Port no shelter from global storm

Ports of Auckland’s performance for the first six months of its financial year, released today, is likely to be better than its second half as the impact of a global recession continues to worsen.

But that’s not saying much, judging by its first quarter numbers: for the three months ended September 30, Ports of Auckland’s profit was $5.8 million, compared to $6.4 million for the first quarter of 2007/08.

While this is not a significant decline in dollar terms (although it is a 9.3% slump, simply because the figures involved are now so small), it is the continuation of a long-term trend of whittled-down profits.

The Auckland ratepayer-owned port’s last full year result, for example, was a profit of $21.1 million. This was down on $64.6 million the year before.

For the most recent September quarter, total container volumes were up 4.5% compared with the first quarter of 2007/08.

Breakbulk and bulk (non-containerised) cargo volumes were down 8.8%

While the port did have its highest ever container volumes in December, which may help to reverse its failing fortunes, volumes slumped again in January - down 4.7% on the same month last year.

At that point Ports of Auckland managing director Jens Madsen adopted a bearish attitude towards the port’s throughput in the remainder of the financial year.

“Over the last few months, there have been reports of significant reductions in container volumes through major world ports such as Singapore and Long Beach. New Zealand seems to have remained fairly insulated from the impacts until now.”

“As flagged last month, we are gearing the business to cope with what appear to be very challenging times ahead,” Mr Madsen added.

Ports of Auckland has reignited a war of words with its main rival Port of Tauranga in recent months, signing on as a major customer of wannabe Tauranga container terminal operator NZL Group and issuing a media statement saying it was keen on a merger with the Tauranga port but had been snubbed.

Both issues have drawn heated response from Port of Tauranga chief executive Mark Cairns, who says that NZL Group’s contractually-obligated rights are much narrower in scope than a full container terminal and the partial merger that Ports of Auckland had proposed was not in the interests of “shareholders, customers or New Zealand as a whole.”

Ports of Auckland’s council-controlled owner Auckland Regional Holdings scuttled full merger talks two years ago.

The pressure from ARH on the Auckland port to keep providing dividends is not likely to abate any time soon, after ARH lost $5.3 milion in the July-September quarter, compared to a budgeted profit of $17.1 million, mainly due to declining values of its diversified financial portfolio.

“This loss for the quarter is significant and, unless recovered in future periods, will strongly limit the Auckland Regional Council’s financial flexibility, as the loss reduces ARH’s ability to make distributions to the ARC over time.

“The main issue is that after ARH has exhausted its cash portfolio, which was around $201 million as at September 30 2008, ARH will need to either borrow or break its “diversified financial assets” investments in order to make distributions.

"This could arise as early as 2010, and needs to be monitored carefully,” the council subsidiary says.

Last year ARH wrote down the book value of Ports of Auckland by $92.1 million, from $587.8 million to $495.7 million, citing the port’s “more difficult trading circumstances”, as already forecast in its Long Term Funding Plan 2008-18, as the reason for the change.

Ports of Auckland is also expected to provide $24.3 million less in dividends in the next three years and $100 million less over the next 10 years, than was forecast in 2007.


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