Eastland Group has announced net profit of $4.2 million for the six months to September 30, 2011, down $400,000 on the same period in 2010 due to higher depreciation charges.
The Gisborne-based infrastructure business group and its 100 per cent shareholder the Eastland Community Trust (ECT) are also considering the introduction of new equity to fund high capital investment requirements and opportunities, especially in geothermal energy in the eastern Bay of Plenty.
Revenue for the community-owned operator of the district's electricity network, port and airport was up 4.2 per cent to $37.6m, from $36.1m.
Chief executive Matt Todd said profit reduction was due mainly to increased depreciation charges on the revaluation of port operating assets, which reduced net profit after tax by $1.0m.
Eastland Port's valuation increased from $27.5m to $75.1m in Eastland Group's financial statements for the year to March 31, 2011 - due to new methodology used because of a significant boost in log volumes and cashflows.
The assets of the group have grown slightly over the past six months, with total assets now standing at $349.4m. Bank debt has remained stable and is currently at $100.4m.
Mr Todd said the key message for Eastland Group to continue to grow was new equity funding, not debt funding.
While he did not want to speculate how the new equity would be delivered, Mr Todd said there were a number of ways and the company was working with its shareholder, Eastland Community Trust (ECT), to understand how best it could fund new opportunities.
The geothermal power project in Kawerau, Te Ahi o Maui, might require an investment of around $60m and the airport also requires new investment, with a runway overlay required within the next few years.
The electricity network also needs about $6m of new capital per year between now and 2020.
A half-year gross dividend of $3.1m was paid to the ECT, with another dividend of the same amount forecast to be paid prior to the end of the financial year, equating to a full-year gross dividend of $6.2m, a 3.0 per cent increase on the previous year.
Mr Todd said the company's strong financial performance was underpinned by a growing forestry sector fuelled by continued strong demand out of Asian economies, in particular China.
"The infrastructure at the port is under significant pressure from the increased volumes, which has led to the company accelerating its port development plan. Capital investment in off-site storage at Matawhero and asphalting of the lower log yard will all assist in increasing the capacity, efficiency and ability of the port to cope with the growing log export volumes, which this year are on target to be greater than 1.6 million tonnes.''
Earnings from operations (EBITDA ) for the group were 4.9 per cent higher at $17.1m, against $16.3m the previous year.
Mr Todd said the aviation businesses were generating an operating profit, although this sector remained the most severely affected by issues facing the economy.
The group is also about to embark on a refinancing of its $125m of bank debt facilities.
"It is hoped that the strong financial performance of Eastland Group will allow a reduction in the cost of debt funding to be obtained.''
Mr Todd said the outlook through to March 31, 2012 remained positive.
"At an operating level the company is performing well, however there is some risk around external events which, in particular a slowdown in the Chinese economy, could impact unfavourably upon the export log business. These have the potential to adversely affect the company's audited net profit for the year ended March 31, 2012.''
- Gisborne Herald
