Underlying earnings rise as strong growth in container volumes offsets drop in log exports; harbour dredging clearing the way for larger ship visits to Tauranga by year end.
Highlights:
- Total trade for the six months to 31 December 2015 up 1.1%[1] to 10.1 million tonnes
- Container volumes rise 10.4% to 470,928 TEUs (twenty foot equivalent units)
- Group Net Profit After Tax of $38.6 million
- Imports increased by 1.6% while exports increased 0.8%
- Dairy product export volumes increase 29%
- Kiwifruit exports up by 22.9%
- Interim dividend up 4.6% to 23 cents per share
New Zealand’s largest freight gateway, Port of Tauranga, today reported continued growth in container and dairy export volumes for the first half of the 2016 financial year, offsetting a fall in log exports over the period.
Revenue for the six months to December 2015 was down 9.8% following the exclusion of Tapper Transport revenue, equity accounting this business as an Associate Company with its merger into Coda Group.
Reported and Underlying Group Net Profit After Tax was $38.6 million. The result was slightly ahead of the prior year’s interim Underlying Profit After Tax[2] of $38.5 million, but lower than the prior half year reported Net Profit of $42.6 million, which included a non-recurring gain on the sale of Associate Companies of $4.1 million.
The result was supported by a strong 10.4% rise in container volumes to 470,928 TEUs (twenty foot equivalent units), reinforcing Port of Tauranga’s position as New Zealand’s largest container terminal and the country’s premier freight gateway. These gains were diluted by a 16.2% decrease in log export volumes to 2.4 million tonnes from 2.8 million tonnes in the prior year.
Chairman David Pilkington said: “Port of Tauranga has delivered a strong six month result, especially in the face of the decline in log export volumes. Our strategy of extending the port’s freight catchment across New Zealand continues to deliver results for shareholders and the country’s exporters and importers.”
The Port of Tauranga Board has declared an interim dividend of 23 cents per share, up 4.6% on the prior year’s interim dividend. The record date for the interim dividend is 11 March 2016 and the payment date is 24 March 2016.
Chief Executive Mark Cairns said: “Port of Tauranga is in an excellent position to continue to grow its cargo volumes as more exporters and importers recognise the value our hub port strategy delivers with reliable, fast and cost-efficient routes to markets.
“With the Tauranga harbour channel dredging proceeding well, we are on track to complete our contractual commitments with freight and logistics management company Kotahi by July, in order to see larger vessels starting to call at the container terminal by the end of 2016. This is the final building block in our five year $350 million investment programme to prepare for larger ships, which have the potential to deliver annual savings of as much as $300 million to New Zealand shippers[3].
“In the medium term, with the arrival of larger ships, we will be handling significantly larger volumes of cargo per shipment. We are looking at every aspect of our operations to ensure that we are ready for the step change later this year.”
Infrastructure Investment
Dredging specialist Rohde Nielsen is more than a third through the work to dredge Tauranga harbour’s shipping channels to a depth of 14.5m inside the harbour entrance and 15.8m outside the harbour entrance. It is on track to complete the work under budget and ahead of schedule in July.
The Port has expanded landside capacity at the Tauranga Container Terminal and also ordered two new container cranes and thirteen new straddle carriers, which are scheduled for delivery by September and will significantly enhance the Port’s “best in class” terminal productivity.
The Port has also focused on improving efficiency in the rail connection between the Tauranga Container Terminal and the inland freight hub at MetroPort Auckland. These efforts have been rewarded with a 24% increase in the volume of containers carried on the rail corridor compared with the same period a year ago.
Chief Executive Mark Cairns continued: “We are increasing efficiencies in the supply chain by ensuring the north and southbound trains are fully utilised. Coda (our freight and logistics partnership with Kotahi) has been making good progress in securing significant domestic freight to provide southbound backhaul loads to balance the northbound dairy trains from the lower North Island. Port of Tauranga is now handling more than 90% of the North Island dairy export volumes. Coda has commenced work on expanding its intermodal freight hub in Otahuhu to handle these increased volumes. This intermodal operation is expected to remove approximately 5,000 truck movements per year.”
