Ports of Auckland announces half-year result

10 March 2009

MEDIA RELEASE

For immediate release

Ports of Auckland announces half-year result

·       Vehicle imports at lowest level since records began

·       Container volumes hit record high

·       Container terminals EBIT up 8.4%; volumes up 6.4%

·       Full capital structure review underway

Ports of Auckland today announced a net profit after tax of $9.3m for the half year to 31 December 2008, compared to $12.6m for the first half last year.  The 2007 half-year result included a one-off $1.5m tax credit.

Managing Director Jens Madsen said an improved performance from the Ports’ container terminals was very pleasing, as this was the area of the business subject to strong competition.

Container volumes reached a record high of 455,083 TEU*, up 6.4% on the same period in 2007 Container division EBIT was up 8.4% on the six months ended 31 December 2007 and 35.5% on the six months ended 30 June 2008.

As shipping lines consolidated operations to reduce cost, Ports of Auckland won bigger services carrying more volume.

Trans-shipment numbers were up 33.5%.  “This increase reflects shipping line decisions to hub services off Auckland, using regional ports as feeder ports,” Mr Madsen said.

“Our proximity to the Auckland import market is an important competitive advantage.”

Ports of Auckland’s focus on productivity was also paying off, Mr Madsen said.

Crane rate was up 9.4% and staff hours per container down 15.0% in December 2008, compared to 2007.

“These improvements are very encouraging - crane rate is a key customer service measure and staff hours per container have a direct impact on our bottom line.”

“We anticipate significant further improvements in crane rate and staff hours as the full benefits of new work practices, including dual-cycling, twin-lifting and two-way driving are realised.”

However, Mr Madsen said Ports of Auckland’s overall result was significantly impacted by imported vehicle volumes dropping 23.7% to 66,493 units. 

“The decline in vehicle imports reflects the significant global downturn this industry is experiencing, and a recovery is not forecast.”

General Wharves containers and break-bulk division EBIT decreased 15.7%.  General Wharves tonnage (excluding vehicle units) was down 3.06% to 767,694 tonnes. 

Port Operations EBITDA was $36.8m, down 0.6% compared to the same period last year and, including the impact of depreciation, Port Operations earnings before interest and tax were $26.2m, down 6.3%.

There were 22 cruise ship calls compared to 19 in the same half for 2007.

Mr Madsen said management has introduced a range of measures to curtail costs, including implementing a freeze on executive salaries.

“We are making an intensive effort to curtail costs, including working constructively with staff and unions on a range of strategies to reduce unit cost and minimise potential job losses.”

However, Mr Madsen said Ports of Auckland’s current labour model put too much pressure on margins and that it was critical costs were in line with forecast volumes.

He added that following a high level of capital investment in recent years, Ports of Auckland was now well placed to manage future capacity demands.

Capital expenditure was $7.4m compared to $26.5m in the first half of FY08 following the completion of the Rangitoto Channel deepening, among other projects.

Capital structure review

Mr Madsen said a full capital structure review was underway. 

“The objectives of the review, which will be completed by the first quarter of next financial year, are to lock in longer-term funding and ensure the Company’s dividend payout policy of 75% of net profit after tax is appropriate.

The Ports of Auckland Board had decided to defer a decision to pay an interim dividend, Mr Madsen said.  “This is a prudent move given the current capital structure review.”

Ports of Auckland has a $105.5m current liability resulting from a decision not to roll over some existing debt facilities while the capital structure review is underway.

Debt levels at 31 December 2008 were $355.5 million, similar to debt levels at 30 June 2008  Interest paid for the period was $14.4m compared to $13.5m.

Outlook

Mr Madsen said trade volumes were weak over January and February, but had picked up slightly with the beginning of the export season in March.

“However, there is no doubt that the trading environment in New Zealand and abroad is extremely challenging, and will continue to be so in the foreseeable future.”

“It is difficult to accurately forecast forward volumes; however, we are encouraged by our recent market share gains and ability to reduce costs.”

“Our core objectives for the next 12-18 months are to continue to increase productivity, expand our product portfolio, restructure our balance sheet and further improve our positioning in the market.”

Mr Madsen said that as a future customer of NZL Group, he was pleased with the progress NZL was making with its plans to re-establish a container terminal at Port of Tauranga.

ENDS

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