Harbour master
Tauranga Port CEO Mark Cairns
Afew weeks back, Port of Tauranga chief executive Mark Cairns surrendered his lightfilled Mount Maunganui seaside office to his successor and moved into a poky, darker room next door.
The gesture — particularly generous given that the retiring CEO doesn’t leave the building until the end of this month — is good for in-house banter, but seemed perfectly natural to those who know Cairns.
Port chairman David Pilkington says the financial performance of New Zealand’s biggest and busiest port under Cairns’ watch “speaks for itself ”, but his greatest attribute is his ability to develop staff.
Leonard Sampson, the slightly premature occupant of the CEO’s seat, is an example of this strength, says the chairman. Sampson was selected from Cairns’ senior executive team after a search “that went far and wide”.
Giving his successor time to get his feet under the desk, literally, was just par for the Cairns course. “It was part of a gradual process of bringing Leonard forward and taking half a step back himself,” says Pilkington.
“There would be very few CEOs who would sit comfortably with that, and it speaks to Mark’s ability
. . . You see so many chief executives who struggle to let go.”
Cairns, 58, isn’t entirely immune from that struggle. He’s looking forward to directorships on listed companies, but leaving his “port family” after 16 years will be a wrench.
“It was my dream job when I came here, I love the sector,” says Cairns. “But there’s something really special about this company and its culture. The staff always look to say yes, rather than no.
“The culture here is one plus one equals three — all day long. I’m going to miss my family.”
Cairns doesn’t take credit for the culture, which he says he inherited.
Others beg to differ. Don Braid, managing director of NZX-listed global logistics company Mainfreight, says Cairns’ leadership skills have been “exceptional”.
“He has helped to create a world-class port and transformed what really was just a regional port into New Zealand’s premier port.”
Mark Lister, head of private wealth research at Craigs Investment Partners, says Port of Tauranga is one of the best-quality businesses on the sharemarket.
“Much of that success is down to Mark’s leadership as well as his ability to build a strong team around him . . . he’s been very good at succession planning. As a Tauranga local myself, the only negative I hear said about Mark Cairns is that he has a tendency to exaggerate his fishing stories, sometimes quite significantly.”
Maersk, the world’s biggest container shipping line, thanked Cairns for “exceptional work to develop Port of Tauranga as the main gateway connecting New Zealand with the world”.
During Cairns’ leadership, the port’s market capitalisation has lifted by $4.6 billion. Cargo volumes have doubled and container volumes trebled.
He headed a bold $350 million capital investment to enable the port to handle big container ships, a project completed in 2016. The following year, Tauranga hosted the biggest container vessel ever to visit New Zealand, a Maersk ship that can carry 11,000-plus containers.
Today the port, NZ’s largest by both cargo and container volumes, remains the only one in the country that can host ships of this size.
Owned 54 per cent by the Bay of Plenty Regional Council, with the balance held by NZX investors, the port has returned $860m in dividends to the council since listing in 1992.
The council also has a perpetual preference share issue that’s created a $200m infrastructure fund for major projects, using dividends solely from the port.
The port has several subsidiaries including Northport, a joint venture in Northland with Marsden Maritime Holdings, and PrimePort Timaru.
About 95 per cent of the port’s 270 staff own shares through an employee scheme offering interestfree loans to buy shares.
“It’s really good to have people at all levels of the organisation pulling me over and saying ‘what are you doing with the bloody share price today?’. They’ve moved from being a wage earner to a shareholder in the company — that’s what I like about being a listed issuer.”
Maritime Union national secretary Craig Harrison says he doesn’t have much to do with Cairns because the port does so much contracting out, “which as a union, we have some fundamental issues with”.
“But you have to respect where he has taken the port to and the service it delivers to the greater North Island and in general, the whole of New Zealand.”
Cairns’ first degree was in civil engineering — which, as he puts it, uses the left side of his brain. He likes building things but it’s people development that’s had his heart.
He has made a point of developing the right side of his brain, getting management qualifications that include a Masters of Management degree.
So it’s little surprise that safety has been his most acute focus. What keeps him awake at night isn’t a repeat of the 2011 Rena container vessel grounding — though that was a bad time — it’s safety.
“One of the first things I did, a small thing, was to make the first paragraph of my board reports about safety. It still is today,” says Cairns.
“Some directors said ‘is safety now more important than profitability?’ and I said yes.
