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20th October 2018

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Napier Port share sale a potential catalyst for change

Fund managers say the Napier Port share sale could be a catalyst for a wider shake-up.
Fund managers say the Napier Port share sale could be a catalyst for a wider shake-up.

Hawke’s Bay Regional Council’s proposal to sell and list up to 45 per cent of the port on NZX was an “an interesting and surprising” development, said James Lindsay, senior portfolio manager at Nikko Asset Management.

Listing the firm would help ensure it worked to achieve decent returns by looking after its New Zealand customers and suppliers. Subject to the pricing “we’d be fully supportive of them having something listed on market,” he said.

The council is embarking on a six-week consultation process with its ratepayers and favours selling up to $181 million of shares in the business. That would leave it with a controlling stake in a growing business, sufficient cash to fund environmental projects it plans, and a more diversified investment base.

Other options the council is seeking feedback on include the sale of a minority stake to a partner – which it thinks would raise less money – the sale of a long-term lease to an operator – which could raise the most money – or retaining the current structure and raising rates by 45 per cent to fund the port’s expansion.

Craig Stent, head of equities at Harbour Asset Management, believes there would be good interest if the listing goes ahead.

Port of Tauranga has delivered strong returns over many years and Napier would give investors an exposure to Hawke’s Bay’s agriculture and horticulture industries.

“They are fairly safe, defensive investments with a reasonable amount of growth – although that growth is somewhat linked to local GDP growth.”

New Zealand’s ports, previously run by elected harbour boards, were corporatised in 1988. The history of those that listed is mixed.

In 2010 the New Zealand Institute of Economic Research found the major ports had delivered substantial returns since corporatisation. But it also said they had considerable scope to improve their performance and that council ownership had been an obstacle to rationalisation within the sector.

But Ports of Auckland was delisted in 2005. The regional council, having extracted any surplus capital from the firm during the preceding 12 years, bought out the minority holders citing diminishing returns and the need to rationalise the city’s waterfront.

Talks on a possible merger with Tauranga ended in early 2007.

The port, which has a stake in Northport’s parent company, also built inland freight hubs at Wiri, Mt Maunganui, Longburn and now Horotiu. Longburn is operated in partnership with Napier Port.

In August, the government named a five-member panel to review the freight and logistics system in the upper North Island. Its brief includes assessing the feasibility of relocating the Auckland port business to Northland long-term.

Lyttelton Port Company was delisted in 2014, eight years after Christchurch City Holdings had proposed such a move as part of a plan to appoint Hong Kong-based Hutchison Port Holdings – the world’s biggest operator – to run the business.

That transaction withered after Port Otago bought a 10 percent blocking stake. Otago and Lyttelton investigated a merger in 2008 but that has not proceeded.

Stent said it would be encouraging if other councils – such as Christchurch and Auckland – relooked at a sell-down for their ports. Both cities have needs for capital elsewhere and could still retain a majority interest.

Mark Lister, head of private wealth research at Craigs Investment Partners, said the whole sector would benefit if more ports were subject to the investor scrutiny that comes with listing.

“If you get that across the country you get a much, much more efficient port system everywhere rather than some of them being poorly run because councils aren’t insisting on those commercial drivers.”

While he welcomed Napier Port’s potential listing, Nikko’s Lindsay believed there was still too much duplication in the sector. Running them each as separate businesses, each spending time and money investigating and new technologies like automation, was not efficient for the country.

“I think a consolidation of some of them to optimise the freight network for New Zealand would be a really good thing.”

An option that would encourage that was the operating lease model that Lyttelton and Napier had investigated and which has proven successful in Australia and other parts of the world.

Lindsay said that would leave councils full ownership of the port land and assets, and the operating company could get on and drive efficiencies. Having a single operating company for multiple ports would encourage greater optimisation across the country and further reduce costs.

Hawke’s Bay regional councillors initially favoured a 50-year lease of the Napier Port operation, which it estimates could raise $466m – leaving the council $366m to reinvest. Listing is expected to raise $181m and leave the council with $83m for reinvestment.

But the council was conscious that most of the interest in an operating lease would be from overseas players. Nor was it confident about committing the region to a 50-year partnership and what it would take to maintain that relationship.

The council said it was “concerned around values alignment and the importance of ensuring a clear and direct connection between the port, its staff, the local community and management.”

The option remains among four the council is consulting on.

“There’s huge value being lost in New Zealand Inc. for that model not being instigated,” Lindsay said.

Washout jeopardises Wairoa-Napier railway reopening

Plans to get logging trains moving between Wairoa and Napier by the end of the year could have been derailed by a washout during the storm in northern Hawke’s Bay.

