Prudent port weighs pruning wharf plan
Extension rethink no cause for alarm, assures analyst
The Port of Tauranga is considering shrinking a planned new container vessel berth by 175m but the reason is financial prudence, not nervousness about growth prospects.
The port company (PoT), which this week cracked the $100 million annual net profit mark and was moved up into “A” credit rating territory by Standard & Poor’s, plans to make a new berth by extending up to 385m to the south of the existing Sulphur Point wharves, but has told market analysts it is more likely to be 210m.
Craigs Investment Partners senior research analyst Mohandeep Singh said the signal shouldn’t be taken negatively.
“They’ve decided they don’t need all that . . . the asset they’ve already got plus 210m they’re going to get will do for a while. It’s more a disciplined use of capital.”
The port company would require some consents for the full 385m new berth around the flight path of the nearby airport, Singh said.
“Eventually they could do it but the prudent way is to do the first lot [of extension] and utilise that, and if they
need to build later they can, instead of having latent capacity.”
PoT chief executive Mark Cairns said the size of the extension was still being finalised.
Singh said PoT planned capital expenditure of $60m in the next two years, ramping up to $110m in 2022. Much of that capex was for the berth extension.
He said PoT’s group net profit increase of 6.7 per cent to $100.6m for FY2019 was in line with market expectations.
One of the key result areas the market had been eyeing was whether the company would continue its special dividend programme of the past four years, Singh said.
PoT obliged by announcing it would run for another four years from next year but at 2.5c a share, instead of 5c under the previous programme which ended in FY19.
“The key highlight is that obviously the big chunk of capital returned over the last four years hasn’t changed their debt profile. The fact [the special dividend] was lowered was expected — the question was would it go to zero — so it’s a good outcome.
“It shows confidence in the outlook for the business and also shows how they will manage capex over the next few years.”
The company said the last of four special dividends of 5c per share would be paid on October 4. It declared a final dividend of 7.3c per share, bringing the full year’s dividend to 13.3c a share, 4.7 per cent up on FY18.
The fresh capital repayment programme will start from October 2020.
Singh said a 27.5 per cent decrease in earnings from PoT’s associate companies was disappointing but “small in the context of the overall business”.
The major culprit was Coda Group, PoT’s 50:50 joint venture with Kotahi, which showed a total loss of $7.1m, including $3.7m of one-off write offs.
Singh said “poorly priced contracts and the debtors’ book stretching out” were contributors to Coda’s result, but on the positive side PoT management wasn’t hiding its dissatisfaction, changing the chief executive and chief financial officer.
Coda’s new chief executive is former Maersk shipping line managing director for Australasia, Gerard Morrison.
Meanwhile Singh said he didn’t see the newly-listed Napier port being competition for PoT.
“Tauranga will remain the key port for large ships because it can accommodate them. Napier is a great regional port, a great asset, leveraged largely for the Hawke’s Bay economy. It won’t have a material impact in terms of taking business away from Tauranga”.