Port of Tauranga sees Auckland claw back shipping, keeps FY guidance intact

Port of Tauranga
Port of Tauranga 12-month price history (NZX.com)

Port of Tauranga [NZX: POT], New Zealand's largest port operator, posted a decline in container volumes in the first-half as rival Ports of Auckland won back business lost during its strikes and dairy volumes declined. The drop-off wasn't enough to dent the port's full-year guidance.

Total freight volume increased 5.8 percent to 9.9 million tonnes in the six months ended Dec. 31, although container volumes slipped 12 percent to 381,038 twenty-foot equivalent units from 431,878 TEUs, in part due to shipping line Maersk's Southern Star service returning to Ports of Auckland.

In 2012 the Southern Star service, as well as Fonterra's entire upper North Island dairy product exports, shifted to Tauranga during extended industrial action on Auckland's docks. First half-earnings for the Auckland Council-owned company, released yesterday, rose 70 percent on productivity gains and as container volumes increased 15 percent to 474,333 TEUs.

"Ports of Auckland do appear to have got their act together somewhat, and are coming back into the fray and are much more competitive with the Port of Tauranga," said Grant Williamson a director at Hamilton Hindin Greene. "Port of Tauranga have had it all over Ports of Auckland for quite a few years now, particularly with the way the employee structure differs between the two companies, Port of Tauranga being a lot more flexible."

The Tauranga port operator said an 18 percent fall in dairy exports over the comparable period because of a drop in dairy volumes. It has previously attributed this to disruptions from Fonterra's August botulism scare.

"There was a lag in dairy exports, but our expectation is that it will go back up in trade at the end of this year," Mark Cairns chief executive of the port told BusinessDesk. "There was also the loss of the Southern Star line returning to Port of Auckland."

"I suppose congratulations are due to Ports of Auckland," Cairns said. Port of Tauranga had held onto container volumes post-strike longer than expected, and was still 35 percent above 2011, pre-strike, levels.

An increase in log exports, dairy feed and fertiliser imports offset the decline in container volume. Overall exports climbed 6.6 percent to 6.8 million tonnes and imports were up 4.1 percent to 3.1 million tonnes.

First-half operating earnings rose to $66.7 million from about $60 million a year earlier. Revenue rose about 16 percent to $137 million, though operating expenses increased 20 percent to $70 million, largely on employee and maintenance costs.

Cairns said the rise in expenses was a distortion resulting from a shift in equity accounting and costs that weren't recognized in previous years.

Underlying net profit edged up 0.4 percent to $39.3 million, excluding a one-time $38.3 million gain from the sale of logistics company C3 Limited in 2012.

Port of Tauranga is pushing to become New Zealand's dominant freight gateway, expanding its wharves, through an estimated $40 million to $50 million dredging plan due to start this year, and has expanded to the South Island, buying 50 percent of PrimePort Timaru and land south of Christchurch to develop another freight hub. It has also invested more in its MetroPort facilities in Auckland.

The company affirmed its forecast for full-year earnings of $77 million to $81 million

"The company is getting a foothold in the South Island now, capital expenditure on land this financial year is forecast to be relatively heavy," Williamson said. "The company is maintaining a pretty impressive track record of earnings growth, although it has slowed somewhat as the company has got larger and larger."

The company increased its dividend payout 5 percent to 21 cents per share. The shares slipped 0.4 percent to $13.79 and are up 1.1 percent this year.

"Quite often we do see it where it is a good result but investors don't see any reason to buy the stock in the short term and it just drifts of a little bit, and that's what we're seeing here today," Williamson said.

(BusinessDesk)

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