A fortnight after the washout, ruining 45 metres of the track just north of Raupunga, KiwiRail is non-committal to a date for the reopening of the line, and is still assessing the problem.

The washout has left the railway track suspended. Photo / Duncan BrownThe washout has left the railway track suspended. Photo / Duncan Brown

“Our teams are continuing to assess the damage and any impact it may have on the planned reopening date for the line,” KiwiRail said in a short statement today.

The line has been closed for more than six years since KiwiRail decided it was uneconomical after a major washout which left about 100 metres of track suspended in the air near Mahia on the Wairoa-Gisborne sector in March 2012.

KiwiRail had put the cost of repairing that sector at over $3.5 million, and mothballed the line, which had been used only for freight trains since Cyclone Bola put an end to regular passenger services in 1988.

Haami Hilton, kaumatua, blessing a work train in anticipation of the railway line reopening. Third from left is Shane Jones, regional economic development minister. Haami Hilton, kaumatua, blessing a work train in anticipation of the railway line reopening. Third from left is Shane Jones, regional economic development minister.

Help was rejected by the government of National Party leaders John Key and Bill English, but the new Labour coalition in February announced a $5 million contribution from the Provincial Growth Fund to reopen the line for logging trains to relieve pressure on the highways amid the growth of the Wall of Timber from forestry harvesting in Northern Hawke’s Bay and Gisborne-East Coast.

The washout is north of Raupunga, on the way north towards Wairoa. Photo / Duncan BrownPhoto / Duncan Brown

During a ceremonial launch of the project in June, including the dispatch of a train from Napier with track ballast as part of the railway restoration, regional economic development minister Shane Jones sand KiwiRail chief executive Peter Reidy weren’t putting a precise date on the reopening, but Mr Jones said it was hoped there’d be 2-3 trains from Wairoa to the Napier Port each week within 12 months.

This picture shows the extent of the washout. Photo / Duncan BrownPhoto / Duncan Brown

It’s estimated there will be close to 6000 less logging-truck trips on the 116km stretch of State Highway 2, which has had several passing bays installed and the major work of the Mata horua Gorge realignment and bridge, but still includes winding stretches, and the notorious bend of the Devil’s Elbow between Napier and Tutira.

NZ Intermodal Transport Safety Group formed

A new body has been formed to establish and maintain best practice safety and compliance standards for all road transport operators loading, handling and delivering intermodal imported and exported freight.

The NZ Intermodal Transport Safety Group (NZITSG) is to address the significant safety and other issues associated with the interface between road transport and other modes associated with import and export freight.

The NZITSG provides the road transport industry a single and convenient portal to talk with government, officials, port management, manufacturers and other stakeholders impacting road freight operators working in the import/export arena.

“We can achieve a lot more to improve safety and compliance once all the key industry players are working collaboratively than we can doing our own separate things,” says Group Chair Murray Young.

“It also makes sense for the industry to have information disseminated down through the Group and on to the businesses affected rather than having each company trying to engage with WorkSafe NZ, ports, manufacturers and training institutions on their own.”

As a sign of the industry’s commitment to improving workplace safety 21 separate transport companies were involved at the NZITSG’s initial August meeting. At that meeting the Group’s members were elected, essentially representing the interests of the majority of road freight transporters operating in this space.

The Group’s first major project will be to improve sidelifter safety. A number of companies have shared internal policy that will be incorporated into an industry code of practice for the use of sidelifters.

The NZITSG is also engaging with Worksafe NZ, manufacturers and educational and qualification institutions such as MITO to assist with development of the code of practice.

“The use of the Sidelifter Code of Practice, while recommended, will not be mandatory although the mandatory requirements that will be referenced in it cannot be avoided,” says Young.

“It is the intention of the NZITSG to make compliance uncomplicated and make sure that needless costs or compliance burden are not unnecessarily placed on operators. This Code of Practice will be the simplest and most effective mechanism available for industry to develop for the improvement of safety and compliance. The alternative is to wait for government to intervene and take a heavy-handed regulatory approach.”

The Group’s members represent each of the main port regions throughout New Zealand and are:

• Murray Young – NZ Express Transport – Christchurch

• Ian Pauling – CODA Group – Auckland

• Calven Bonney – L.W. Bonney & Sons– Auckland

• Mike Herrick – TDL Group – Auckland

• Grant Darrah – Reliance Transport – Auckland

• Clinton Burgess – CODA Group – Tauranga

• Nigel Eden – Tomoana Warehousing – Napier

• John Anderson – LG Andersons Transport– Wellington

• Richard Smith – Hilton Haulage – Christchurch

• Mark Purdue – H.W.R Group – Dunedin

The Road Transport Forum is providing secretariat services to the NZITSG.

