Port of Tauranga first quarter cargo volumes dip but full year earnings outlook holds steady

First quarter log and dairy exports volumes subdued at Port of Tauranga.

Falls in log and dairy exports through the Port of Tauranga have contributed to a slight dip in net profit after tax in the first quarter of the 2020 financial year for New Zealand's biggest port.

Chief executive Mark Cairns told the listed company's annual meeting that unaudited group net profit after tax for the period July 1 to September 30 was $21.7 million, down 6.3 per cent on the previous corresponding quarter.

The port company expected full year earnings to be between $96m and $101m, the same guidance given at last year's annual meeting for the record 2019 year group net profit after tax of $100.6m, he said.

During the quarter the port handled nearly 6.8m tonnes of cargo, down 1.1 per cent on the same period last year.

As forecast, log exports dropped following a sharp fall in international prices and demand in recent months. At just over 1.7m tonnes, log volumes were down 5.2 per cent.

Dairy exports decreased by 1.7 per cent.

However there was brighter news on the container and transhipment fronts.

Container numbers rose by 5.8 per cent to more than 312,000, and transhipments, where a container is transferred from one service to another at Tauranga, increased 9.2 per cent to more than 92,000.

Cairns and chairman David Pilkington reflected on a successful year to June, with volumes and financial performance cementing the port's place as New Zealand's largest, fastest growing and most productive port.

Exports increased 11.2 per cent to 17m tonnes and imports rose 8.4 per cent to 9.8m tonnes. The port handled 37 per cent of all containers in New Zealand and 30 per cent of total national cargo.

A bumper cruise ship season injected an estimated $90.3m into the Bay of Plenty economy with 116 passenger ships visiting compared to the previous year's 83.

In the coming season 112 cruise ships were booked to call.

The port contributed dividends of $66.3m to its main shareholder, the Bay of Plenty Regional Council's investment arm Quayside Holdings.

Since the port company listed in 2002, Quayside had received more than $800m in dividends from its shareholding.

Cairns said this was on top of the $200m regional infrastructure fund the council had established via its shareholding, to help fund major capital investments throughout the region.

Recapping dividend performance, Pilkington said ordinary dividends for the year totalled 13.3c, up 4.7 per cent on the previous year. Total dividends increased 6.5 per cent with the last of four special dividend payments of 5c per share.

The board had decided to continue paying a special dividend, of 2.5c per share a year, subject to any change in capital expenditure plans.

Capital spending of $310m was planned, in five stages aligned with ongoing cargo growth.

Subsidiary interest Northport had posted steady cargo volumes on the previous year, and Pilkington welcomed news KiwiRail would invest in upgrading the Auckland-Northland rail line.

He hoped it would bring capacity in future for Northport to handle increased cargo volumes.

Pilkington also looked forward to the final report of a Government-appointed working group looking at proposals to move Ports of Auckland volumes to Northport.

The group's latest report has recommended the majority of Auckland cargo be handled through Northport.

Pilkington said this would require huge investment in road and rail connections to Northland and associated infrastructure and ultimately it would be freight owners who would continue to choose the most reliable and cost-effective supply chain for the upper North Island.

He said the company had not yet had the opportunity to discuss detailed figures with the producers of the Ernst & Young analysis in the working group's latest report.

"Some of the data the group has reported - around costs, future capacity and cargo forecasts - does not align with our own data."

A report by Netherlands container terminal experts TBA Group, commissioned by the port company more than a year ago, had shown PoT could accommodate up to around 2.8m containers per year at its current size, with some further capital investment.