Port of Tauranga Limited Annual Meeting - John Parker
Port of Tauranga Limited Annual Meeting 25 October 2012 John Parker, Chairman
Good afternoon Ladies and Gentlemen.
This year we celebrate 20 years since being publicly listed - with another very good result. It s been a good 20 years and I hope you ll allow me to blow our horn just a bit.
For those of you who have been shareholders since the very beginning, your faith has been very amply rewarded. You will have received an average 24% compounding annual return on your investment over those two decades.
In that time, net profits have increased tenfold as overall trade volumes have increased by 190%, and container volumes by more than 1500%. Port of Tauranga has been the best performing share on the New Zealand Stock Exchange over the last 15 years.
In the 2012 financial year, strong growth across the Company and in all major cargo categories has seen Group net profit increase to a new record of $73.5 million. That is an increase of 26% on 2011 which of course was itself a record. I will go into some more detail on the financial results shortly but first I would like to highlight the significant challenges thrown at us in the past year.
The Ports of Auckland strike stretched us to the limit. It sounds great more business - but trying to balance the needs of existing customers with the urgent needs of those shut out of Auckland stretched us to the limit. We did our best for all but it was seriously tough on our staff and service providers and they performed magnificently.
The grounding of the Rena was a huge challenge as we put maximum effort into assisting the cleanup and ensuring the port stayed safe and working. To achieve such a good result in the face of these challenges is great.
So, to the highlights of the financial results for the year: EBITDA increased 18% to $128.9 million for the Group. Operating revenue increased to more than $227 million in 2012 - up 22.5% on 2011. Our balance sheet remains very strong with the ratio of debt to debt + equity at 29% - down very slightly from last year.
A revaluation of land, buildings, wharves, harbour improvements and hardstanding resulted in values increasing by $13.2 million. The result also includes $1.3 million impairment to buildings, which are to be relocated in the short-term to create more space and increase productivity on both sides of the harbour. Associate and subsidiary earnings were up 7% to $13.3 million, with a particularly pleasing result from Northport.
Mark Cairns will talk in detail about the different areas of trade, but total trade increased 20% to 18.5 million tonnes in the year to June 2012. The Port handled 35% more containers than the previous year, and export log volumes increased to a record 4.9 million tonnes. Overall, imports and exports each increased by 20%. We have declared a final dividend of 27 cents per share, on top of the interim dividend of 12 cents per share. This total dividend of 39 cents per share is an increase of 26% on last year s dividend.
For the year to June 30, total gross shareholder return that s share price increases plus dividends was 30%. During the year, we received a number of requests from mainly retail investors to consider a share split. The Board has considered the matter and has resolved not to undertake a share split, as there is a lack of solid evidence that a share split directly increases shareholder value or liquidity. As shareholders, we should be proud that Port of Tauranga is currently tracking as the highest priced New Zealand company on the NZX.
I said that this was a very challenging year. Here is the Management team. That s the lot. There are five of them. Compare that to most comparable size companies. I could show you a photo of all the staff as we re lean there too, but this photo makes the point. These five people attend all Board meetings and participate. Those of you involved in or knowledgeable about corporate governance will know that s very unusual.
Even more unusually, they truly work as a team and get involved in each other s territory and do a lot of brainstorming as a team. So, Sara is called Corporate Services Manager but might get involved in marketing, Tony (the silver headed one) is Property Manager but might get involved in evaluating a new business opportunity. I could go on, but you get the point.
They keep it simple. There is no Public Relations Department to massage information and there is no excess of expenditure of your money Directors share in the appreciation expressed by customers, partners and our community. And on the subject of directors, thank you too. This is a Board that s a real pleasure to chair. They have a great range of skills and again, they work as a team. Might I suggest that team work and co-operation in management and a Board may well be more important than so called teams that are studded with stars who can t or won t co-operate?
Looking to the future, there is still volatility in the container cargo environment worldwide, and we see evidence of that in New Zealand with shipping line mergers and rationalisations still a feature. Despite that, we are confident that our location, efficiency and service levels will allow us to attract new services, as well as increased business from existing lines.
In bulk cargoes, forestry exports continue to be buoyant despite the strength of the New Zealand dollar. All forecasts show continued demand from China and India, notwithstanding the usual seasonal fluctuations in price. In addition to the project to widen and deepen the shipping channels in the Tauranga Harbour, our other capital expenditure will ready us for the increased cargo volumes coming our way.
The Company spent $39 million on capital works in the 2012 financial year and we have spending of $180 million planned over the next three years. We are now, four years after commencing the consent application and $2.5 million in RMA, legal and Court costs (that doesn t count the additional cost of staff time), getting closer to being able to dredge our channel wider and deeper. It s been a debilitating, long and costly process. I don t suggest we shouldn t have a process that ensures all parties affected can have an input and have power. As a result of the process, we have made changes to meet objections, but it s a process that s much too long and too costly for both objectors and us and seriously needs an overhaul. And we re still not there since writing this two weeks ago we have been advised of an appeal to the Court of Appeal. I will leave Mark to comment further If I were to comment my language would certainly offend.
It is impossible to predict if we will ever again experience the unexpected congestion brought on by the Auckland strikes, but we have moved to provide capacity headroom with our capex programme, and we are prioritizing those investments that maximize productivity.
It is hard to see the world economy improving much at all over the next year and I guess a EU economic meltdown and subsequent damage to the economies of Asia is a possibility. On balance, we believe that earnings growth for the Company will continue, based on the soundness of our diversification strategy, and the continued success in attracting new business to the Port. Mark will provide further colour around our guidance in his address.
Finally, a comment on our major shareholder, Bay of Plenty Regional Council which holds its 55% shareholding through Quayside Securities Limited. In all the years I have been a director, they have never sought to involve themselves in the running of the business, other than through the valued commercial input of John Cronin, Chair of the Council and Michael Smith, Chair of Quayside - both of whom sit on our Board. You might say so what? but it s a topical subject and political interference in the appointment of directors and the running of the business plagues too many New Zealand ports. This region has it right. So Regional Council, take a bow.
Thank you for your attention.
John Parker CHAIRMAN