Port of Tauranga, New Zealand’s largest port, today reported Group Net Profit After Tax of $90.0 million on 24.8 million tonnes of trade.
Despite the ongoing disruption caused by the Covid-19 global pandemic, container volumes increased 1.5% to 1,251,741 TEUs[1] for the year ended 30 June 2020.
The Port of Tauranga Limited Board has declared a final dividend of 6.4 cents per share.
Results summary:
- Annual revenue of $302.0 million (2019: $313.3 million)
- Group Net Profit After Tax of $90.0 million (2019: $100.6 million)
- Subsidiary and Associate Companies’ earnings of $14.1 million (up 18.5% from $11.9 million in 2019).
- Final dividend of 6.4 cents per share (total ordinary dividend of 12.4 cents per share)
- Average annual compounding Total Shareholder Return of 23.34% over the last decade
- Total trade of 24.8 million tonnes (2019: 26.9 million tonnes)
- Container volumes: 1,251,741 TEUs (up 1.5% from 1,233,177 TEUs)
- Transhipped[2] containers remained nearly a third of total containers handled
- Imports decreased 7.8% to 9.0 million tonnes
- Exports decreased 8.0% to 15.8 million tonnes
- Reduced our overall carbon emissions[3] by 15.3%
- Continued improvement in safety culture and safety performance with our Combined Port of Tauranga and Contractor Total Recordable Injury Frequency Rate (TRIFR) dropping 26% to 4.5[4] (2019: 6.1)
- Remaining Australasia’s most productive container terminal with Average Net Crane Rate for the year increasing 8.8% to 35.8 moves per hour
- Our high quality land and building portfolio increased in value by $43.5 million.
Port of Tauranga’s Chair, David Pilkington, says the results reflect the turbulent year and are a strong performance in view of an almost 22% reduction in log exports.
“Some of our customers saw record export volumes, while others were unable to operate during the lockdown,” says Mr Pilkington.
“Port of Tauranga is New Zealand’s major international hub port so it is not surprising that we have seen the effects of the global upheaval.”
The Covid-19 pandemic has had a wide-ranging impact on the business, including shipping cancellations, reduced cargo volumes, operational challenges and increased costs, and the resulting economic recession in New Zealand and the world.
“We are better positioned than most, due to our track record of strong capital discipline, our conservative balance sheet and capacity headroom,” says Mr Pilkington.
“Our diversity of cargo gives us some resilience in terms of revenue, while the strength of our people and processes has really shone through in keeping New Zealand’s most efficient port operating.”
Port of Tauranga has extended its strategic alliance with New Zealand’s biggest container exporter, Kotahi, through to 2031. The Port also has long-term freight volume agreements in place with other key exporters such as Oji Fibre Solutions and Zespri International.
“These long-term partnerships give Port of Tauranga certainty to plan for the future, and to expand capacity in a way that matches customer demand rather than investing speculatively,” says Mr Pilkington.
“It’s vital to have strong relationships with our customers to ensure we have the freight volume to attract the big ship services.”
Mr Pilkington believes shippers will increasingly seek out the lowest carbon supply chain, which they can access through the bigger ship services calling only at Tauranga. Larger vessels of 7,500 to 9,500 TEUs have a carbon footprint more than 31% lower than the average size vessels calling in New Zealand previously.
“We are the only New Zealand port able to offer the efficient, short transit time services that these larger vessels bring,” says Mr Pilkington.
Port of Tauranga has formed a joint venture with Tainui Group Holdings to develop the 30 hectare Ruakura Inland Port at Hamilton. The partnership will help Waikato-based importers and exporters to easily access the direct rail link to Tauranga.
Port of Tauranga Chief Executive, Mark Cairns, says the port team put in an outstanding performance to keep essential imports and exports flowing throughout the Covid-19 lockdown.
“Our team and partners managed a record cargo exchange on the Sally Maersk container vessel during lockdown. They transferred a total of 9,367 TEUs in two and a half days, obliterating the previous record exchange of just under 7,000 TEUs,” says Mr Cairns.
“We also commissioned our ninth container crane, which arrived in pieces in February and was in service just 11 weeks later.”
Port of Tauranga is now planning for the next stage of cargo growth and, in response to customer demand, intends to add another container vessel berth to the south of the existing Sulphur Point wharves.
“We take a long-term, strategic view of our infrastructure investment to ensure we can provide importers and exporters with the facilities they will need in the future,” says Mr Cairns.
Financial performance
Group EBITDA (earnings before interest, tax, depreciation and amortisation) decreased 8.1% to $166.5 million.
Solid performances, led by PrimePort Timaru, saw earnings from Subsidiary and Associate Companies’ earnings increase 18.5% to $14.1 million.
Dividend policy
The Board has reviewed its dividend policy in the light of the pandemic and its fallout. The special dividend scheme will be suspended, with funds reserved to accelerate capital expenditure such as the planned container berth extension. The Board has maintained the existing ordinary dividend policy of paying between 70% and 100% of Underlying Net Profit After Tax.
The Board has declared a final dividend of 6.4 cents per share, bringing the full year ordinary dividend to 12.4 cents per share (90% of Underlying Net Profit After Tax).
