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South Port signals 40% rise in maintenance spend

Friday 30th August 2019

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South Port New Zealand, operator of the port at Bluff, is forecasting a 40 percent increase in maintenance spending during the coming two years as it works to extend the life of its assets.

The country’s southern-most port has been quietly ramping up its repair and maintenance spending to ensure the integrity of its man-made island harbour.

It expects that spending to increase to about $3.5 million in the current year and $4 million in the following year. That is up from $2.8 million in the June year just ended and $2.1 million the year before.

“Increased infrastructure expenditure will be a feature for coming years with the focus in the next 12 months being placed on the access bridge, wharves and electrical infrastructure.”

That extra spending means net profit for the current year may be about 5 percent lower than the record $9.79 million the firm reported yesterday. Barring unforeseen circumstances and despite the lower earnings profile, the port will endeavour to maintain its current level of dividend, chair Rex Chapman said.

South Port shares last traded at $7.25 and have gained about 10 percent this year.

Like many ports, South Port has been investing in recent years to improve its handling of the growing export log trade and increasing dairy export volumes from new regional processors. But that is occurring at the same time the firm faces a mounting bill to ensure the 59–year-old, 40-hectare island harbour – reclaimed from the seafloor during the 1950s – can last another 60 years.

In March, chief executive Nigel Gear reminded customers that 90 percent of the port’s 1.9 kilometres of wharf space was built with steel sheet piles. Significant resources were already being spent annually to maintain the assets but further intervention above the normal maintenance spend would be required, he said.

Yesterday’s result was marginally ahead of the guidance the firm gave in July, when it said profit would match the record $9.66 million reported the year before. Strong cargo flows late in the period had offset increasing maintenance spending and lifted earnings above the previous $8.6-8.9 million guidance.

Total cargo increased 2 percent to 3.52 million tonnes, with container traffic up 25 percent at the equivalent of 48,700 20-foot containers.

Log cargoes reached 700,000 tonnes for a second year running, the port said, while wood chip exports eased to 320,000 tonnes from 343,000 the year before.

A new blast freezer helped lift volumes for that service 50 percent. It was installed as part of a $1.7 million upgrade and consolidation of the port’s cold storage activities in one facility on the island harbour, reducing costs per tonne handled.

The Tiwai Point aluminium smelter is the port’s largest single customer and accounts for about a third of its volume. While the smelter restarted a potline late last year that had been shut since 2012, South Port noted it hadn’t been able to take full advantage of the asset, given high power and alumina costs, and weak aluminium prices.

Earlier this month, energy research house Enerlytica estimated that since February the smelter had utilised only about half the extra production capability the restart of potline four provided.

South Port said it continues to work with the smelter on opportunities to pack a range of aluminium products into containers for export.

The company will pay an 18.5 cent final dividend on Nov. 12 to investors registered on Nov. 1. That is unchanged from last year and maintains last year’s 26-cent full-year payout. The regional council, Environment Southland, owns about 66 percent of the company. 

(BusinessDesk)

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