Port takes a bow

Triple cheer as Tauranga firm tops $100m profit, enters A rating zone and extends dividend

Christmas has come early for Port of Tauranga shareholders with their company cracking the $100 million net profit mark, moving up into “A” credit rating territory with Standard & Poors, and extending a special dividend payment programme another four years.

New Zealand’s largest port reported group net profit after tax of $100.6m, up 6.7 per cent for the 2019 financial year on cargo volume growth and delivering on earlier guidance that full-year earnings would be at the upper end of a $96m-$101m range.

The NZX-listed Mount Maunganuibased company, 54 per cent owned by the Bay of Plenty Regional Council, also reported its long-term credit rating had been elevated from “BBB+” to “A-” by Standard & Poors (S&P). The short-term rating was affirmed at “A-2”.

The final dividend for the year is 7.3c per share, taking the full-year dividend to 13.3c per share, 4.7 per cent up on the previous year.

A special dividend, the last of four, of 5c a share will also be paid and the capital repayment programme which spawned them would be extended another four years at 2.5c per share, said the board.

Chief executive Mark Cairns said he was delighted at the long-term credit rating upgrade.

“It’s certainly good for 10-20 basis points in terms of our finance costs. That will mean seven figures in terms of our finance and expenses.”

He was also heartened by S&P’s commentary that the port company had consolidated its strategic position and competitiveness relative to the Ports of Auckland.

“It’s good to have that external perspective on where they saw Auckland’s ability to compete.”

PoT has invested $350m in new infrastructure to accommodate the world’s biggest cargo ships, a strategy S&P said was paying off, making the port the key entry point for large ships and the major export port for New Zealand.

“We believe the threat posed by Ports of Auckland is weak over the next two to three years at least, bolstering PoT’s competitive position,” said the upgrade report from S&P Global Ratings.

“This is due to the constraints surrounding Ports of Auckland’s

ability to expand its operations, given physical limitations and community opposition to further development of the port within Auckland.”

Other constraints were increased congestion at Ports of Auckland itself, roadworks around Auckland city and weak road and rail links to the port, said S&P.

The risk of Port of Auckland operations being moved outside the city appeared “limited”.

PoT revenue increased 10.4 per cent to $313.3m.

The port handled close to 27 million tonnes of cargo, an increase of 10.2 per cent in volume, with container cargo growing 4.3 per cent to more than 1.1 million TEUs, or 20-foot equivalents. Exports rose 11.2 per cent to 17.1 million tonnes while imports rose 8.4 per cent to 9.8 million tonnes.

Transhipments, where containers are transferred from one service to another, increased 11.2 per cent, now making up 32.1 per cent of containers handled at Tauranga.

The number of containers transferred by rail to and from the port company’s inland freight hub, MetroPort Auckland, increased 4.3 per cent in the year. The inland hub was now the country’s fourth largest container terminal by volume.

The company also expanded its Christchurch inland freight hub to handle dairy exports from Westland Milk.

Parent company ebitda increased 12.4 per cent to $168.6m.

Earnings from associate companies decreased 27.5 per cent after what Cairns called a very disappointing result from Coda Group, the port’s 50:50 joint venture with Kotahi.

Cairns was confident Coda would return to profitability in the next financial year. Coda’s new chief executive Gerard Morrison, former Australasian managing director of the Maersk shipping line, had started an extensive change programme.

“To be brutally frank, it’s been extremely poorly managed for two to three years,” Cairns said.

The company’s 100 per centowned subsidiary Quality Marshalling had an outstanding year with profits increasing 15.1 per cent, while South Island joint venture PrimePort Timaru increased its contribution by 36.6 per cent.

Looking ahead to the 2020 financial year, Cairns expected log volumes to fluctuate following the drop in international prices.

The company would provide an update on the first quarter’s trade and earnings guidance for the full year at the annual meeting on October 25, he said.

[The S&P upgrade] will mean seven figures in terms of our finance and expenses. Mark Cairns (left), Port of Tauranga chief executive