The Port of Tauranga has become a megachurch: too big to touch

Pipi beds die and algae blooms, but iwi are repeatedly told ‘there’s nothing to see here’, writes Graham Cameron. 

When the Tainui canoe entered Tauranga harbour a millennium ago, it had the misfortune to run aground on a then prominent sandbar called Ruahine that sat below the waterline between Matakana Island and Mauao.

The Tainui was refloated and continued on its journey; the incident in which the Ruahine sandbar was central is remembered in a well known Tauranga Moana tauparapara:

Pāpaki tū ana ngā tai ki Mauao, i whānekenekehia, i whānukunukuhia, ka whiua reretia Wahinerua ki te wai, ki tai wiwi, ki tai wawa, ki te whai ao, ki te ao mārama.

You may well hear that tauparapara at our marae, but you won’t see the Ruahine sandbar if you walk Mauao. By 1970 the sandbar no longer existed. It’d been destroyed in the process of widening and deepening the harbour and entrance for the establishment of the Port of Tauranga.

Our church is progress, and in the Bay of Plenty, the megachurch is the Port of Tauranga. Megachurches tend to not so much follow the law as create the law; the news that the Port of Tauranga has operated without a consent for stormwater for the past 27 years came as no surprise to tāngata whenua in Tauranga Moana.

The Port of Tauranga is a shining city on the hill. It’s the engine that drives almost everything here. Logs, kiwifruit, steel, palm kernel, coal and containers all flow in and out, like the lungs of our economy. Cruise ships visit in increasing numbers – loved by local retailers, despised by locals who remember a time when it was all for them.

The port is jobs, but not great jobs: casual, no longer zero hours but definitely not certain hours, de-unionised, long shifts and efficiency first. The port is jobs and the Port of Tauranga has kept bread on the table for many of our old people and our whanaunga since its inception.

For all intents and purposes, the Port is a religious idol in our privatised, profit, growth and market driven New Zealand. And like all true and holy idols, it’ll brook no opposition – it’s central to the power of the political and economic elite.

The Port of Tauranga is 54% owned by the Bay of Plenty Regional Council. The designation ‘regional council’ means that the 54% owner of the Port of Tauranga is also responsible under the Resource Management Act 1991 for managing the effects of using freshwater, land, air and coastal waters by issuing resource consents. For example, resource consents for stormwater discharge from ports.

Where parties fail to get a consent or follow the conditions of a consent, they can be fined or prosecuted. In 27 years of stormwater discharging into Tauranga harbour from the Port of Tauranga, the Bay of Plenty Regional Council has never fined or prosecuted the port.

The past 27 years are a series of false starts. The first consent lodged in 1998 never went anywhere because the port was slow in providing information requested by the council. The Regional Council then tried to couple the port’s consent with another for the Tauranga City Council. That failed because they couldn’t agree on who was liable for what discharge. Then it was revealed that Beca, contracted to do the consenting by the port, had lost the paperwork. The third application was lodged in 2013, but apparently nothing happened because of five years of consultation. We are now onto the fourth application. It is unlikely the port will be compliant this year.

When Radio New Zealand’s Checkpoint investigated this, everyone seemed disappointed with themselves, but not exactly up in arms. Stormwater doesn’t sound all that worrying. And the stormwater runoff from the Port of Tauranga is not notably toxic.

David Culliford looked into the stormwater runoff at the Port of Tauranga in his 2015 thesis ‘Characterisation, potential toxicity and fate of storm water run-off from log storage areas of the Port of Tauranga’. As best as anyone can tell, it’s all within acceptable limits, but Culliford’s work is clear that requires more research. The runoff from the log storage includes bits of wood, resins, chemicals and at times raw effluent. The runoff can slightly lower the pH of the water which is shown to affect the development and behaviour of marine life. There are periods of acute toxicity, particularly from raw effluent during storms. The runoff is detectable to over 60 metres, indicating there’s likely a wide spread of whatever impacts exist. At the moment there isn’t a good base of research as to the impact of dredging on sedimentation and toxicity. Which led to the conclusion that all is essentially well.

