Platform For Long-Term Growth

11 August 2004

Setting A Platform For Long-Term Growth

Lyttelton Port Company today announced that in the financial year to 30 June 2004 it has made significant achievements in stabilising the business and setting a platform for growth, while achieving an acceptable financial result.

The achievements have included:- re-establishing relationships with key customers nationally and internationally and with key importers and exporters identifying growth opportunities growing volumes through existing customers assessing the infrastructure requirements to stimulate growth and determine which areas require investment ordering four new straddle carriers for delivery in January 2005 to enhance container terminal service delivery continuing to implement changes and improve our communication with staff establishing a better relationship with community leaders realigning the management structure with a reassessment of key positions, and flattening the operational structure completing the Fast Coal project development under revised projected cost achieving compliance with new international security regulations and increased MAF and Customs’ requirements.

During the year the Company achieved an 8% increase in earnings before interest, taxation, depreciation and amortisation (EBITDA) for the twelve months ended 30 June 2004. EBITDA rose to $25.4m, with net profit after taxation (NPAT) increasing 3%, from $11.6m to $12.0m

Commenting on the result, Chairman Barney Sundstrum said, “Volume growth across our key trades – containers, coal and bulk fuel – contributed to our result. Total revenue for the year was slightly up from $60.9m to $61.8m. The revenue has not increased at the same rate as volume due to market pressure and changes in the cargo mix. Effective 1 July 2004, we implemented price increases for all trades other than where term contracts are yet to be renewed.

EBITDA reflects decreased expenditure of $0.9m, however we note that a one-off charge of $2.9m associated with the settlement of the Collective Employment Agreement with the Combined Unions, increased operating costs in the 2003 year.

In the year under review, there were some increases in operational costs due to trade volume, maintenance and general costs. Additional costs occurred in the coal operation to achieve record export volumes, while simultaneously undertaking the major upgrade to the facility.

Other pretax costs also rose – depreciation by $0.9m and interest up $0.7m as a result of the significant capital expenditure in the last two financial years, $30m of which was on the coal upgrade approved by shareholders in September 2002.

Directors have declared a final ordinary dividend of 7.25 cps, fully imputed for taxation, which will be paid to shareholders on 15 October 2004. This brings the total ordinary dividend for 2003/04 to 11.0 cps as per the previous two years. The dividend has been maintained at this level based on Directors current assessment of projected profit growth over the next five years balanced with the projected capital expenditure required to facilitate this growth.

Key trading figures for the year ending June 2004 included a 20% increase in volumes through the container terminal from 134,000 twenty foot equivalent units (TEUs) to 161,200 TEUs. Coal volumes exported increased 3% from 2 million tonnes to 2.1 million tonnes, while bulk fuel volumes rose 13% from 994,000 tonnes to 1.1 million tonnes.

Chief Executive, Peter Davie, is confident about the long-term direction of the Company. “Over the past twelve months we have achieved a clear understanding of what we need to do to deliver on our potential. The growth of key trades puts us in a good position to take our business forward.

“The 20% increase in volume through the container terminal was mostly due to an extremely strong export season between February and May, and marked the third consecutive year volumes have risen.

“We are fortunate to enjoy a diversity of import and export trades, which minimises our exposure to any one sector. Over the next two to three years, we anticipate continued growth in our container trade — the result of increased import demand, growth in exports, and from building closer links with exporters and importers enabling us to increase our market share.

“Coal forecasts were not achieved in the year under review because of a reduction in available rail capacity between the West Coast and Lyttelton. We have received assurances from both Solid Energy and Toll NZ that required enhancements will be effected, and accordingly, we have forecast 2004/05 volumes to be in the vicinity of 2.2–2.5 million tonnes, of which about 80,000 tonnes will be delivered by barge from the West Coast,” said Mr Davie.

Increasing demand for diesel, and double-digit growth in jet fuel consumption due to increased international traffic through Christchurch Airport, saw bulk fuel volumes rise. Lyttelton represents a strategically important location for the major oil companies operating in New Zealand, and a need for increased storage capacity has been signalled. BP New Zealand recently commissioned three new 8 million litre tanks at a cost of $15m, expanding overall storage capacity at the Port by 30%.

Overall volumes through the port increased 4% in the year.

This year saw a total of 1,293 ships visit Lyttelton, down from 1,424 visits the previous year. It reflected the reduction in the coastal fleet, the trend for bigger ships and further consolidation of services by the international lines.

“A strategic review of all trades has revealed that key infrastructure developments and plant are required. Significant investment is planned in the coming year to ensure that we cater for growth, remain competitive and offer our customers fast, efficient turnaround. We expect to be in a position to provide more detail on this at our Annual Meeting on 15th October 2004.” said Mr Davie.


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