SPN
31/10/2013 10:55
ADDRESS
REL: 1055 HRS South Port New Zealand Limited (NS)
ADDRESS: SPN: South Port Annual Meeting
NZX and Media Statement
31 October 2013
Annual Meeting South Port New Zealand Ltd ('SPN')
"Primary exports underpinning South Port"
South Port New Zealand Ltd, operators of the Bluff port for the country's
southern region, underscored the region's expanding primary exports growth at
the Company's 25th Annual Meeting today.
Bluff is strategically positioned to benefit from the growth in dairying,
which South Port Chairman, Mr Rex Chapman, says "is likely to continue for
some years to come" and log exports with ongoing demand from China "likely to
remain strong in the short to medium term" and then later by larger harvests
in the region's forests.
Shareholders have been rewarded in South Port's 25th anniversary year with a
10% higher full year dividend of 22 cents per share, following an 8.5%
increase in the Company's after tax profit to a record $6.50m, surpassing the
prior record of $6.26m set in 2011.
The earnings result was achieved despite a 7% reduction in cargo volumes to
2.51 million tonnes brought about by lower activity at the NZAS aluminum
smelter at Tiwai Point, slowed exports of woodchips and reduced imported
stock food.
Approximately 100,000 tonnes or around 56% of the reduction in volume related
to lower NZAS activity. Mr Chapman said the new power contract negotiated by
NZAS and Meridian Energy will provide "some much needed certainty for this
nationally significant business and for the Southland region" and South Port
hoped the new contract will help establish a competitive cost position for
the smelter's longer term operations.
Following a period of rapid growth, South Port is consolidating gains made
and reviewing operating costs to ensure optimum efficiency.
Mr Chapman said that at this early stage of the 2013-14 year the Company's
warehouse inventory levels are much lower than in the prior year and the
first quarter has resulted in a slower start in cargo handling.
"Based on that, we are forecasting a lower level of tax paid profit - perhaps
back between 5-10% - for the 2014 financial year." He added that "even at
this slightly reduced level this would be a very satisfactory result in the
current environment."
The Chairman and Chief Executive, Mark O'Connor, detailed the Company's
position in the context of strategic objectives.
o The dividend policy to relate payments to free cash flow and profitability
has resulted in a sustained and 'very substantial' rise in dividends over
recent years.
o The strategy to protect existing trade and develop cargo growth has
resulted in a further 6,000m? of dry warehouse capacity on the Port's Island
Harbour at a cost of $4.8m and now fully tenanted, since completion in June
2013
o A $1.75m upgrade to container terminal paving over two years was completed
o Larger 4,000 TEU container vessels are now serviced on the weekly call by
the MSC shipping line.
Capital expenditure will be reverting to a lower level in 2014 subject to
further investment opportunities identified.
South Port is committed to delivering a cost-effective, efficient, container
handling capability.
A year ago, South Port acquired the Bluff-based Southland Cool Stores
business and the enlarged single cold storage division has achieved economies
of scale and efficiencies that have improved the financial contribution.
Commenting on port sector rationalisation, Mr Chapman said the acquisition by
Port of Tauranga of a 50% shareholding in PrimePort Timaru, whilst a very
significant development, poses no threat to South Port's business model.
"What it does highlight is that longer term value can be seen through
strategic alliances between ports."
South Port's Directors believe dairy sector growth provides good growth
opportunities for the Port. Over the last 20 years the number of dairy cows
in Southland has more than doubled. "Exports to China alone are now greater
than our entire dairy exports (as a country) 20 years ago."
The dairying growth also means growth in imported packaging materials and
ingredients for existing warehousing and freight customers Open Country Dairy
and Fonterra.
Open Country Dairy is currently constructing a second milk powder dryer at
its Awarua production site. Negotiations relating to the warehousing of the
additional cargo that will flow from this expansion have yet to be completed.
South Port expects substantial growth in the regional forestry industry, not
so much from demand but from the forecast increased volume which will exceed
future domestic processing demand and will need to be exported.
The Port Company is cautiously optimistic that a positive decision will be
made by the Shell-led consortium to commit by February 2014 to exploration in
offshore petroleum licences in the Great South Basin. Though there is no
certainty of this, a number of the same companies in the consortium recently
decided to take up an additional exploration permit in the Basin.
The financial demise of Solid Energy has disrupted prospects for development
of Southland's lignite resource and it remains to be seen whether a new party
will take up the opportunity.
Mr O'Connor said trading conditions for some sectors are still challenging
and South Port would target continued growth by evolving business beyond the
Port gate. The Company had acquired 0.63 ha bare land at the Invercargill
rail-head and is targeting off-port warehousing & container activity on this
site.
"Primary industries are key for the Port and region - dairy, forestry and
energy are likely to drive future expansion."
FOR FURTHER INFORMATION PLEASE CONTACT:
Mr Mark O'Connor Mr Rex Chapman
Chief Executive Chairman
Tel: 03 212 8159 Mob: 027 454
8455
Mob: 0272 560 407
End CA:00243138 For:SPN Type:ADDRESS Time:2013-10-31 10:55:16
