Big ships muscle up Port of Tauranga result
Company raises its earnings guidance for the full year to June to between $92m and $96m
When the world’s latest cargo ships turned up much earlier and much bigger than expected, the Port of Tauranga was ready when others weren’t.
That’s how chief executive Mark Cairns sums up the port company’s strong half-year financial result which reflects growth across all cargo types and a nearly 50 per cent hike, compared to the same period last year, in trans-shipment volumes. These are containers that are transferred from one service to another, feeding the cavernous spaces of the biggest cargo ships to visit New Zealand.
Majority owned by the Bay of Plenty Regional Council, the NZXlisted port company posted a 12.6 per cent rise in net profit to $47.1 million for the six months to December 31 and revenue of $141.4m, up 12.8 per cent.
The company raised its earnings guidance for the full year to June, to between $92m and $96m, from previous guidance of $88m-$92m. It declared an interim dividend of 5.7c per share, up 14 per cent on last year’s half-year return to shareholders.
Container volumes lifted 16 per cent to nudge 600,000 TEUs.
Imports increased 21 per cent to 4.7m tonnes. Exports were up 9.4 per cent to 7.7m tonnes.
The port, New Zealand’s largest, invested $350m deepening its entrance and preparing for the big ships in the face of scorn from some industry participants. Until now it has been better known for its export volumes than imports. Cairns said the big rise in imports was a result of being the only port able to handle the big ships which are 3.5 rugby fields long, and due to a “rebalancing” of import competition with Ports of Auckland and the Tauranga port’s much strengthened rail arrangements.
Much of the increased import volume would previously have gone into Auckland, he said.
Shippers and trans-shippers had been quick to take advantage of the big ships’ economy of scale and speed. The journey between Tauranga and north Asia takes the big ships just 11 days.
Log exports continued to be buoyant on strong demand from China and record prices for top quality logs, Cairns said.
Log volumes lifted 12.5 per cent to 3.3m tonnes in the six months. Meat volumes rose 17 per cent and steel exports by 50 per cent. Dairy exports increased 3 per cent.
Cars and other imported vehicles were a growing business for the port company, with numbers significantly up on the same period last year, Cairns said.
Ship visits increased by 15 per cent to 890.
The port company, which has more than 40ha of its 190ha territory still undeveloped, was advanced in its 15 year forward plan for growth, Cairns said.
It could handle up to three million TEUs annually without further reclamation.
A new ship-to-shore gantry crane, costing $13m-$15m, had been ordered and the company had applied for resource consent to extend the length of three berths for containers and log cargoes.
The second pleasant surprise apart from lifted earnings guidance was that its 2018 half-year achieved good revenue growth out of strong volumes growth compared to the same period last year, said Craigs Investment Partners senior research analyst Mohandeep Singh. In the first and second quarters of last year, cargo volumes were up 8.3 per cent and 12.4 per cent respectively, but revenue lifted 2 per cent and 6.5 per cent respectively.
“The market had been concerned about good volume growth throughout the port not translating into revenue growth. Capital expenditure had some impact on that but this is the first sign in a couple of years, and also with Port of Tauranga being the port of favour, that volume has translated into decent revenue growth.”
Singh said another pleasing signal from the result was that revenue growth had not been at the expense of margin growth — the port company had not had to add proportionally more costs to achieve the revenue growth. Ebitda has stayed relatively flat at 54.5 per cent compared to 54.4 per cent in the same period last year.