Port of Tauranga

Results for the year to 30 June 2007

Posted on 30th August 2007

The Port of Tauranga has today announced a net profit for the year to 30 June 2007 of $37.973 million - a 22.4% increase over last year, on revenue increasing 14.6% to $140.296 million.

Both years included some net gains from non-recurring transactions, amounting to $0.865 million this year and $2.181 million in 2006. Excluding these, the normalised operating profit has improved 28.6% to $37.108 million in 2007.

Chairman John Parker said, "This is a pleasing result under the challenging trading conditions over the year. Operating costs were again a key management focus for the Company and Group Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDa) improved by $9.883 million to $79.791 million - a 14% increase. This is particularly pleasing given our half-year uncertainty with Maersk's decision to concentrate its North Island hub on Auckland".

The lift in earnings has allowed Directors to increase the final dividend to 14 cents per ordinary share, payable on 5 October 2007, bringing the total payment to shareholders for the year to 22 cents per ordinary share, representing a 10% increase from the 2006 financial year. Our balance sheet is very strong with a debt to debt plus equity ratio of 22.7% and an interest cover of five times. Directors are therefore pleased to also declare a fully imputed special dividend of 10 cents per ordinary share payable on 5 October 2007.

Chief Executive Mark Cairns reported trade for the year of 12.647 million tonnes, an increase of 369,222 tonnes, or 3%, on the previous year. Container volumes increased 10% to 466,235 TEUs (20' equivalents). "MetroPort, the inland container terminal in South Auckland that we operate in partnership with Toll Rail, has been a very successful strategic initiative for the Company, now handling 138,000 TEUs a year - an increase of 16.4% over the previous year.

Opened in 1999, MetroPort has allowed the Port to grow its container volumes 500%, transforming the Port of Tauranga into New Zealand's largest port. MetroPort in its own right is New Zealand's sixth largest container terminal and has significant capacity to handle future cargo growth."

Cairns said the Company had maintained a "best in class" net crane productivity on container vessels averaging 33 moves per hour, which compares favourably with the current Australian five port average of 26.8 moves per hour.

"We have experienced a promising recovery in the forestry sector with log exports increasing 5%, sawn timber exports increasing 16%, and paper products increasing 3%. Fertiliser base imports were also up 28%, along with palm kernel and grain imports - up 11% on last year. It is pleasing to see continued strong growth in oil product imports represented by a 6% increase and this sector is expected to grow further as businesses move off Wynyard Wharf in Auckland. On that note, we are pleased to see Marstel Terminals commence construction on their $17 million bulk liquids terminal on Port land and also indicating Tauranga as their location for future growth.

Dairy exports declined 65,000 tonnes as a result of the Maersk decision to hub on Auckland. Coal imports were also down 20% to 935,000 tonnes in line with our expectations associated with the commissioning of the new E3P gas-fired turbine at Genesis' Huntly site. Kiwifruit exports were down 6%, largely due to high on-shore fruit losses attributable to a variety of quality issues last season. However, the current season export harvest (which straddles two financial years) is expected to increase by 14 million trays or 18% ahead of last year's crop.

Cairns also announced the acquisition of the Norske Skog facility on Totara Street. The facility comprises a 2 hectare warehouse on 7.7 hectares of land and is one of the last remaining large blocks of land served by rail close to the port. The block adjoins the Port's 17.5 hectare Waimarie Street block, creating a 25.2 hectare block of Port land with direct access to the Mount Maunganui wharves. This substantial block of land gives the Port greater capacity for growth through the ability to provide opportunities for importers and exporters of bulk products. The Port's total land holdings following this acquisition will be 176 hectares.

A project team has also been investigating the widening and dredging of harbour channels to cater for 5,000 to 7,000 TEU vessels, which are expected to be the next class of container ship trading in New Zealand waters.

Commenting on the proposed merger with Ports of Auckland, Parker expressed disappointment with the outcome. "Management and Directors invested considerable time and incurred third party costs of $1.221 million evaluating the merger initially proposed by Ports of Auckland.

"It was clear to both the Port of Tauranga and the Ports of Auckland that a merger would provide substantial financial gains, largely in efficiencies, and these gains would have been shared with customers and shareholders. There would also be considerable benefits to New Zealand. Naturally we are disappointed that for undisclosed reasons Auckland Regional Holdings have chosen not to proceed.

"The issue of port rationalisation will not go away. In a country with a population the size of Melbourne, to have 10 ports vying to be export ports is an expensive extravagance. It is expensive in terms of port infrastructure and efficiencies, as well as costing taxpayers excessive sums in roading and port focussed rail links. Fewer ports would see fewer trucks on the road, more rail and coastal shipping and less pollution. It is going to happen, but as we have experienced, there will be impediments along the way.

Regional Councils control all ports: Environment Bay of Plenty owns 55% of Port of Tauranga with the next lowest percentage being 66%. In eight ports, Regional Councils own 100%. The financial returns to most Regional Councils from their ports is considerably less than their weighted cost of capital. Only four ports are listed on the New Zealand Exchange.

Port of Tauranga can be very thankful that in Environment Bay of Plenty, we have a very enlightened cornerstone shareholder which is supportive of the Port without political interference and has allowed the Board the autonomy to best run the Port on a commercial long term basis.

This commercial autonomy has seen a 1595% total shareholder return (dividends plus share price appreciation) on shareholders' original investment in the Port, or an average compounding return of approximately 20.3% per annum from 1992 to 2007.

At this early stage, it is difficult to accurately predict trade flows for the coming year, but based on early trading, we are expecting to continue to deliver year on year earnings growth."

 

For further information:

John Parker
Chairman
Port of Tauranga Limited
Telephone 0274 421 854

Mark Cairns
Chief Executive
Port of Tauranga Limited
Telephone 07 572 8829
or 021 978 887
www.port-tauranga.co.nz