“You can’t have a profitable organisation without a safe organisation. We’ve had a massive shift and the main difference is personal accountability for safety. Rather than have a whole raft of consultants and supervisors, we’ve put the training in place and require staff to operate it.
“We used to have people saying this is an industry where we always have accidents. I said BS. Every accident is preventable and if you think working at the port is a place you’ll have regular injuries, this isn’t the place for you.”
Every employee has Cairns’ authority to stop all machines and work if they see an unsafe situation.
The Rena incident was Cairns’ “darkest hour”. “Even though it happened miles away from the port, even out of our radar contact, I think a lot of the community blamed the port.”
Another challenging time was the consent process to dredge the harbour for the big ships project.
“We got right to the Court of Appeal but I like to think we learned lessons, particularly around engagement with iwi.” The port engages with three iwi and 28 hapu¯.
It has issues with one hapu¯, Cairns says, over a $68m proposal for a container terminal extension. The project, rejected for government fast-track consideration, is now off to the Environment Court.
It would create 368 jobs in construction and 81 permanent jobs and, says Cairns, is urgently needed to ease upper North Island supply chain congestion and maximise the value of the port’s recent 50:50 partnership with Waikato-Tainui, developing an inland port at Ruakura, Hamilton.
Cairns is clearly frustrated by the setback. “Our economy is primary sector exports and we are further from markets than any of our competitors. We just have to have a highly efficient supply chain and with 99.5 per cent of our goods going through ports, they are a big part of the economy.
“If it takes four to five years for consents for critical infrastructure, New Zealand is in trouble.”
Cairns counts as achievements the signing of longterm strategic operating alliances, first with Oji Fibre, a major pulp, paper and fibre packaging provider, and with Kotahi, New Zealand’s largest containerised freight exporter. Both deals are on their second extensions.
The Kotahi deal consolidated virtually all North Island primary export cargo in Tauranga, serving NZ Inc well in the current supply chain disruption. More to the point, it gave the port confidence to make the $350m investment to be able to handle big ships, says Cairns.
Which brings him to his biggest criticism of New Zealand’s ports: poor capital discipline.
“I’m a cheerleader for the mixed ownership model. If you look at those [part-listed] companies that have capital discipline, their performance is quite different to those that are wholly-owned by, and operating as local government trading enterprises . . . but ratepayers don’t seem to care.”
He’s encouraged that the Auditor-General is eyeing ports’ financial performance, and by Transport Minister Michael Wood’s recent comment that a conversation is needed about ports making a reasonable return.
“I’m really proud of the $860m in dividends we’ve paid to our council. But our prices are typically 30-40 per cent lower than Australian ports.”
Some people may say ports are geographical monopolies that can charge what they like, but “that’s rubbish”, he says. “If you look at the average return on capital employed in the sector, 1 to 2 per cent is just a joke.”
Northport has a great future, Cairns believes, and more resources will be invested there.
Which brings us to the debate about the future of Auckland’s port. Cairns says the Auckland port will do what Sydney’s did. “The container terminal moved out of the city centre to Port Botany near the airport. Bulk liquids moved to Glebe Island, cars moved to Port Kembla and the bulk cargo moved to Newcastle.
“You’re not going to have a binary situation with Ports of Auckland closing and we need a new port in Manukau or the Firth of Thames. You’ll have cargo moving to Tauranga and Northport, and infrastructure will be built accordingly.
“The Firth of Thames option had a negative [net present value] of $44b. Who in their right mind is going to stump up to invest only to lose $44b — because that is what the analysis shows.”
Notwithstanding the 24 port studies already done — a 25th has been suggested by the new Transport Minister — Cairns wants to make something clear. Any suggestion that Tauranga and Northport don’t have capacity to handle Auckland volumes is about as fruitless as all the port studies.
Tauranga commissioned a top Netherlands analytics firm to confirm that it could handle, without reclamation, three million TEUs (containers) at Sulphur Point. It now handles 1.2 million.
“As of today we could handle all of Ports of Auckland’s volume and all of Tauranga’s volume. Once we do the [berth extension] we will have another 1 million containers headroom.”
He says being a CEO “can be a really lonely job at times”. Being respectful of executives and supporting them in his new governance roles will be a focus.
As CEO he’s learned to listen and watch more, and speak less — and that will also apply in the boardroom.
His pet hates? “Bureaucracy. And people who don’t have empathy. They can’t see the effect they have on other people in the organisation. That drives me nuts.
“Governance is very different to management. You have to achieve your results by influence so the empathetic side of leadership becomes even more important.”