Not enough demand to move Ports of Auckland to Northport: Port of Tauranga CEO Cairns
By Rebecca Howard
Aug. 24 (BusinessDesk) - Port of Tauranga chief executive Mark Cairns welcomes the government's review of the upper North Island logistic and freight systems but says there isn't enough demand to justify moving Ports of Auckland to Northport.
He also sounded a warning about proposed legislative changes to employment law.
Earlier this month, the government announced a five-member working group would conduct a review to ensure New Zealand’s supply chain is fit for purpose in the longer-term and indicated the review will include a feasibility study to explore moving the location of the Ports of Auckland, with "serious consideration" to be given to Northport.
Cairns told BusinessDesk that Port of Tauranga welcomes the "greater focus" on the issue and noted "there is an issue of capital discipline in the port sector," with some ports getting a return on equity as low as 2 percent.
In June the auditor general said a variety of accounting treatments used by the country's port companies makes it hard to compare and greater alignment would increase transparency. The port sector generated an average return on equity of 8.9 percent in the June 2017 year, however, returns by individual companies ranged between 2.3 percent and 26.1 percent, according to the auditor general.
Port of Tauranga seeks a minimum return of 8.5 percent after tax on major capital investments.
Regarding any changes to infrastructure - such as moving Ports of Auckland - "it has to be a rational decision for what the import and export demands are for the country and there just isn’t the trade demand in Northland," Cairns said. He emphasised the need for the review to have a clear picture of import and export cargo demand across the nation.
Port of Tauranga has a 50 percent stake in Northport. The other 50 percent is held by Marsden Maritime Holdings, which counts Ports of Auckland as a 19.9 percent shareholder.
Regarding his overall confidence in the economy, Cairns said Port of Tauranga is keeping a close eye on any fallout from geopolitical tensions as it could potentially impact demand. Earlier the company said it operates in a complex environment with many factors outside its immediate control.
"It is very much a watching game. We are seeing effects on the dollar and that perversely helps exports but will have an impact on us from rising fuel prices," he said. "We expect to have to deal with that in the coming year."
Regarding the Employment Relations Amendment Bill, he said Port of Tauranga has no problem with collective bargaining or dealing with unions because "that is how we do business now."
However, "the one aspect of the bill that we really have a problem with is the prospect of multi-employer collective agreements." According to Cairns, if the legislation passes "you could conceivably have a number of unions approaching all ports in New Zealand to have a one agreement applying to all ports."
He said that is a "real problem" given that a number of ports have had industrial action over the past year and under a multi-employer collective agreement every port would be shut when another port is having industrial action and "that would be a dreadful outcome for New Zealand."
Port of Tauranga shares gained 3.4 percent to $4.92 after it said net profit rose to a record $94.3 million in the year to June 30 from $83.4 million a year earlier. Container volumes lifted 8.9 percent to nearly 1.2 million twenty-foot equivalent units, and overall cargo was up 10.2 percent to almost 24.5 million tonnes.