But sit at a table during a hākari at any of our marae, and we all know something is wrong. Pipi beds disappear. That’s not abnormal, but the increasing regularity and the size of the beds that have disappeared is a change. There are places where you don’t collect pipi anymore because they’re unsafe. There’s so much more sea lettuce than we ever had before. Algal blooms are normal; we are often told we can’t eat our kaimoana. Most people just ignore the warnings. And we’re told by our Port and our councils that it’s normal, that it’s seasonal, that it’s always been like this. It hasn’t always been like this.

The uncomfortable reality today is that the Port of Tauranga is too big to be allowed to fail and we can’t afford to stop its growth and development. You will hear few voices calling to limit the Port of Tauranga. Neither their majority shareholder the regional council, nor the local community given how many Mums and Dads have shares in the port, nor iwi.

Our iwi have not held the Port of Tauranga to account. Our lines of defence are quite literally in the sand; we have never halted anything the port wanted to do. If we are to be honest, we have always come around to an agreement with the port. The last instance was dredging that was consented in 2012 where the shipping channel was deepened by three metres to allow cargo ships with nearly double the capacity into our port.

This was only two years after the Rena had run aground on the Astrolabe Reef. As the consent was being considered, a cargo ship carrying logs lost power in the channel and threatened running onto the rocks of Mauao. The dredging at that time included the removal of a section of Panepane, a large pipi bed off Matakana Island.

Even in this instance, as iwi we followed our normal pattern: bold statements and threats of protests; submissions against the consents; the consent granted and challenged at the Environment Court; our agreement to a new oversight committee, some scholarships, the opportunity for shares, and research that will confirm there is nothing to see here.

All of us in the Tauranga Moana community bow our heads to our local religious idol. However passionately we love our harbour and our environment, in the end we are willing to accept the assurances of the Port of Tauranga that they have this under control. We hold these things to be true: the Port of Tauranga will protect the marine environment for us and provide excellent returns every year.

No stormwater consent can pretend to stand as a barrier to such an expression of collective faith. No fine can be allowed to tarnish the reputation of our regional economic saviour, washed clean by the millions of trays of kiwifruit. As we splash at the water’s edge this summer, we will look across to the white steeples of the cranes, and smile at our tamariki, warning them not to eat the pipi because of the algal bloom. And we’ll tell them, don’t worry, everything is going to be alright.

 

Floating dry dock could bring close to $40m a year into Marlborough

A dry dock has been proposed for Shakespeare Bay near Picton.

A dry dock has been proposed for Shakespeare Bay near Picton.
STUART SMITH

OPINION: The many benefits that establishing a floating dry dock at Picton’s Shakespeare Bay would bring to our region cannot be overstated.

This is a valuable opportunity for Marlborough to significantly increase its economic resilience, future growth and provide high-quality, well-paid and reliable career options for our people.

Shakespeare Bay is undeniably a highly strategic place for a dry dock to be located. It’s right in the centre of the country, is handy to Cook Strait shipping lanes and has excellent rail, road and air connections.

The former navy frigate HMNZS Canterbury in an Auckland dry dock.

The former navy frigate HMNZS Canterbury in an Auckland dry dock.

The bay already operates around the clock as part of Port Marlborough’s operations and it is sheltered from Picton and its residents. As the deepest natural berth in New Zealand, minimal or no dredging would be required to operate a dry dock.

According to a research paper prepared by the Shipping Federation in 2015, a new floating dry dock could bring in an estimated $38 million in regional income per year.

This would present a truly significant string to our economic bow.

Kaikōura MP Stuart Smith says a dry dock would bring young workers to Picton.

Kaikōura MP Stuart Smith says a dry dock would bring young workers to Picton.

Concerns have been raised about biosecurity and the environment. The fact is that the water which comes out of the proposed dry dock is as clean, if not cleaner, as when it went in.

The potential for a biosecurity breach is an issue that the Marlborough Sounds is open to on a daily basis. Currently there are no restrictions on pleasure boats and commercial ships coming in and out of the Marlborough Sounds, which means that whatever is on the hulls of those vessels comes in with them.

It is my view that this poses a far greater biosecurity risk than a controlled, self-contained dry dock with water treatment systems in place to capture, treat and dispose of contaminants.

Many of New Zealand’s largest ships that would use the dry dock enter the Marlborough Sounds regularly anyway, including of course the interisland ferries and the Royal New Zealand Navy.

Building dry dock facilities in Picton to service these vessels, rather than sending them to another less suitable port in New Zealand or overseas actually brings better environmental outcomes as well as saving costs which would have been passed on to the consumer.

As I said, the opportunities this dry dock would bring to our region are huge. Picton itself has struggled to retain young people since the loss of the freezing works many years ago. Bringing a major employer to town would draw in, and retain, young people and naturally create positive flow-on effects for surrounding businesses.

