Log trade, Covid-19, hits Napier Port, scraps 1st half dividend

Napier Port cleared its inventory of logs during the lockdown. Photo / Hawke's Bay Today

Cruise ship visits and higher container volumes drove Napier Port's first-half net profit up by 39 per cent but the company said uncertainty surrounding the Covid-19 pandemic had forced it to scrap its interim dividend,

The company said growth in container services and cruise ship visits had offset the effect of lower log volumes later in the six-month period to March 31, driving its profit after tax to $12.8 million from $9.2 million in the prior year.

In March Napier Port withdrew its $19.97m statutory net profit forecast for the year to September 30 due to uncertainty surrounding Covid-19.

The company still intends to pay a final dividend but that it will be subject to a review in August, when it is three-quarters of the way through its financial year, chief executive Todd Dawson told the Herald.

"It was a reasonably solid result for the first half but with a subdued outlook for the remainder of the year, due to the uncertainty that everyone is facing," Dawson said.

Log inventory was cleared from the wharf during level 4 lockdown and the log trade has quickly bounced back to rebuild depleted stocks in China, the biggest market.

"There were strong log volumes in May, but the caveat to that is that we are not sure that that is going to be sustainable, given the global economic outlook," he said.

The cruise industry stopped dead in its tracks when New Zealand and most other countries imposed border restrictions as a result of Covid-19.

Dawson said the future of the cruise industry - like many others - was difficult to read.

He said the industry would bounce back - "it's just a question of when, and demand".

"My view is that the cruise industry has billions of dollars invested in it, and that they are not going to walk away from that business," he said.

Dawson said construction of a new $170m wharf facility, 6Wharf, had stopped during level 4 restrictions, but that he was confident it would be finished on time and on budget by the end of 2022.

Revenue rose 7.5 per cent to $52.3m from $48.7m and container volumes rose 7.5 per cent to 135,000 TEU (twenty-foot equivalent units).

Bulk cargo volumes fell by 7.3 per cent following Chinese log market conditions and the early impact of Covid-19 demand disruptions.

Revenue for the half year to March 31, 2020, increased by 7.5 per cent to $52.3m, underpinned by an increase in container volume, growth in cruise revenue, and previously announced tariff increases.

Container services benefited from the early repositioning of empty containers ahead of the peak primary export season.

This increase helped to lift container services revenues by 12.1 per cent to $30.9m.

Even though the cruise season came to an abrupt and early end following the Covid-19 outbreak, cruise services revenue for the first half was up 22.5 to $4.2m.

After a strong first quarter in log exports, the port ended the half-year to March down 5 per cent on the same period a year ago as the impact of high Chinese log inventories were compounded by the Covid-19 outbreak and extended Chinese New Year holiday, suppressing demand for New Zealand log exports.

Fertiliser imports were, as expected, lower.

Directors are taking a 10 per cent fee cut and the company will defer the appointment of an additional director as well as selected operating and capital expenditure.

Port of Napier, 55 per cent-owned by the Hawke's Bay regional council, is the country's fourth-largest container operation and the sixth-largest for bulk cargo.

Until March, it had been enjoying strong growth from Hawke's Bay's expanding pipfruit, log, wood pulp and timber production. About two-thirds of its revenue comes from container-related services.

Napier Port shares last traded at $3.18, up 4c.