Ports of Auckland drops interim dividend; profit falls

Ports of Auckland's profit fell to $17.2m in the six months ended December 31, down from $24.4m a year earlier. Photo / File

Ports of Auckland won't pay a first-half dividend to the city as its automation programme eats into earnings and the coronavirus outbreak weighs on transport movements.

The port operator said it wouldn't make an interim payment and expected to pay a lower annual dividend than the $8.7 million forecast. It had previously said it would pay a smaller dividend to Auckland Council while it ramped up spending on automating various processes, with a $9.4m dividend forecast for 2021, rising to $64.3m the following year. It paid $18.6m in the 2019 financial year.

The port's profit fell to $17.2m in the six months ended December 31, down from $24.4m a year earlier, as the investment programme drove up labour and interest costs. Revenue was flat at $123.2m with container volumes down 2 per cent at the equivalent of 475,173 twenty-foot units.

The port company delayed the go-live date for its automation programme by a month to March this year, and plans to switch on the entire operation in May or June.

"By phasing automation in this way, we reduce the risk of a major interruption to our service if there are any teething problems," chair Liz Coutts and chief executive Tony Gibson said in their report. "Once automation is fully live around the middle of the year, we will gain a significant amount of terminal capacity, from around 900,000 TEU a year to around 1.7 million TEU."

The port operator said those market dynamics were expected to continue for the rest of the year, weighing on the annual result.

It also said it expected a temporary hit from the coronavirus outbreak, but that it was too early to predict how much.

"There is normally a slow-down in trade after Christmas and the Chinese New Year, but this is being exacerbated by measures taken globally to slow the spread of the virus. There is a human impact and our thoughts are with those affected. We will continue to closely monitor the situation," Coutts and Gibson said.

Rival Port of Tauranga trimmed its annual earnings guidance last week due to the impact of the virus outbreak, with the logging sector hit the hardest. Auckland differs in that it's primarily an import hub.

Stats NZ today estimated that New Zealand exports to China since the coronavirus outbreak were down about 19 per cent. The data, based on exporter intentions in the period January 27 to February 23, suggested trade with China was about $300m lower than would have been the case without covid-19.

Separately, TIL Logistics also noted the impact of the coronavirus outbreak on the logging sector when it reported a 38 per cent decline in earnings before interest, tax, depreciation, and amortisation of $8.7m in the six months ended December 31, excluding accounting adjustments. That was in line with a profit warning in January.

TIL renegotiated its banking arrangements with ASB Bank, and noted that the covid-19 coronavirus posed a risk to freight volumes if trade was disrupted. However, those disruptions could also support TIL's warehousing revenue if product had to be stored.

State-owned KiwiRail last week said it expected the transport market to remain challenging in the first six months of calendar 2020, as importers, producers, and logistics firms contend with the coronavirus outbreak.