Matters Relating to the Electronic Presentation of the Audited Financial Statements
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On behalf of the Auditor-General, Tauranga, New Zealand
PORT OF TAURANGA ANNUAL REPORT 2013
Port of Tauranga is in good shape. Financially it is strong with good profits, steadily increasing dividends and a strong balance sheet. Most important is its readiness for the future. After four years and some $2.5 million of costs, we have the green light to dredge the harbour and channel to accommodate much bigger ships. That dredging should commence in 2014, with ancillary investments completed in the financial year under review or well under way. These projects include the addition of 170 metres of additional berth at Sulphur Point, two new container cranes (one installed and the other due for commissioning in March 2014), six additional straddle carriers and some reconfiguration of container storage and handling facilities.
The dredging programme, while important for the future of our container trade, is also important for our bulk business, with larger vessels and their improved efficiencies being possible for cargoes such as fertiliser and logs plus larger cruise vessels. Our very important bulk business has not been ignored. Burgeoning log volumes are being accommodated with an additional 2.3 hectares of storage having been paved during the year.
Reported Group Net Profit After Tax rose 52% to $112.1 million from $73.5 million a year earlier, lifted by strong earnings from subsidiary and associate companies and a $38.2 million profit on the sale of our 50% share in freight logistics company C3 Limited.
Underlying Group Net Profit After Tax was $77.2 million for the year ended 30 June 2013, an increase of 5% from last year's underlying profit of $73.5 million.
Our container business grew and the standout contributions to the result were logs and dairy products.
Our subsidiary and associate companies had an outstanding year, with excellent results reported by Northport Limited and Tapper Transport Limited and our new subsidiary, Quality Marshalling Limited also contributing strongly.
We have invested $68 million in property, plant and equipment during the 2012/2013 year, largely relating to increasing the container capacity of the Tauranga Container Terminal. Our balance sheet remains strong. We have negotiated a $50 million increase to our bank facility and extended $130 million of this debt facility from 2015 out to 2018 maturity.
Total trade increased 3%, with strong growth in log and dairy product volumes driving export growth of 6%.
Imports decreased by 3% overall, with volumes slipping for some bulk imports due to climatic and supply influences. However container numbers increased 7%.
SALES AND ACQUISITIONS
This financial year saw the departure of C3 Limited from the Port of Tauranga Group. Maintaining a strong presence in the forest industry supply chain, is a core and strategic component of our business, therefore, we acquired Quality Marshalling Limited in February 2013.
Quality Marshalling is New Zealand's second largest log marshalling and scaling operation, with operations at Northport, Port of Tauranga, Murupara, Rotorua, Kaingaroa and Napier. The $34 million acquisition was earnings accretive from day one.
Directors have declared a final dividend of 26 cents per share, on top of the interim dividend of 20 cents per share, bringing the total dividend to 46 cents per share. This is an increase of 18% on last year's dividend distribution.
As previously announced, I will be retiring from the Board and my position as Chairman at the Annual Meeting. David Pilkington, who has served on the Board since 2005, will take over as Chairman.
David is a very experienced Director and Chairman and is currently Chairman Designate of Rangatira and a Director of Restaurant Brands, Ballance Agri-Nutrients and ZESPRI.
Kim Ellis will take up my vacant seat on the Board. Kim was Chief Executive of Waste Management for 13 years and is a Director of EnviroWaste Services, Freightways, Ballance Agri-Nutrients, Moa Group and Fonterra Shareholders Fund. We are very pleased to have him on the Board.
As a consequence of Kim Ellis joining the Board, the number of Directors has increased from seven to eight. The Board deemed the addition of a new Director for five months until my departure to be valuable. The constitution allows up to nine Directors.
At the Annual Meeting Michael Smith will retire and being eligible, will offer himself for re-election, and Kim Ellis will offer himself for election in accordance with the Company's Constitution.
Congratulations to our Chief Executive, Mark Cairns, who was named Executive of the Year in the 2012 Deloitte/Management Magazine Top 200 Awards. Mark leads a great team and it was gratifying for Port of Tauranga to also receive the "Most Improved Performance" Award at the annual ceremony in November 2012.
Larger and larger vessels are calling at the port, including container ships, bulk carriers and cruise ships. The growth in average ship length simply reinforces our well publicised view that we must cater for bigger vessels. Not only do they wish to come because of their greater economics, but New Zealand wants them for the cost advantage they contribute to exporters, importers and the whole New Zealand economy.
Our view of the future, particularly in terms of larger ships and one or two hub ports, has been publicly expounded for some years. We are committed and our intended investment to purchase 50% of the Port of Timaru (it awaits public consultation by the Timaru District Council) provides further evidence of that commitment, as does our further land purchases in Auckland and Tauranga.
We believe that earnings growth for the Company will continue, based on the soundness of our diversification strategy and the success in attracting new business to the port.
In my 17 years as a Director of the Company, it has grown from a market capitalisation of $108 million to nearly $2 billion. In the 20 years since listing on the New Zealand Stock Exchange, the growth has been spectacular, with shareholders receiving a 24% compounding annual return on their investment. I would love to claim the credit but it wouldn't be deserved. In fact, good companies, and this one is very good, are so because of a history of good decisions and good people. Fraser McKenzie as Chair and Jon Mayson as Chief Executive with very good Directors and staff established this company well. Mark Cairns and his executive team have improved mightily on that strong base under the guidance of a Board that has been a pleasure to work with.
I'm absolutely confident that Port of Tauranga in terms of people and direction is well positioned for the future.