Meanwhile, the Port has agreed a ten year freight deal with kiwifruit exporters Zespri International and Tauranga Kiwifruit Logistics, which will see a long term approach taken to investing in cool storage and port operations to cope with the expected growth in the kiwifruit industry.
Cargo Trends
Despite the 16.2% decrease in log volumes, exports still increased 0.8% overall to nearly 6.5 million tonnes. Processed forestry products saw some growth, including the introduction of a new export category, square lumber.
Kiwifruit exports increased 22.9% to 413,102 tonnes. Dairy product exports increased 29% compared with the previous year, as the long-term freight agreement with Kotahi entered its second year.
Imported volumes continued their steady increase, rising by 1.6% overall to nearly 3.7 million tonnes. Imported grain and stock feed supplements decreased by 14.2%, and fertilisers by 9.7%, while oil product imports increased by 14.2%.
Associate Companies
Associate profits were up 8.5% to $8.0 million. The largest increases came from strong performances by Quality Marshalling and PrimePort Timaru.
Outlook
Port of Tauranga’s diverse operations, locations and income streams continue to provide some protection from fluctuating cargo volumes in commodities such as log exports. The Company reconfirms its full year earnings guidance to be in line with last year’s underlying after tax profit of $79.0 million.
About Port of Tauranga:
Port of Tauranga is New Zealand’s largest port by volume of cargo and New Zealand’s international freight gateway. It operates wharves at Tauranga, Mount Maunganui and Timaru, as well as MetroPort Auckland, a rail-linked inland port in South Auckland and MetroPort Christchurch, an intermodal freight hub in Rolleston. The Port of Tauranga Group includes: Quality Marshalling (100% ownership), a forestry and container handling company; Coda (50% ownership), a freight logistics group; Northport(50% ownership), which operates a deep water commercial port in Whangarei; PrimePort Timaru (50% ownership), which operates the commercial port in Timaru; Timaru Container Terminal (50.1% ownership), which leases and operates the container terminal at Timaru and PortConnect (50% ownership), which was set up to operate an online cargo management system, connecting ports to their logistics companies. For more information about Port of Tauranga please visit www.port-tauranga.co.nz
Appendix: Non-GAAP Profit Reporting Measures
Port of Tauranga’s standard measure of profit prepared under New Zealand GAAP is net profit. The company has used the non-GAAP profit measure of underlying profit when discussing financial performance in this document.
The Directors and Management believe this measure provides useful information as they are used internally to evaluate the performance of the group. Non-GAAP profit measures are not prepared in accordance with NZ IFRS (New Zealand International Financial Reporting Standards) and are not uniformly defined, therefore the non-GAAP profit measures reported in this document may not be comparable with those that other companies report and should not be viewed in isolation or considered as a substitute for measures reported by Port of Tauranga in accordance with NZ IFRS.
Definition:
Underlying profit: Reported net profit excluding one-off items.
GAAP to Non-GAAP Reconciliation of
| Six months to 31 December | 2015$M | 2014$M |
| Reported profit after tax | 38.564 | 42.571 |
| Fair value gain recognised on loss of control of Subsidiary | – | (4.731) |
| Impairment of goodwill in MetroBox Limited | – | 0.668 |
| Underlying profit after tax | 38.564 | 38.508 |
Extracted from audited financial statements
[1] Unless otherwise stated all comparisons are between the six months to 31 December 2015 and the prior comparative period.
[2] Underlying profit after tax is a non-GAAP measure of financial performance. For a comprehensive definition and reconciliation to the GAAP measure of net profit refer to page 3 of this release.
[3] The Question of Bigger Ships, New Zealand Shippers Council, August 2010.