Our region really does tick all the boxes as the obvious location for a new dry dock in New Zealand, and it is an opportunity Marlborough should absolutely embrace.

Bulk Cargo Growth Drives South Port Ahead

South Port New Zealand Ltd’s reported after-tax profit for the June 2018 year is $9.66M, up 14% on last year’s result of $8.45M. South Port Chairman, Mr Rex Chapman said, “this is an excellent result for the Port, underpinned by a 13% increase in cargo flows.” Total cargo volume through Bluff set a further record of 3,445,000 tonnes (FY17 3,053,000 tonnes) due to strong growth in bulk cargoes and a positive development in shipping line connectivity.

“The mainstay of our business continues to be bulk cargoes representing 85% of all volumes handled across the Port wharves,” said Mr Chapman.

Revenue from port and warehousing operations equated to $40.7 million ($36.9 million), an increase of 10%. Higher volumes through the Port saw operating profit before financing costs and tax increase by 13% to $13.8 million ($12.3 million).

Net financing costs were $579,000 ($449,000). Earnings per share were 36.8 cents (32.2 cents per share). Net tangible asset backing per share equates to $1.53 ($1.42 per share). In establishing the dividend payment level, Directors took into account sustainable profit plus future maintenance expenditure.

Shareholders will receive a consistent final dividend of 18.5 cents, which sustains a full year dividend of 26.0 cents, fully imputed. The dividend payment represents a gross return of 5.2% (net 3.7%), based on a share price of $7.00 as at 30 June 2018.

A dividend payout ratio of 71% results for 2018 (using reported NPAT) and equates to 61% of free cash flow. Mr Chapman said that “South Port has recently been successful in renewing its insurance cover, including material damage, up to $250 million.” Insurance companies are now raising the issue of whether ports need to carry out additional strengthening work on critical assets in coming years to maintain insurance cover.

This could have significant cost implications for the Port and Management has started to investigate these requirements.

Not enough demand to move Ports of Auckland to Northport

Aug. 24 (BusinessDesk)

 

Port of Tauranga chief executive Mark Cairns welcomes the government’s review of the upper North Island logistic and freight systems but says there isn’t enough demand to justify moving Ports of Auckland to Northport.

He also sounded a warning about proposed legislative changes to employment law.

Earlier this month, the government announced a five-member working group would conduct a review to ensure New Zealand’s supply chain is fit for purpose in the longer-term and indicated the review will include a feasibility study to explore moving the location of the Ports of Auckland, with “serious consideration” to be given to Northport.

Cairns told BusinessDesk that Port of Tauranga welcomes the “greater focus” on the issue and noted “there is an issue of capital discipline in the port sector,” with some ports getting a return on equity as low as 2 percent.

In June the auditor general said a variety of accounting treatments used by the country’s port companies makes it hard to compare and greater alignment would increase transparency. The port sector generated an average return on equity of 8.9 percent in the June 2017 year, however, returns by individual companies ranged between 2.3 percent and 26.1 percent, according to the auditor general.

Port of Tauranga seeks a minimum return of 8.5 percent after tax on major capital investments.

Regarding any changes to infrastructure – such as moving Ports of Auckland – “it has to be a rational decision for what the import and export demands are for the country and there just isn’t the trade demand in Northland,” Cairns said. He emphasised the need for the review to have a clear picture of import and export cargo demand across the nation.

Port of Tauranga has a 50 percent stake in Northport. The other 50 percent is held by Marsden Maritime Holdings, which counts Ports of Auckland as a 19.9 percent shareholder.

Regarding his overall confidence in the economy, Cairns said Port of Tauranga is keeping a close eye on any fallout from geopolitical tensions as it could potentially impact demand. Earlier the company said it operates in a complex environment with many factors outside its immediate control.

“It is very much a watching game. We are seeing effects on the dollar and that perversely helps exports but will have an impact on us from rising fuel prices,” he said. “We expect to have to deal with that in the coming year.”

Regarding the Employment Relations Amendment Bill, he said Port of Tauranga has no problem with collective bargaining or dealing with unions because “that is how we do business now.”

However, “the one aspect of the bill that we really have a problem with is the prospect of multi-employer collective agreements.” According to Cairns, if the legislation passes “you could conceivably have a number of unions approaching all ports in New Zealand to have a one agreement applying to all ports.”

He said that is a “real problem” given that a number of ports have had industrial action over the past year and under a multi-employer collective agreement every port would be shut when another port is having industrial action and “that would be a dreadful outcome for New Zealand.”

