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UPDATE: Port of Tauranga lifts annual profit 13%, plans further expansion

Friday 24th August 2018

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Port of Tauranga, New Zealand's biggest port company, posted a 13 percent rise in annual profit, driven by record cargo volumes, and plans to further expand capacity. 

The port company - which handles 40 percent  of all containers in New Zealand - said net profit rose to a record $94.3 million in the year to June 30 from $83.4 million a year earlier as container volumes lifted 8.9 percent to nearly 1.2 million twenty-foot equivalent units or TEUs and overall cargo was up 10.2 percent to almost 24.5 million tonnes. 

"Our expansion programme to accommodate larger vessels, coupled with New Zealand’s buoyant economy, has resulted in the 10.2 percent increase in cargo volumes. Revenue increased 10.9 percent to $283.7 million," chief executive Mark Cairns said in the annual report. 

The stock gained 2.9 percent to $4.90, having slipped 3.6 percent so far this year ahead of today's result.

Bryon Burke, head of equities at Craigs Investment Partners. said the result was "pretty much bang on forecasts" and therefore is unlikely to spur a huge move in the shares. Given the stock has been under some pressure lately, however, it could see a bit of a rally to the upside but "overall, we'd expect them to trade in line," he said, adding that like most companies that have been reporting "it's ticking along nicely." 

David Price, a broker at Forsyth Barr, said, however, the result was ahead of Forsyth Barr's expectations and was likely to be well-received by the market. 

The company said today it has begun planning for the next stage of capacity expansion as part of its aim to be able to handle up to 3 million TEUs. It has about 40 hectares of undeveloped, port-zoned land available for future expansion. There are options to extend the quay length on both sides of the harbour, using port-owned land south of the existing berths, it said. 

Volumes rose across all major cargo categories, with export logs up 14.3 percent in volume and dairy products up 4 percent. On the import side, cement imports increased 18.9 percent while steel imports were up 25 percent. Oil product imports rose 9.3 percent. Imports of cars and other vehicles doubled from the prior year. 

Port of Tauranga is reaping the benefits of a $350 million investment over six years to prepare for larger vessels, which began calling in late 2016. The investment included dredging to widen and deepen shipping lanes, extending the container ship wharves by a third, and purchasing new ship-to-shore cranes and other equipment. 

“This growth is a direct result of Port of Tauranga’s six-year investment in building capacity to accommodate larger vessels,” said chair David Pilkington.

Profit included a $16.4 million contribution from Port of Tauranga's subsidiaries and associate companies, up 11.9 percent on the year.

The investments reflect the company's reach across the country including 50 percent of Northport, 50 percent of Prime Port Timaru, 50.1 percent of Timaru Container Terminal, 50 percent of logistics group Coda and long-term agreements with strategic partners such as Kotahi Logistics, owned by Fonterra Cooperative Group and Silver Fern Farms. About 17 percent of its income comes from those subsidiaries and associate companies. 

The port company will pay a final ordinary dividend of 7 cents per share, taking total ordinary dividends to 12.7 cents per share, a 13.4 percent increase on the previous year. The record date is Sept. 21 and the payment date is Oct. 5. It will also pay a further special dividend of 5 cents a share as part of an ongoing plan to return $140 million to shareholders. It is now in the third year of a four-year capital restructure plan. 

Port of Tauranga, which is 54 percent owned by the Bay of Plenty Regional Council, paid nearly $62.3 million in dividends to the Bay of Plenty Regional Council's Quayside Holdings.

Looking ahead, the company expects cargo growth to continue in the next year across most categories, particularly containerised cargo, it said.

"We will invest appropriately in the infrastructure required to manage these volumes and remain confident that our current footprint allows for significant expansion without the need for expensive reclamation," said Cairns.

Port of Tauranga hosted 83 cruise ship visits in the 2017/18 summer season. It expects this to lifted to an estimated 113 calls this summer, including seven visits by the giant Ovation of the Seas carrying up to 4,900 passengers each time.


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