South Port positioning itself for carbon neutral future

South Port held its 2018 AGM on Thursday.
ROBYN EDIE/STUFF
South Port held its 2018 AGM on Thursday.

South Port is reducing its carbon emissions in a bid to stay competitive as New Zealand moves towards a carbon neutral future.

At it’s annual general meeting, held on Thursday, South Port chairman Rex Chapman said to shareholders the ports geographical position put it closer to other import sources and it could be leveraged in terms of reduced carbon emissions.

Chapman believed the port would be in a good position as the country started to reduce its carbon emissions under the Paris Agreement.

New Zealand has agreed to reduce its carbon emissions by 30 per cent below 2005 levels by 2030.

The company had implemented a number of initiatives to reduce its carbon footprint like putting antifoul on the hull of tugboats and pilot vessels to reduce fuel use.

More cargo was being transported by rail to the intermodal freight centre in Invercargill, instead of on trucks, leading to a reduction in carbon emissions, Chapman said.

This year, South Port had an after-tax profit of $9.66 million, up from $8.45m in 2017.

Cargo flows had increased from roughly 3 million tonnes to more than 3.4 million tonnes, a record level for the port.

Bulk cargo continues to be the mainstay of the business, representing 85 per cent of cargo volumes coming through the port, Chapman said.

This year, logs and woodchips exceeded the one million tonne mark for the first time in the port’s history and is the largest contributor to the volume and profit, he said.

Because of the the drought during the summer, a record volume of stock feed was imported at 212,000 tonnes.

The replacement of ageing infrastructure was expected to make an impact on future profit, as maintenance expenditure has been lifted and will continue to increase over the next five years, Chapman said.

South Port chief executive Nigel Gear said it has been 58 years since Island Harbour was completed and several assets were nearing the end of their useful life.

Work was currently under way to replace some of the piles that supported the rail and road bridges that provide the only land access to the Island Harbour, Gear said

Estimates are that earnings in the next financial year will likely be 10 per cent lower than 2017/18.

South Port is working with Mataura Valley Milk see whether it can provide the purpose-built nutrition plant to see if it can provide a distribution channel for importing an exporting cargoes.

Another potential client was Plaman Global, who is looking to mine more than 30 million tonnes of a rare organic black diatomite near Middlemarch, Central Otago, Chapman said.

The mineral would be used as a natural and organic animal feed additive that could reduce antibiotic usage, stimulate growth and improve both feed quality and gastrointestinal health in animals.

Chapman noted that there was tension in the markets as a result of the tariff war between the United States and China.

However, trade forecasts for the port remain steady with forestry exporters predicting healthy export market conditions in China, India and Japan.

The board has said it plans to keep paying the current dividend of 26 cents.

 

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.