Port of Tauranga shares gained 3.4 percent to $4.92 after it said net profit rose to a record $94.3 million in the year to June 30 from $83.4 million a year earlier. Container volumes lifted 8.9 percent to nearly 1.2 million twenty-foot equivalent units, and overall cargo was up 10.2 percent to almost 24.5 million tonnes.

Contrasting financial years for country’s largest ports

The full year to June financial results for New Zealand’s two largest ports were poles apart, with the Port of Tauranga posting a 13% profit gain while Christchurch’s Lyttelton Port Company’s profit declined 16.6%.

Port of Tauranga, New Zealand’s biggest port company, posted a 13% rise in annual profit, driven by record cargo volumes, and said it is planning to expand capacity.

Conversely Lyttelton Port Company’s annual profit fell as strike action and costs of hiring additional staff outweighed higher revenue.

At the Port of Tauranga revenue increased 10.9% to $283.7million and net profit rose 13% from $83.4million a year ago to $94.3million.

At Lyttelton Port Company, revenue rose 7% to $122million, but lagged behind the $126million flagged in its statement of intent, while net profit fell 16.6% from $14.4million to $12million.

Forsyth Barr broker Suzanne Kinnaird said Tauranga delivered a “strong result”, in line with expectations, with its underlying profit gain of 123% driven by cargo growth of 11%.

“Port of Tauranga has recorded a second year of meaningful earnings growth, driven by cargo volumes,” she said.

Tauranga’s container volumes lifted 8.9% to nearly 1.2million twenty-foot equivalent units (TEUs), and overall cargo was up 10.2% to almost 24.5million tonnes.

Tauranga’s chief executive Mark Cairns said in the annual report the company’s expansion programme to accommodate larger vessels, coupled with New Zealand’s buoyant economy, resulted in the 10.2% increase in cargo volumes.

Volumes lifted across all major cargo categories, with export logs up 14.3% in volume and dairy products up 4%.

Tauranga paid a final dividend of 7c, taking total dividends to 12.7c, up 13.4% on a year ago.

Mrs Kinnaird noted capital expenditure guidance of $60 million was ahead of expectations and was “cautious” that continued cargo growth would be sustained, and might decline in the financial year ahead.

Lyttelton Port Company chief executive Peter Davie said its revenue increase was mainly driven by the port’s container terminal and MidlandPort, its inland port at Rolleston.

Profitability was impacted by strike action, hiring additional staff in the container terminal to meet customer demand, and more investment in health and safety, he said.

The port company did not say whether it would pay a dividend to the Christchurch City Council.

It paid $8million in dividends in 2017, and had targeted a 2018 payment of $1million in its statement of intent.

Container volumes rose 5.7% to 424,560 TEUs and would have been higher, but industrial action in March and April reduced TEUs by about 10,000.

The company said yesterday it gained resource consents that would allow the infrastructure development required to manage the forecast doubling of Canterbury freight volume during the next 15 years.

“It was vital we obtained the resource consents that permit dredging of the harbour shipping channel to deepen and extend it, [and] the expansion of the container terminal land area at Te Awaparahi Bay,” Mr Davie said.

These two developments were crucial for the port to grow Canterbury’s trade.

The dredging programme meant larger container ships would be able to call at Lyttelton.

“At the same time we will expand the reclamation by 24ha and construct a new 700m container wharf,” he said.

Cargo Growth Produces Record Year for Port of Tauranga

Cargo Growth Produces Record Year for Port of Tauranga

FINANCIAL RESULTS FOR THE YEAR TO 30 JUNE 2018

Port of Tauranga’s hub port strategy is gaining momentum, with growing cargo volumes and increased transhipment driving record results in the year to 30 June 2018.

New Zealand’s largest, fastest growing and most productive port saw container volumes increase 8.9% to nearly 1.2 million TEUs , while overall cargo volumes increased 10.2% to almost 24.5 million tonnes.

Highlights:
• Group Net Profit After Tax increases 13.0% to $94.3 million
• Annual container throughput increases 8.9% to almost 1.2 million TEUs
• Transhipment increases 23.3%, making up a quarter of all container traffic
• Log volumes increase 14.3% to 6.3 million tonnes
• Exports increase 8.2% to 15.4 million tonnes, while imports grow 13.7% to 9 million tonnes
• Subsidiary and Associate earnings increase 11.9% to $16.4 million
• Annual revenue increases 10.9% to $283.7 million
• Asset valuation increases by $226.0 million
• Final dividend of 7.0 cents per share brings the total ordinary dividend to 12.7 cents per share, an increase of 13.4% on the previous year. In addition, a special dividend of 5.0 cents per share will be paid.

