NZ shipping magnate Mark Ching keeps Armacup stake as EV demand boosts profits

Teslas getting unloaded from Armacup vessel Turandot. Photo / Ports of AucklandBy 

Duncan Bridgeman

Head of Premium Business Content

Auckland shipping magnate Mark Ching intends to keep his stake in ocean freight company Armacup – a business that is booming amid high cargo rates and surging demand for electric vehicles.

Ching owns 31.5 per cent of Armacup with accountant Grant McCurrach, who also owns 3.5 per cent with wife Kristine. The 65 per cent majority shareholding is held by Norwegian shipping giant Wallenius Wilhelmsen.

The Oslo-based company said in its latest annual report, published in March, that it planned to take full control of its New Zealand subsidiary at the end of this year.

“According to a shareholder agreement, the group shall purchase the remaining 35 per cent of the shares on 31 December 2022,” the annual report said.

“The fair value at December 31, 2020 is $US15 million (NZ$24m) and is recognised as an other current liability.”

However, that position appears to have now changed.

“The major shareholder’s annual report does not reflect the current position between the respective shareholding groups,” Armacup’s chief operating officer Hans Corporaal told the Herald this week.

He said the company would not comment further on the change and nor would it comment on Armacup’s own financial result, which showed a big jump in profit last year as the cost of moving cars across the ocean skyrocketed.

Armacup, headquartered in Auckland, has long been a feature of New Zealand vehicle shipping. The company commissioned the first of its Pure Car Carrier vessels back in 1989.

Its present fleet of five carriers – each with capacity to carry at least 5000 cars – can handle passenger vehicles, trucks, buses and machinery. The company’s ships can be seen berthing and unloading at Ports of Auckland on a regular basis.

The company has benefited from a surge in demand for electric vehicles (EVs), driven lately by the Labour Government’s Clean Car Discount, where anyone purchasing electric and plug-in hybrid vehicles is eligible for rebates of up to $8625 for new cars and up to $3450 for used vehicles.https://datawrapper.dwcdn.net/bu4bb/3/

Armacup’s accounts, filed with the Companies Office this week, show an after-tax net profit of $27.25m for the year to December 2021, up from $9.17m in 2020 and $3.86m in 2019.

Revenue from contracts with customers jumped to $218.73m in 2021, from $120.69m in 2020 and $134.06m in 2019 – before the pandemic.

The company declared a dividend to its shareholders of $28.05m, or $9.62 per share, a big jump from the $5m payout in 2020.

Ching and the McCurrachs share of that dividend works out at close to $10m, based on the 1,019,879 shares held between them.

Ching bought Armacup in 1992 after it pioneered the Japanese car trade into New Zealand. Over the years he sold down his stake to Wallenius Wilhelmsen.

In 2016 Ching entered the NBR Rich List (as it was then called) with an estimated net worth of $75m, although he was understood to have disputed that initial figure and requested a revaluation.

The following year he featured on the list at $60m.

Gaining some context about why Armacup has been so successful is not straightforward, given that it is a privately-owned company, but it has clearly benefited from higher shipping rates in recent months and the boom in EV vehicle imports fuelled by the Government’s subsidy programme.

Last November, Ports of Auckland posted on its Twitter account photos of row after row of Tesla EVs unloaded from Armacup’s Turandot vessel, which is capable of carrying 5846 cars.

Statistics from the Motor Industry Association showed there were a record 3290 Teslas registered in New Zealand in 2021. That was up from 592 in 2020 and 801 in 2019.

Mark Stockdale, principal technical adviser at the MIA, said sales data showed a decent proportion of the growth in Tesla sales could be attributed to the Government’s feebate subsidy scheme.

As soon as the policy came into full effect in September last year, the number of Tesla sales shot up from 191 to 1066 for the month. The sales dropped off in October, then surged right back in November and December.

However, Stockdale said sales numbers were still erratic due to supply chain disruptions since the Covid pandemic.

That included problems sourcing raw materials, parts such as microchips and fully assembled vehicles.

“There have also been changes to shipping schedules and routes and this has manifested itself in higher shipping costs, which are ultimately being passed on to the consumer.

“Some months sales of certain electric models have been very strong and then in other months it’s fallen down and that’s really entirely because all the supply lands in one go and it’s sold out, until they can get the next shipment.”

In its annual report Wallenius Wilhelmsen cited surging volumes, port congestion, labour shortages and pandemic restrictions as difficulties continuing into 2022.

Microchip shortages, which have hit car manufacturers, had also caused supply-side issues, although that situation had eased, the Norwegian company said.

Despite those challenges, the group produced strong results – reporting total income of US$3.88 billion last year compared to US$2.95b in 2020 and $3.9b in 2019, before Covid.

Net profit came in at US$177m, compared to a loss of US$302m in 2020 and a US$102m profit in 2019.

“We see strong results in a market where demand has returned and even surpassed pre-pandemic levels,” the company said in its full-year report.

“This has put a strain on global supply chains. Trade remained overloaded throughout 2021, with particularly strong demand out of Asia. Europe saw a more muted volume development.

“Our business model has over time yielded resilient free cash flow. In combination with the current solid market fundamentals, we are well positioned to enjoy the high economic activity and return to our policy of paying dividends to our shareholders.”

More recently the company updated the market for the first quarter of this year, saying it was seeing high underlying light vehicle demand from consumers, although production was affected by semiconductor chip shortages.