South Port to maintain dividend in face of weaker earnings

By Paul McBeth

Oct. 25 (BusinessDesk) - South Port New Zealand reiterated plans to maintain its dividend this year, even as earnings are squeezed by increased spending to repair and replace ageing assets.

Chairman Rex Chapman reaffirmed guidance for earnings in the year ending June 30 to be about 10 percent lower than the record $9.66 million reported last year. That's due to the added cost of updating assets near the end of their life. The board also said it plans to keep paying the current dividend of 26 cents, representing a gross yield of 3.5 percent.

"For the moment trade forecasts for the port remain steady with forestry exporters still predicting strong demand in China, India and Japan," Chapman said. "The softening in the forecast farm gate milk price for the coming season could have an impact on farm inputs such as fertiliser and stock food but this will not be known until later in the year."

The board will update guidance at the first-half report in February. The port operator is holding its annual meeting in Bluff today, where shareholders will vote on whether to elect Rick Christie and Thomas Foggo to the board. Directors are also seeking a 3 percent, or $8,100, increase in the pool for their fees to $278,100.

Environment Southland owns 66 percent of the country's southern-most port. The regional council's South Port sub-committee meeting in August was told ageing infrastructure needed ongoing maintenance but that the port didn't have any major programmes on the horizon.

The shares last traded at $7.40 and have gained 23 percent so far this year, outpacing a 2.4 percent increase in the much-larger Port of Tauranga.

Chapman today said particularly strong Chinese demand for logs continued to support operations, with bulk cargo set to remain the cornerstone of its business. Expanded production at the Tiwai Point aluminium smelter will also provide more work.

The port's intermodal freight hub in Invercargill is tracking ahead of expectations and South Port said it's an important element to grow and diversify revenue. The company is also investigating how it can secure distribution relationships with Mataura Valley Milk and Plaman Global, which plans to mine black diatomite near Middlemarch.

Chapman said a recently completed external review will help the company lay the foundation for its five-year goals. A key element will likely be how the port can be a central logistics solution for the region.

"In order to achieve this, we need an appropriate and resilient infrastructural base; we need to keep our people safe and engaged in a shared vision for the company; we need to be guardians of the environment in which we operate; and we need to be engaged with the community and to earn the community’s support for the business," he said.

Council will hear a presentation on South Port next month.

(BusinessDesk)

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