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POA CEO Issues Statement on Annual Results

Geoff Vazey Chief Executive Ports of Auckland Limited Annual Results Presentation Tuesday 17 August 2004

Welcome to the port.

My presentation follows a strategic format today. You already have our volumes for the year so rather than run through them again I will instead report on our operational achievements against strategy.

Ports of Auckland mission

Ports of Auckland’s mission is to ensure the most efficient and cost-effective supply chain is created for containerised cargo between export and import customers, and shipping services.

I need to add that we also value our breakbulk cargoes and in particular vehicle imports.

We strongly believe that an optimised supply chain will bring business growth for Ports of Auckland – to the benefit of our stakeholders, the Auckland region and the country as a whole. This is because increasingly products don’t compete – supply chains do.

When we talk about the supply chain, we include our ports – the Port of Auckland in particular is an important part of the container freight supply chain – and we include activities beyond the red fence.

Strategic platforms to achieve the Company’s mission

We have three strategic platforms aimed at achieving our mission. They are:

To deliver superior customer service and to create new service offerings.

To ensure that we have the necessary capacity and capability into the future.

To undertake key market initiatives that will advantage our supply chain.

I will now track progress for the year against these three strategic platforms and will outline what we are doing for the future.

Strategic platform: Delivering superior customer service and creating new service offerings.

Firstly, customer service. We’re doing it well and we’re constantly upping our game because we’re focused on continuous improvement.

I use the word customer in a sense that takes in both our shipping-line customers and our supply-chain participants such as importers, exporters and land transporters.

Productivity increases for shipping-line customers

Shipping lines want fast ship turnarounds. Today’s containerships are like ocean-going conveyer belts. They want to get into port, complete their significantly larger container exchanges, and get out again as quickly as possible.

The Axis Intermodal terminals are continually improving ship turnaround times and are equipped with New Zealand’s most advanced twin-lifting equipment and electronic systems.

The result for 2003-04 includes:

A remarkable 20% reduction in ship hours in port per TEU at Axis Fergusson, our main terminal.

4% rise in crane productivity across our terminals.

1st ranking among Australasian ports by a major shipping-line customer and 5th among all 16 international ports for performance on the 4100-TEU containerships. We are even ahead of Rotterdam.

Another global shipping service recently rated us 4th out of 21 international ports, and a third service has rated us top out of eight New Zealand ports, including Tauranga.

The ratings come direct from our customers and are hard international evidence of our high performance. With the first anniversary of the big ships during the year, we greatly value this affirmation from our customers.

New service offerings: Logistics solutions for cargo owners and transporters

Our commitment to logistics work is stronger than ever. The benefits of working closely with cargo interests and freight transporters on supply-chain efficiencies are demonstrated daily.

The result for 2003-04 includes:

18% rise in container volumes through our East Tamaki inland port. East Tamaki is thriving and new customers are using the site.

Enhanced competitive advantages through same-day or overnight delivery of prioritised import containers. We’re seeing import containers arrive at local importers often the day the ship berths. This is resulting in major benefits for Auckland importers.

27% increase in after-hours container trucking, to comprise 34% of all containers trucked to or from the seaport. This impressive performance – achieved in just three years – is a result of establishing the East Tamaki inland port, 24-hour seaport access, and work with transporters to gain acceptance for our electronic container processing products.

Trialling of an on-wharf automatic fast quarantine car wash facility for vehicle imports is under way. This is designed to cut delays for second-hand cars while meeting the higher level of inspection and cleaning that is now part of that business.

Imported vehicle volumes continue to grow, with a 2% rise to 189,770 during the year. Improved yard planning and development is helping to get vehicles moved out more quickly by transporters.

E-commerce for all supply-chain participants

Innovative high-tech systems and products, and electronic information flows extend through Axis Intermodal’s entire container logistics chain. They provide importers, exporters, freight forwarders, shipping lines, and road and rail transporters with a container flow visibility that is unrivalled in New Zealand.

During the year, new developments included:

A value-added bureau service to prepare and submit Outward Cargo Reports for Customs. This service consolidates information from New Zealand ports, and shipping-line customers are saving time and costs by cutting out the need for multiple reports by multiple parties. Already 10 shipping lines have come onboard.

A revolutionary web-based container delivery system was conceived and brought to a high level of development ready for launching this year.

