South Port has delivered a record profit on record cargo
volumes, largely from dairying, fertiliser and petroleum,
marking the 20th anniversary of its stock market listing.
However, clouds are forming on the horizon with the dairying
downturn, the possible effects of the Fonterra-Maersk
transport network and the future of the Tiwai Point aluminium
smelter, all major contributors to South Port operations.
South Port pushed a record 2.72 million tonnes of bulk
cargoes across its wharves for the year to June, boosting
port and warehousing revenues by 7% to $31.3 million, with
after-tax profit up 2.8% to a record $6.5 million; beating
its own earnings expectations.
The 16c-per-share dividend takes the full-year dividend to
22c, equalling last year's, with a total payout of $5.64
South Port chief executive Mark O'Connor said the record 2.72
million tonnes was slightly ahead of the record set in 2012.
''The 8% improvement in volume was largely driven by stock
food and logs while other cargo categories maintained their
more recent buoyancy.
''Imported stock food volume was double the full-year 2013
level, registering a new record for this cargo category,'' Mr
In taking into account several cyclical cargo factors, Mr
O'Connor said for 2015 South Port was forecasting a similar
overall cargo level but a slightly lower level of after-tax
Craigs Investment Partners broker Peter McIntyre said the
year's trading was a ''very positive result'' and good
management left the port company with a strong balance sheet.
Dairying and forestry had been strong contributors, offering
good revenue, but he questioned how much growth might be
ahead from those sectors.
''Its a question of whether the [commodities] cycle has hit a
peak and if this is as good as it gets. It's going to be a
challenge for South Port to repeat the last two or three
years,'' he said.
Mr O'Connor said cargo tonnage from New Zealand Aluminium
Smelters (NZAS), owned by mining giant Rio Tinto, was
''steady'' and the Tiwai plant continued to focus on
achieving further business efficiency gains.
''[However] key decisions will be required by this
significant customer within the next 18 months as it works
through the implications of potentially securing a reduced
contracted parcel of electricity from Meridian Energy,'' he
Tiwai Point was unable to be sold by Rio Tinto and took a
contentious $30 million Government handout to continue
operating in 2013. The lifespan of the ageing, loss-making
Tiwai Point is secured only until early 2017.
Mr O'Connor said despite a recent trend of falling global
dairy prices, participants in the sector would have
experienced ''strong financial returns over the past
''The dairy industry continued to be an important contributor
to South Port's overall activity, providing a growing volume
of import and export cargoes,'' he said.
Port chairman Rex Chapman said in his business outlook, that
a major topic preoccupying the freight industry was the
''flow-on effect for cargo providers'' of Kotahi; a new
freight alliance with Fonterra and Silver Fern Farms, which
delivers more containers to Port of Tauranga, and shipping
''We believe that the significant scale of the freight now
being directed by Kotahi/Port of Tauranga/Maersk will send
ripples out into the New Zealand market''.
Time would tell whether this ultimately resulted in less
competition and capacity and created higher costs for some
exporters and importers.
South Port noted the downturn in the international softwood
chip commodity market, resulting in lower annual volumes.
Log exports surged to their highest level at 390,000 tonnes,
and while demand had softened, logs, woodchips and sawn
timber represented almost 25% of South Port's total cargo
Fertiliser and petroleum products remained ''sizeable bulk
cargoes'' and contributed positively to overall performance,
both delivering volumes which tracked closely to the year's
buoyant levels, he said.
A slow first quarter saw overall container handling decline
from 34,800 last year to 32,700.
Mr O'Connor highlighted South Port's investment in a second
mobile harbour crane and forklift, for $6.3 million, which is
aimed at maintaining competitive shipping options for local
shippers. More staff would be hired in the months ahead.
Mr McIntyre said while the investment was a positive, given
the strong sources of export products, there remained
questions over longer-term growth prospects.