A fundamental shift
Chief executive Mike Fuge said it was the strongest result in four years and came amid extreme volatility in the market.
There had been an increase in costs, and wholesale prices had been higher in what appeared to be a fundamental shift. This was due to the need to “firm” intermittent renewable generation and the price being driven by thermal generation costs, particularly gas and wind power not being as cheap as everyone had thought due to higher construction costs.
Negotiations with the smelter’s majority owner Rio Tinto had been constructive and re-enforced Contact’s long-held view that the New Zealand aluminium smelter (NZAS) appears likely to stay.
Contact is expecting a new agreement to be long-term, at a fair price materially above the current pricing, and include demand response to mitigate dry-year risk.
“A new long-term agreement would de-risk investment in new renewable generation, contribute to energy security and help to preserve an important export industry, supporting growth and decarbonisation of the New Zealand economy,” Fuge said.
The six-month result had set up the company for the remainder of the year.
Contact now expects to deliver underlying Ebitdaf of $620m in FY24, and the board declared an interim dividend of 14 cents per share, in line with 1H23.
‘Security of supply’
Remediation works got under way at Contact’s Tauhara geothermal development in November, and the reconstruction of the steam separation plant is nearly complete.
The delayed Tauhara project is expected to come online later this year at an initial design capacity of around 152MW, and another geothermal project, Te Huka Unit 3, is on track to follow in Q4 2024.
Drilling, advanced steamfield design and tendering have progressed to prepare for a final investment decision in 2024 on GeoFuture, the replacement of Contact’s 65-year-old Wairākei geothermal plant. Final investment decisions are also expected in 2024 on a 100MW North Island battery and the Kōwhai Park solar development.
“These investments in new renewable technologies will contribute to security of supply as New Zealand decarbonises,” Fuge said.
Labour and rent costs hit Freightways’ earnings
It was a case of give and take for Freightways’ recently acquired Australian venture, Allied Express, which continued to deliver as the logistics and express courier group’s top performer but also accounted for higher interest costs at the halfway stage.
The oversize package specialist, which Freightways picked up in August 2022 for A$160m (NZ$170m), contributed NZ$137m in revenue for the six months to December.
That helped the dual Australian and New Zealand listed group’s main express package and mail businesses – which include NZ Couriers and Post Haste – to revenues of $517.1m, up 15 per cent year-on-year.
The information management side of the business was up 2 per cent at $105.7m.
Sales overall were up 12.4 per cent to $620.7 million from $552.1m for the comparable period, adding $4m to finance costs at the same time.
Labour costs
Net interest and finance costs clipped $17.2m from the logistics and courier express group’s earnings, reducing net profit after tax (Npat) to $40.9m, down 9.5 per cent on the $45.2m comparable 2022 result.
That was slightly under forecasts for the company, with investment house Forsyth Barr pegging revenues at $630.3m and Npat at $41.8m.
Chief executive Mark Troughear said flat earnings at earnings before interest, tax and amortisation (Ebita), which came in at $74.4m, reflected higher labour costs, rent increases at Big Chill’s recently opened storage facility at Ruakura near Hamilton and a slowdown in temperature-controlled transport for the period.
Reviewing acquisitions
Troughear said the remainder of the financial year is likely to reflect a “tougher” economic climate again but also the tail of higher-than-average labour cost increases, which came because of tight NZ and Australian labour markets.
The group’s capital spending for the remainder of the year will be $35m, the bulk of which will include investment in a second automated sorting system at Allied Express in Victoria.
Trougher said the company will also continue to review “complementary” acquisition opportunities, particularly in the Australian market.
The company will pay an interim dividend of 18 cents a share, about $32m, to eligible shareholders on April 2.