New Zealand’s busiest port, Port of Tauranga Limited (NZX:POT) today announced record annual earnings as freight volumes continue to increase and shippers utilise its hub port status.

Group Net Profit After Tax for the year to 30 June 2018 increased 13.0% to $94.3 million.

Good performance from our subsidiary and associate companies saw earnings lift 11.9% to $16.4 million.

The results were lifted by increased volumes across all major cargo categories, including export logs (up 14.3% in volume) and dairy products (up 4.0%).

Transhipment, where containers are transferred from one service to another at Tauranga, has grown 23.3% in the past year, demonstrating the entrenchment of the ‘hub and feeder port’ model in New Zealand.

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

“We completed our capacity expansion programme in 2016 and the effects were almost immediate. We are seeing larger container vessels, as well as larger bulk cargo and passenger ships,” he said.

With the fast container service connections between Tauranga and North Asia, North America and South America, shippers in Australia and New Zealand have increasingly been using Tauranga as a hub port. Containers transhipped from other New Zealand ports grew 54.7% compared with the previous year. The Port now handles 40% of all containers in New Zealand.

New Zealand’s importers and exporters are within easy reach of Port of Tauranga’s national network of ports, inland freight hubs and logistics services. The Group has interests in Northport in Whangarei and PrimePort Timaru, as well as operating inland ports at Auckland and Rolleston near Christchurch.

Dividends
The Company today announced a further special dividend of 5.0 cents per share as part of its ongoing plan to return up to $140 million to shareholders. This is the third year of a four-year capital restructure plan.

Directors have also declared a final ordinary dividend of 7.0 cents per share, taking total ordinary dividends to 12.7 cents per share, a 13.4% increase on the previous year. The record date for entitlements is 21 September 2018 and the payment date is 5 October 2018.

Shareholders have received an annual equivalent return of 22.4% since the Company listed in May 1992.

Cargo trends
Imports increased 13.7% to 9.0 million tonnes and exports increased 8.2% to 15.4 million tonnes for the year ended 30 June 2018. Total ship visits increased 5.8%.

Log exports increased 14.3% to 6.3 million tonnes. Sawn timber exports also increased 10.3% in volume. Forestry products are still fetching record prices internationally.

Dairy product exports increased 4.0% to 2.3 million tonnes. Imports of dairy industry food supplements increased 18.2%, and fertiliser imports increased 16.4%, reflecting a strong sector.

Other primary product sectors also fared well, with frozen meat exports increasing 11.3%, and apples increasing 20.9%.

Cement imports increased 18.9% while steel exports increased 25%.

Oil product imports increased 9.3% and other bulk liquids increased 39.9%.

The number of cars and other vehicles imported at Port of Tauranga doubled compared with the previous year.

Whilst kiwifruit volumes were down 5.8% due to a seasonal drop in green kiwifruit, an increasing proportion of kiwifruit are being shipped via refrigerated container. The number of TEUs increased 27.6% compared with the previous year.

Operational developments
Port of Tauranga Chief Executive, Mark Cairns, said a ninth container crane had been ordered for delivery in 2020.

Port of Tauranga’s container terminal now has 2,634 refrigerated container (reefer) connection points, which are supplemented in the peak season with 12 generators each supplying power to 35 containers.

“We believe we have the largest reefer capacity in Australasia demonstrating the significance of the volumes we are handling,” said Mr Cairns.

The Port also opened a new purpose-built coolstore at Mount Maunganui to handle kiwifruit and other chilled cargoes.

The Port maintained its industry-leading record for productivity, with a net crane rate for the year to 30 June 2018 of 35.5 moves per hour (compared with the reported national average of 33.5 moves per hour and Australian rate of 28.9 moves per hour).

Our people and their safety
Mr Cairns said the injury frequency rate among the Company’s staff reduced by 2% to 5.6 per million hours worked, whilst the Company’s contractor injury frequency rate reduced nearly 70% to 9.3 per million hours worked.

The Company has launched a wellbeing programme for all Port of Tauranga employees.

Care for the environment
Port of Tauranga has appointed an Environmental Manager and is making use of technology to reduce carbon emissions and improve energy efficiency, including introducing electric vehicles where possible.

Stormwater management is a current priority, and infrastructure improvements continue as a long-running resource consent application for the Mount Maunganui wharves is dealt with via an independent commissioner.

The Company has also undertaken a comprehensive, independent carbon emissions audit to set targets for future reductions in emissions.

