Tauranga Port expects improved earnings

Mark Cairns, CEO Port of Tauranga.

Port of Tauranga has seen a "reasonably positive" start to the year in its July-September first quarter 2016/17, chief executive Mark Cairns told the company's annual general meeting in Tauranga on Thursday.

Provided there were no significant changes to market conditions, the port expected to achieve full year earnings in the range of $79 million to $83 million, he said. The port reported a net profit after tax (NPAT) of $77.3 million for the year ending June 2016, down 2.4 per cent on the previous corresponding period.

In the first quarter, parent net profit after tax (NPAT) was up 10 per cent and group NPAT was up six per cent on the prior corresponding period. Overall trade was up five per cent, log volumes up 16 per cent, dairy volumes up 12 per cent and container volumes up 3 per cent.

"No matter the fluctuations in individual cargoes, we believe our diverse product mix, income sources and locations will protect us somewhat," he said. "We also believe our long-term freight agreements with major exporters give us some certainty to our planning and infrastructure investment."

The port expects to handle more than 1 million TEU's in the full year ending June 2017, and is predicting that log exports will recover to 2015 levels.

Last year's fall in total trade of 0.3 per cent to 20.1 million tonnes was largely attributed to the 1 million decline in log volumes. The full year also saw exports decrease by 1.2 per cent to 13.1 million tonnes, while imports increased by 1.4 per cent to 7 million tonnes.

Meanwhile, container traffic continued to grow strongly last year, especially in imports, with lumber exports holding their own and pulp and paper exports up by five per cent in volume on the previous year, said Mr Cairns.

Last year dairy exports were up 22 per cent to just over 2 million tonnes, he said, adding that as result of the Kotahi collaboration Port of Tauranga now handled 99.5 per cent of Fonterra's North Island dairy exports. Kiwifruit has been the star performer, with export volumes increasing 21 per cent and expected to continue growing at a strong rate.

Chairman David Pilkington said the port expected its long-term alliances - with the likes of Oji Fibre Solutions, Kotahi, and more recently Zespri and Tauranga Kiwifruit Logistics - to continue to drive cargo growth, especially in container traffic.

"These initiatives also shelter us somewhat from swings in individual cargoes, such as last year's significant reduction in log exports," he said.

The port's $350 million investment programme to prepare for big ship arrivals, extensive land holdings in Tauranga, and rail-linked MetroPort facility in Auckland, had readied it for future expansion.

Mr Pilkington noted that the recent future port study, undertaken on behalf of Ports of Auckland, had suggested as an option a mega port on the Firth of Thames to accommodate Auckland and Tauranga cargo growth over the next 50 years.

"We have seen no economic justification for this idea, nor have we been privy to the assumptions that led to it," he said.

"What we do know is that we can significantly expand the volume of imports we can deliver into Auckland, without adding to traffic flows in downtown Auckland. Ultimately, we believe the market will drive any rationalisation required, and we are about to see the efficiencies that can be had from the arrival of bigger ships."

Port of Tauranga

• This week undertook a five-for-one share split.
• Previously announced a special dividend of $34 million, or 25 cents per share, as part of a capital restructure aiming to return up to $140 million to shareholders over the next four years.