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Ports provide safe harbour

By Peter V O'Brien

Friday 7th February 2003

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Port companies had an eventful period between July and January.

Port of Tauranga had a 2:1 share split, after an earlier capital repayment, and increased its debt, resulting in a reduction of the equity/total assets percentage from 75.5 to 52.1, based on figures for the year ended June 30.

The company's Northport joint venture with Northland Port Corporation at Whangarei became operational last June. Northport then entered a joint venture with Ports of Auckland to provide piloting, tug and lines services for commercial shipping on Whangarei harbour. That joint venture merged Northland Port's marine services operation and North Tugz, Ports of Auckland's marine services activities at Marsden Pt.

A media statement in December said the joint venture would rationalise marine operations, maximise the use of the available marine assets and provide workloads necessary to create a more efficient operation.

All companies reported increased their profit in the latest accounting periods. Lyttelton Port's profit went up 19.4% over the previous year, Ports of Auckland's 5%, Tauranga's 15.6%, Northland's 45% (interim to September 30) and South Port's 22%.

Balance sheet ratios remained strong and increased the position in June (which was assessed in The National Business Review, July 5, based on the then latest accounts), with the exception of Port of Tauranga. That company decided to rationalise its balance sheet but, as chairman Fraser McKenzie said last year, the structure would remain sound and be managed within "conservative parameters."

Equity/total assets percentages in the previous reports were: Lyttelton 59.3; Northland 92.2; Tauranga 75.5; Auckland 84.2; and South Port 76.8.

The improvement in Ports of Auckland's percentage came from a combination of the company's revaluation of land, buildings, wharves and pavements ­ bringing $162.9 million to the balance sheet ­ and a $132.5 million capital return to shareholders through the 1:5 scrip cancellation. There was also a relatively small increase in retained surplus.

Port companies have two advantages over many industrial groups. They are effectively regional monopolies, although changes to shipping patterns can bring, or take, some business from their sphere of influence and there is solid competition for container trade.

In most cases, their basic infrastructure is in place, subject to developments such as those under way in Northland. There can be a relatively low demand for capital expenditure, apart from plant and equipment replacement, and the trend to "inland ports," such as those under the control of Ports of Auckland and Port of Tauranga.

Rationality and changes to shipping lines' practices were referred to directly and indirectly at Lyttelton Port's annual meeting in October. Managing director David Viles said it was important to distinguish between shipping lines that serviced the port and cargo that came into and left it.

Mr Viles said the key for Lyttelton was to ensure it captured Canterbury cargo. Change "Canterbury" to any other particular region and the comment applied to every port. The ports' reliance on diversified products moving through their facilities, whether by product type or as imports or exports, gives them some protection against a high-flying currency.

The import-export mix was mentioned in Ports of Auckland's report for the year ended June 30. The company said Auckland remained New Zealand's most balanced port, with a 55:45 ratio of total import volumes to total exports.

A rising dollar should, in theory, put pressure on exports while making imported goods (consumer or for industrial use) more attractive. The situation can be eased for exporters of manufactured goods whose products have a high imported content.

New Zealand will continue to export and import, irrespective of fluctuations in the currency, some of which are covered through hedging.

Most exports and imports move through the ports, apart from those suitable for air transport. An airline needs numerous flights to equal the capacity of one container ship or bulk cargo vessel.

Historic share price movements show port companies are less volatile than many industrials through economic ups and downs. They are financially strong, have substantial product volume bases and should continue as safe harbours for investors.

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