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Ports of Auckland annual profit drops 30% as it invests in the future

Friday 27th September 2019

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Ports of Auckland's annual net profit fell 30 percent and it axed its final dividend but its chief executive says it was "a good result in the circumstances."

Those circumstances included disruption and reduced capacity caused by the port's installation of automated equipment, the loss of a shipping service and a 14 percent downturn in car volumes through the port.

The Auckland Council-owned port's net profit for the year ended June fell to $53.9 million from $76.8 million the previous year.

"What you have to appreciate is that we're at the peak of our investment cycle," chief executive Tony Gibson told BusinessDesk.

"You can't look at this as being a bad year. It's about providing the foundation for future growth."

Ports of Auckland is in the midst of increasing container capacity from 1.1 million twenty-foot equivalent units to 1.6 million and converting its cranes to robot straddles while continuing to operate existing facilities.

The port's capital spending rose to $104.8 million from $96.5 million the previous year while gearing rose to 38 percent at June 30 from 34 percent a year earlier.

To avoid going live with automation during the peak Christmas import season, the port plans to switch it on from February 2020 and to complete the switch over by April.

Ports of Auckland is also in the middle of constructing a new car-handling building, which is expected to be completed in August 2020, and is preparing a consent application to deepen its shipping channel, aiming to lodge it later this calendar year.

It also plans to build a demonstration hydrogen production and refuelling facility due to open in 2020.

Gibson rejected suggestions that the port shouldn't be spending so much when its future is the subject of hotly-debated politics, including shifting the car-handling operations to Whangarei.

"We're happy with our investment strategy – it has been known for a while," he said, adding that an infrastructure business such as Ports of Auckland has to be investing to handle future growth.

"The car trade will never, ever move to Whangarei – if Auckland was banned, it would go to Tauranga," he said.

But such politicking "obviously undermines our business and we have lost business as a result."

Even if it were decided to move the port, "it would be a massive job and we think it would take about 30 years."

As previously announced, after paying the council an $18.6 million first-half dividend, the port won't be paying a final dividend this year and dividends will be reduced from 80 percent of net profit to 20 percent for the next two years to help fund the port's investment programme.

The council's payout has been falling since the $54.3 million paid in 2016 to $51.1 million in 2018 but Gibson dismisses concern about this: "Those dividends will return in a few year's time."

The Auckland port used to be the nation's largest container port but Port of Tauranga has long-since overtaken it.

In the latest year, Ports of Auckland's container volumes fell 3.5 percent to 939,680 TEUs while Port of Tauranga's rose 4.3 percent to more than 1.2 million TEUs over the same period – the Tauranga port is also nearly twice as profitable, posting a $100.6 million net result for the latest year.

Although the Auckland port lost cars, other bulk and breakbulk volumes rose 7.4 percent to 3.7 million tonnes in the latest year.

The investment programme has taken a small toll on the port's efficiency with container crane rates averaging 32.5 moves per hour, down from 35.63 the previous year – the Tauranga port's rates also fell in the latest year to 33.6mph from 35.5.

Gibson says the Auckland port expects automation will take it to 35-40mph, but that will be only after "fine-tuning the system, so we're not over-promising."

But other factors have also impacted port efficiency including staff shortages and vessels changing schedules because of wealth in Shanghai which has affected port congestion.


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