The average annual compounding Total Shareholder Return has been 23.34% over the last decade.
Cargo trends
Exports decreased 8.0% in volume to nearly 15.8 million tonnes and imports decreased 7.8% to just over 9.0 million tonnes for the year ended 30 June 2020.
In the first half of the financial year, log volumes were hit by lower international prices and demand. By March positive signs were emerging in China, New Zealand’s major log export market, as business there returned to normal and demand increased.
However, forestry was deemed a non-essential industry during New Zealand’s Level 4 lockdown from late March. Log inventory stored at the Mount Maunganui wharves could be shipped to make way for essential cargoes, but cart-in did not resume through the port gates until early May.
Overall, log volumes decreased 21.5% compared with the previous year, to 5.5 million tonnes. Sawn timber exports decreased 10.4% in volume. Pulp and paper exports increased slightly over the full year.
Dairy product exports increased 1.7% to nearly 2.4 million tonnes. Meat products increased 15.4% in volume.
Kiwifruit export volumes remained steady, with a continuing trend towards containerisation.
Imported fertilisers remained steady in volume compared with the previous year, while protein and feed imports increased 20.1% in volume. Grain imports increased 26.1% in volume.
Oil product imports decreased 12.3% in volume, reflecting the economic conditions.
Transhipment volumes remained steady, despite the overall decline in cargo volumes. Transhipped containers represent nearly a third of all containers handled.
Ship visits decreased by 9.7%, from 1,678 to 1,515 for the year.
People and safety
Mr Cairns says the Port of Tauranga team demonstrated strength, resilience and fortitude in dealing with the Covid-19 pandemic and the wide-reaching impacts on the Port’s operations.
“Our systems, processes and people were tested in a myriad of ways, and the effects are ongoing,” he says.
“Our people’s health and wellbeing is more important than ever. Since the beginning of the outbreak, we have supported our frontline workers to keep them safe from Covid-19. They continue to operate at Level 4 standards, with temperature checks, wearing of masks and gloves, social distancing, attention to hand hygiene and frequent surface sanitisation,” says Mr Cairns.
Meanwhile, safety performance during the year improved again, with the combined Port of Tauranga and contractors’ injury rate improving 26%. There is strong evidence of a proactive safety culture through lead indicator reporting.
Sustainability
Measuring, understanding and reducing our carbon emissions is a big focus and we are proud to report that the Company has cut its overall emissions by 15.3% compared with the previous financial year.
Much of the decrease has come through a waste minimisation programme that reduced the volume of waste going to landfill from the Mount Maunganui wharves by 48.5%. Significantly more waste is being recycled instead, and we believe we can still generate further improvements in this area.
All of our business units reduced emissions compared with the previous year. We achieved a 4.2% decrease in Scope 1 emissions, and the intensity (Scope 1, 2 and 3 emissions per cargo tonne) decreased 7.9%.
Our emissions are certified through the Certified Emissions Measurement and Reduction Scheme (CEMARS) and audited by Toitū Envirocare. It is important to us that our emissions reduction strategy is not based on hollow promises or greenwashing. Our approach is to break down every part of our business to ensure we are making lasting and tangible change.
The Port’s focus on air and water quality continues, with significant progress in dust suppression. The international move to low sulphur fuel for shipping (or the use of exhaust scrubbers) has had an immediate effect on air quality.
The amount of methyl bromide used at the port for container and log export fumigation dropped 36.6% as a result of log de-barking and other alternatives. Fumigation contractors Genera now utilise recapture technology to recapture close to 90% of log fumigations and 100% of container fumigations.
Outlook
Mr Cairns says the short and medium-term impacts of the Covid-19 pandemic are still uncertain.
“We expect cargo volumes to slowly recover over the next three years, with dairy product and kiwifruit exports likely to be the strongest performers in terms of growth.
“We are still confident of growth over the long-term and, given the lead time required for any investment, we continue to pursue capacity expansion,” he says.
“Our track record means we have a strong credit rating and we believe we are well placed to weather the Covid-19 storm.”
Port of Tauranga Limited will provide an update on the first quarter’s trade, and earnings guidance for the full year, at the Annual Shareholders’ Meeting on 30 October 2020.
About Port of Tauranga
Port of Tauranga, headquartered in the Bay of Plenty, is New Zealand’s largest port and international freight gateway. It operates wharves in 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 cargo services company; Coda (50% ownership), a freight logistics group; Northport (50% ownership), the deep water commercial port in Whangarei; PrimePort Timaru (50% ownership), the commercial port in Timaru; Timaru Container Terminal (50.1% ownership), which leases and operates the terminal at Timaru; and PortConnect (50% ownership), an online cargo management system. For more information, please visit www.port-tauranga.co.nz
[1] TEUs = twenty foot equivalent units, a standard measure of shipping containers
[2] Transhipment is when containers are transferred from one ship to another at Port of Tauranga
[3] Scope 1, 2 and 3 emissions, audited under the Certified Measurement and Reduction Scheme (CEMARS)
[4] Per million hours worked