Strategic platform: Ensuring capacity and capability into the future

Careful planning has kept us ahead of demand while ensuring capital investment is timed according to need. As a result, we were ready for the recent big ships and we’ll be ready for the next generation of containerships as well.

Achievements during the year include:

Terminal capacity – We increased terminal capacity by about 10,000 TEUs by reconfiguring container stacks and stacking systems. We have significant spare capacity right now. The Axis Fergusson extension stage will give us another 100,000 TEU capacity when it is completed in 2006.

Inland ports – Inland ports will give us extra off-wharf capacity. Work began in earnest on our Wiri site in the 2003-04 year and it will be fully operating in the new financial year. Already cargo owners and the freight community are expressing interest in our container-freight “village” concept.

Crane intensity – A 19% increase in crane intensity was achieved. This means more cranes on ships and faster ship turnarounds. We can put four post-panamax cranes on the large containerships to achieve the necessary fast turnarounds.

Reefer capacity and facilities – Stage one of our new $11 million refrigerated container facility was completed. This is providing extra capacity and monitoring services for the increasing number of integral reefers.

Shipping lane deepening – The Parnell grit rock was mechanically removed during the year without the need to blast, which is very pleasing. The contract was let for the main dredging, which will begin this year. When completed, large vessels will be able to enter and exit the port at virtually all states of the tide.

Technology – We began an extensive upgrade of our IT capability so that we can continue to roll out advanced e-commerce products for customers and to make further systems enhancements.

Strategic platform: New key market initiatives that will advantage our supply chain

We are working on several market initiatives to achieve business growth that adds value. These initiatives are market sensitive so details are not ready for release at this point.

During the year we had positive discussions with Toll Rail on a number of topics and particularly on the feasibility of providing a rail link between our Wiri inland port and the seaport.

We remain interested in extending our reach beyond Auckland, where it makes sense, and discussions are continuing on a number of fronts.

Several initiatives are under way to regain ground in the Auckland market in response to competitive market pressures.

We are seeking a balanced set of very good outcomes for our customers, our shareholders and our staff.

A reliable company

The Company has delivered consistently to its customers and shareholders, and we are determined to deliver going forward.

While competition is intense the Company’s competitive advantages are considerable.

Firstly, we have a clear strategy and it is the right one. The strategy delivers best value to customers and ensures we pursue market initiatives that add value. By building on the excellent progress made during the year against our strategy, we are ensuring growth well into the future.

Secondly, we have very strong competitive advantages:

We’ve got the big ships and we’re servicing them well. This is the reality here in Auckland. We also have an all-weather port – unlike most New Zealand ports – and once dredging is completed we’ll have the best port access for big ships.

We’ve got Australasia’s third-largest – and New Zealand’s largest and best-equipped – terminal operator to serve the big ships. Axis Intermodal’s high performance is confirmed by customer ratings.

We’ve achieved good growth. The Axis terminal volumes are still growing despite some market relocation during the year. Terminal volumes grew 4% compared with 2% for the overall Company as Auckland’s imports continue to grow and export goods are increasingly containerised.

We’re always ahead of demand for container-handling capacity. We have spare capacity right now and we have new capacity coming on-stream soon. In the future, we can more than double capacity at the seaport without expanding beyond our present east-west boundaries – by improving land-use and systems, and by reconfiguring our wharf. Together with other initiatives we can grow to over 3 million TEUs a year.

We have the technology. Our innovative high-tech systems and products, and electronic information systems are consistently ahead of the game in New Zealand.

We’re in the best location. We have the country’s largest consumer population and manufacturing base. This enables fastest delivery to the Auckland market and ensures shipping lines can balance cargo flows. These are very significant competitive advantages. As a result, we are New Zealand’s most well-balanced major port, with a 58:42 ratio of full import to full export containers.

Auckland is ideal for imports and the 8% growth in transhipments confirms that shipping lines are increasingly using Axis facilities to link their various services. Auckland’s rail infrastructure is advantageous and roading improvements are enhancing access to the seaport.


Finally, a quick look at 2004-05.

Our strategy has been rewarded with a strong start to the new financial year.

July container throughput was 61,360 TEUs – a large 20% increase on July last year and the second highest monthly volume we’ve ever had.

Breakbulk was also way up – by a substantial 8%.

Looking ahead, we’re in good shape. Our strategy is right and we’re totally focused on achieving it.

Thank you.

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