Leaner port ready for rough seas

The port has increased its share of the upper North Island container market. Photo / Kenny Rodger

Ports of Auckland has battened down the hatches by slashing debt and capital spending and by reducing labour costs as it faces uncertainty over the long-term recovery in cargo volumes.

Although there were signs of increased import volumes last month when compared to the same month last year, the company says growth in worldwide container shipping is likely to remain weak for two years.

During the past 15 years the port has seen annual volume growth of around 7 per cent but this had reversed this year in the January to June period plunging 5.8 per cent.

Net profit after tax in the year to June 30 was $5.4 million, down from $21.1 million last year.

This includes writedowns on investment property and Northland Port shares of $10.3 million.

Normalised earnings before taxation fell to $15.7 million from $22.3 million.

Managing director Jens Madsen said the company had made significant strides in cutting costs, with an estimated $5 million in savings in the coming year.

Long-signalled recapitalisation was announced yesterday. Ports' owner Auckland Regional Holdings is putting in $40 million in equity and $20 million in loans into the company. Combined with $40 million from the sale of Queens Wharf the company will be able to repay a bank loan of $105.5 million in December and this would save a further $5 million in interest costs a year.

"The recapitalisation has improved our financial and strategic position. We appreciate the confidence shown in us by our shareholder and its long-term view of Ports of Auckland's strategic importance to the Auckland region."

Long-term debt was being reduced from around $550 million to $300 million-$330 million.

"We are a significantly leaner and more efficient port operation than we were 12 months ago," Madsen said.

Container shipping makes up around 80 per cent of revenue for the company and the port had increased its share of the upper North Island container market from 59 per cent to 61 per cent.

In spite of the poor second half, the number of standard-sized containers was up 0.3 per cent on the year before. Earnings before interest, tax, depreciation and amortisation for the container division rose 1.4 per cent.

Madsen said productivity continued to improve, with average crane rate up 6.6 per cent, straddle carrier moves per hour up 4.6 per cent and staff hours per container down 7.7 per cent. There remains uncertainty ahead with global trade still suffering from the recession. About 10 per cent of large container vessels are laid up and just two of the world's top 20 container ports recorded volume increases.

Despite the downturn the number of cruise ships was only down one at 69 and Madsen said a further "minor decline" was expected this year.

"I think the sky is the only limit, you will see a boom in the industry going forward. We are welcoming new facilities in Auckland," he said in reference to the redevelopment of Queens Wharf.

Imports of used cars had been hit by the downturn and Government-imposed limits on the age of vehicles.

The number of vehicles fell 36 per cent to 110,580 in the past year.