We continue to support forestry industry efforts to reduce the amount of methyl bromide used at the port ahead of the 2020 deadline for 100% recapture of the fumigant. We are encouraging exporters to de-bark logs prior to arrival at the wharves to reduce the need for fumigation.

Sector and industrial relations issues
Port of Tauranga is proud of its industrial relations track record and works hard to maintain productive employment relationships with our staff and unions. It is salient that more than 90% of our staff are shareholders in the Company.

The Company has made a submission opposing certain aspects of the Employment Relations Amendment Bill.

“Specifically, we believe the repeal of the ability for employers to opt out of Multi Employer Collective Agreement (MECA) negotiations breaches international conventions,” said Mr Cairns.

“We believe this aspect of the Bill will see a lowest common denominator outcome and will most certainly decrease productivity in the Port sector.”

Port of Tauranga continues to be concerned about the impact on New Zealand’s land transport network of further sub-economic investments being made or contemplated by other New Zealand Ports. This is not just an issue for the sector, but the economy as a whole.

“We support the Auditor-General’s advice to port companies to use fair value valuations to ensure major capital investments are properly justified. Port of Tauranga seeks a minimum return of 8.5% after tax on major capital investments;” said Mr Cairns.

Outlook
Port of Tauranga has commenced planning for the next stage of capacity expansion.

The Company has approximately 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.

Port of Tauranga operates in a complex environment with many factors outside its immediate control.

“We have implemented the policies, processes and practices we need to deliver superior customer service, economic benefit to our communities and strong returns to our shareholders,” said Mr Cairns.

“We expect cargo growth to continue in the next year across most categories, and particularly containerised cargo,” he said.

Guidance on full year earnings will be provided at the Annual Shareholder Meeting on 17 October 2018.

New KiwiRail chair pops up on upper North Island port study group

New KiwiRail chair pops up on upper North Island port study group. Photo: Lynn Grieveson

Newly appointed KiwiRail chair Greg Miller has also been appointed to a five-member working group charged with writing a new upper North Island supply chain strategy to guide the government’s desire to integrate port, rail and road transport infrastructure planning for the country’s economic and population epicentre.

The Ministry of Transport is close to announcing the five person group, to be chaired by former Northland mayor and health board chairman Wayne Brown, which will advise on a range of major transport and infrastructure issues, including “the current and future drivers of freight and logistics demand, including the impact of technological change; a potential future location or locations for Ports of Auckland, with serious consideration to be given to Northport”; and “priorities for other transport infrastructure, across road, rail and other modes and corridors such as coastal shipping”.

A Northport redevelopment could include refurbishment and extension of rail freight services into Northland and to NorthPort, and could ultimately include moving the Royal New Zealand Navy’s Devonport base to Whangarei.

Miller’s appointment to the KiwiRail chairmanship was announced yesterday after he resigned as chief executive at Toll Holdings on Monday and was heavily backed by State-Owned Enterprises Minister Winston Peters against initial objections from the Treasury and Finance Minister Grant Robertson.

The state-owned rail company is therefore changing both its chair and deputy, with both Trevor Janes and Paula Rebstock respectively stepping down, and its chief executive following the announcement last month by current KiwiRail CEO Peter Reidy that he was taking up a senior role at Fletcher Building. That decision is understood to have been prompted by the planned appointment of Miller, who was CEO at KiwiRail’s predecessor, TranzRail, at the time it was sold back to the government by Toll in 2008.

Also on the working group is a former TranzRail group general manager, Noel Coom, in another sign of NZ First ministers Peters and Shane Jones’ determination to inject deeper knowledge of transport and logistics into government thinking on transport and infrastructure.

Susan Krumdieck, a professor in mechanical engineering at Canterbury University with long experience consulting for local government, government departments and community groups on transport, energy and future demand projects will also join the supply chain working group, along with Sarah Sinclair, a construction and infrastructure specialist for law firm MinterEllisonRuddWatts.

Its fifth member is Shane Vuletich, who has represented the Society for the Protection of Auckland Harbours lobby group in public debate on the future of the Auckland central city port, and is managing director of the Fresh Information Company, a strategy and forecasting analysis business, with tourism, major events and infrastructure planning experience,

“A system wide review of the Upper North Island supply chain is important because about 55 percent of New Zealand’s freight originates in or is destined for, the Northland, Auckland, Waikato and Bay of Plenty regions,” the MoT’s explanation of the working group says, noting its recommendations could include “investment in the regions, and that the government might need to invest”.

No timetable has yet been set for outcomes from the study, the terms of reference for which were agreed last December.

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