Port of Tauranga Underlying Profit Up After Watershed Year
21 August 2014
Port of Tauranga Underlying Profit
After Watershed Year
• Underlying Group Net Profit After Tax reaches new record, rising 1.3% to $78.3 million
• Group EBITDa up 5.5% to $142.5 million
• Total trade volume increases 3.5% to more than 19.7 million tonnes
• Purchase of 50% of PrimePort Timaru and execution of a 35 year lease to operate Timaru Container Terminal
• Purchase of 15 hectare inland port site at Rolleston
• Establishment of long term alliance with freight management and logistics provider Kotahi
• Final dividend of 29 cents per share, increasing full year dividend 8.7% to 50 cents per share Port of Tauranga, New Zealand’s pre-eminent freight gateway (NZX: POT), today reports an improved financial result for the year to 30 June 2014 and a strong outlook following a successful year extending its freight catchment across the country.
Group EBITDa increased 5.5% to $142.5 million from $135.0 million as an increase in bulk cargo transported across the Company’s wharves offset a temporary decline in container volumes. Total cargo volumes rose 3.5% to more than 19.7 million tonnes from 19.1 million tonnes a year earlier.
Reported Net Profit After Tax fell 30.2% to $78.3 million from $112.1 million a year earlier as the prior year included a $34.9 million one off gain from the sale of an associate company.
Port of Tauranga Chairman, David Pilkington, said, “The 2014 financial year represents a watershed for Port of Tauranga. During the year, we took a 50% stake in PrimePort Timaru and took control of its container terminal, began the development of a new freight hub in Christchurch and struck an alliance with freight management and logistics provider Kotahi, which will deliver up to 1.8 million export TEUs to the port over the next ten years.
“These strategic initiatives, combined with the significant investments we have made in prior years, have put in place a platform for long term growth and will deliver significant gains for importers and exporters across the country.
“Reflecting our confidence in the Port’s prospects, and our certainty over forecast container volumes following the Kotahi alliance, the Board has today declared a final dividend of 29 cents per share, lifting the full-year, fully-imputed dividend to 50 cents per share, representing an 8.7% increase over the prior year’s 46 cents per share,” Mr Pilkington said.
The record date for entitlements to the dividend is 19 September 2014 and the payment date is 3 October 2014.
Mr Pilkington noted upcoming changes to the Port of Tauranga Board.
“Sir Dryden Spring has indicated his intention to retire at the Annual Meeting in October after 10 years on the Board. Sir Dryden has been a significant contributor around the Board table and his experience and wise counsel will be missed.
“Our new independent director, Alastair Lawrence, was appointed in February in anticipation of this move. His knowledge of mergers and acquisitions has been particularly welcome in the past year.
“As well as strong growth in the dairy sector, we see significant potential in other primary produce sectors including forestry. We believe our diverse cargoes and income streams ensure the Port of Tauranga Group will continue to achieve steady growth, as we consolidate our position as the country’s largest port.”
Port of Tauranga Chief Executive, Mark Cairns, said, “Port of Tauranga seeks to profitably grow cargo volumes while providing an efficient and cost effective service to our customers.
“We successfully executed a number of further strategic building blocks during the year, and we are now reaping the benefits, most notably in the form of our long term alliance with freight and logistics management company Kotahi.”
“We now have the certainty to invest in the infrastructure needed to accommodate the next generation of 6,500 TEU (twenty foot equivalent unit) ships and to do so in a way that will deliver efficiencies for New Zealand shippers and appropriate returns to shareholders.
“We expect cargo volumes to increase in the coming year; reflecting: the agreement with Kotahi; the investments we are making in our freight handling infrastructure across the country and the return of the Maersk Line’s Southern Star service to the Port of Tauranga this month.”
Underlying Net Profit After Tax reached a new record, rising 1.3% to $78.3 million from $77.2 million in the prior period.
Subsidiary and associate companies generally delivered strong results despite some tough challenges. Northport reported a strong financial performance on the back of log export growth.
Tapper Transport performed well in a very competitive environment, while successfully integrating a new subsidiary.
Quality Marshalling had a tough year following the loss of a major contract which was put to competitive tender. The company is now rebuilding, pursuing new lines of business to replace revenue.
Port of Tauranga’s balance sheet is strong with net debt at $255 million and gearing as measured by debt-to-debt plus equity steady at 29.7%, giving plenty of capacity to fund the $50 million expected to be required to dredge Port of Tauranga’s shipping channels. This dredging is due to commence in 2015 and the alliance with Kotahi will help ensure that an acceptable return is achieved on this investment.
