Port of Tauranga pays dividend, provides capex for growth despite Covid turbulence

Despite Covid 19, Port of Tauranga is now planning its next stage of growth. Photo / Supplied

Port of Tauranga's dividend may be slightly down on last year and its special dividend suspended, but its investors have more reason to smile than those in some other Covid-afflicted high-value companies.

That's the take of Craigs Investment Partners' senior research analyst Mohandeep Singh from a solid annual result from New Zealand's biggest port, which despite a significant Covid hit to volumes, posted a group net profit of $90 million for the year to June 30 (2019:$100.6m).

The company's earnings guidance, before it was withdrawn in March lockdown, was $94m-$99m. This in turn had been revised down in February because of international Covid-19 concerns.

The company will pay a final dividend of 6.4c a share, making a total ordinary dividend of 12.4c a share, compared to 13.3c last year.

Singh said the decision to suspend the special dividend scheme was expected, but the fact the money would be redirected into growth via a new container berth would please investors. For the fourth year, the ordinary dividend was maintained at 90 per cent of underlying net profit after tax.

"They're still paying a dividend reasonably close to last year and when high-quality stocks are cutting their dividends to zero, it's not a bad outcome.

"A lot of companies have been cutting dividends, cutting staff and cutting capex to shore up the balance sheet or just to stay in business."

The fact that the port was planning to materially lift capital expenditure into growth assets showed the strength of its five-year outlook conviction, he said.

Revenue was $302m ($313.3m). Subsidiary and associate companies' earnings rose 18.5 per cent to $14.1m. Group ebitda fell 8.1 per cent to $166.5m.

Total trade of 24.8m tonnes compared to 26.9m tonnes the previous year.

The biggest hit to volumes was a 21.5 per cent drop in logs. Forestry was deemed a non-essential industry during lockdown and for two months no new logs came through the port gates.

Exports were down 8 per cent to 15.8m tonnes, while imports decreased 7.8 per cent to 9m tonnes.

Container volumes increased 1.5 per cent to 1,251,741 TEUs. Overall carbon emissions reduced by 15.3 per cent.

The port remained Australasia's most productive container terminal with the average net crane rate increasing 8.8 per cent to 35.8 moves per hour.

The diversity of cargoes the port can handle showed it was "no one-trick pony", Singh said.

The result also highlighted the port's ability to handle big container ships carrying 7000 to 9500 containers, which can't tie up anywhere else in New Zealand.

The result of an international hub port strategy developed more than five years ago, this capacity was paying off for shipping companies and the port's environmental sustainability focus.

One of these big ships recorded 30 per cent fewer emissions than the average container ship, said Singh.

"For shipping lines, profitability is pretty tough so being able to send larger ships rather than multiple small ships is preferable and Tauranga is the only one able to cater for them at the moment."

Another environmental plus in the result was that transhipments, where containers are switched from one ship to another, remained at a third of the total containers handled, meaning they did not use road or rail, Singh said.