In the 2014 financial year, $61.1 million was invested in property, plant and equipment.
Imports increased 6.4% to nearly 6.4 million tonnes from 6.0 million tonnes in the prior period. This increase was driven primarily by imports for the buoyant agricultural and construction sectors. Total exports rose 2% to 13.4 million tonnes from 13.1 million tonnes in the prior period driven by dairy and forestry exports.
Container volumes fell 10% to 759,587 TEUs from 848,448 in the prior year, primarily due to the loss of the Maersk Southern Star service. The service resumed its Tauranga calls in August and, based on previous container volumes associated with this service, we expect it to deliver an additional 70,000 TEUs per annum.
Transhipped cargo increased by nearly 5% over the year. Transhipped containers now represent 26% of the containers handled.
In Tauranga, the Company continued to invest in new infrastructure as traffic through the port grows.
The Tauranga Container Terminal commissioned its seventh twin-lift gantry crane this year and two new tug boats have been ordered for delivery in early 2015. The two new vessels will be powerful enough to handle the increasingly large ships visiting the port.
Port of Tauranga took control of the Timaru Container Terminal in December to deliver greater choice of cost-effective routes to South Island importers and exporters. Container volumes have already increased and a new harbour mobile crane has been ordered to handle the greater volumes.
Good progress is being made in establishing an intermodal freight hub on the 15 hectares of industrial land the Company acquired in Rolleston, south of Christchurch. The hub, modeled on the proven MetroPort Auckland operation and due to open in early 2015, is just 12 kilometres south of the city and enjoys excellent road and rail connections. It will allow exporters to aggregate cargo bound for the Timaru Container Terminal, and similarly allow importers to efficiently access the Christchurch domestic market. It will eventually provide capacity for up to 100,000 TEUs per year.
In Auckland, the MetroBox container handling service was expanded to a second location in Mangere, in partnership with Specialised Container Services. The purchase of the 6.8 hectare Gateside Industrial Park next door to MetroPort has also provided expansion options in the long-term.
Port of Tauranga’s safety record is strong with the lowest level of Accident Compensation Corporation claims of any port in the country. However, any claim is one too many, so the Company has been working on improving safety culture and employee engagement and this is delivering significant improvements in safety outcomes with a 92% improvement in Total Injury Frequency Rate.
Mr Cairns said, “The first month of this financial year has shown continued growth in container and log export volumes from the previous year, however price pressure in the Chinese market is expected to impact on the volume of log exports in the short term. Dairy volumes handled by the port are expected to increase, and imported fertiliser and dairy feed supplements also to remain strong. At this stage, container volumes are expected to exceed the previous record volumes in FY13 and an update will be provided to shareholders at the Annual Meeting on Thursday 23 October 2014, once the first quarter’s trade volumes are available.”
The Port’s freight alliance with Kotahi has given the Port the certainty to proceed with investment plans to ready Tauranga for the arrival of larger ships. It will be able to accommodate vessels of up to 6,500 TEUs within a few years.
“We are making excellent progress reinforcing our position as New Zealand’s pre-eminent freight gateway,” Mr Cairns said.
Reconciliation of Underlying Net Profit After Tax
The key differences between underlying profit and reported profit in 2013 relate to the sale of Port of Tauranga’s investment in C3 Limited and the derivative contracts closed out that related to debt repaid from the consideration received from the sale.
About Port of Tauranga Port of Tauranga is New Zealand’s largest port by volume of cargo and New Zealand’s international freight gateway. It operates wharves at Sulphur Point, Mount Maunganui and Timaru, as well as MetroPort, a rail-linked inland port in South Auckland. It is developing an intermodal freight hub in Rolleston.
The Port of Tauranga Group includes: Tapper Transport, New Zealand’s largest wharf cartage company. It operates a container freight station adjacent to MetroPort Auckland, and owns Priority Logistics, a Bay of Plenty-based transport and freight handling operation; Quality Marshalling, a forestry and container handling company, Northport (50% ownership), which operates a deepwater commercial port in Whangarei, PrimePort Timaru (50% ownership), which operates the commercial port in Timaru, Timaru Container Terminal, which leases and operates the container terminal at Timaru, MetroPack, container packing and unpacking facilities based in Auckland and Tauranga, MetroBox (50% ownership), a container cleaning, repair and storage service and Cubic Transport Services (37.5% ownership), which specialises in moving freight within New Zealand.