SPN
20/08/2014 14:42
FLLYR
REL: 1442 HRS South Port New Zealand Limited (NS)
FLLYR: SPN: South Port Year End Result
20 August 2014
Record result in South Port's milestone year.
South Port New Zealand Ltd has marked its 20th year since listing on NZX with
a record net profit after tax of $6.68 million.
This excellent result is driven by stronger bulk cargo activity with total
cargo throughput for the business reaching a new record level of 2.72 million
tonnes.
South Port achieved several significant milestones during the year. The
Chairman Mr Rex Chapman said it is 25 years since the assets of the former
Southland Harbour Board passed to the then new corporate South Port New
Zealand Ltd. South Port was listed in July 1994.
In other areas of the business margins were however mixed with cold storage
returns being adversely affected by changing market patterns and additional
handling requirements. Conversely dry warehousing activity continued to
deliver a consistent contribution to NPAT.
The reported after tax profit is 2.8% greater than the 2013 result of $6.50
million and exceeds earlier earnings expectations by the company, said the
Chairman Mr Rex Chapman.
Revenue from port and warehousing operations equated to $31.3 million ($29.3
million) representing an increase of 7%, he said.
Operating profit before financing costs and tax increased by 3% to $9.3
million ($9.0 million), while financing costs increased to a level of
$390,000 ($270,000).
Earnings per share were 25.5 cents per share (24.8 cents per share).
NEW EQUIPMENT
In March of this year South Port committed to a second Liebherr mobile
harbour crane and an additional heavy-lift container forklift for an outlay
of $6.3 million. This enables a two container crane operating model to be
made available for the MSC Capricorn Service, allowing the shipper MSC to
reduce its "time-in-port" operating window but with an increased volume of
containerised cargo exchanged.
The new crane and forklift will enable South Port to service the projected
growth in containerised cargo over the next 5 - 10 years, said Mr Chapman.
He said a two-crane infrastructure levy will partially bridge the gap between
container revenue generated over the next 3-4 years and the investment return
being targeted.
"The required lift in cargo to support this level of capital expenditure will
take several years to achieve and this new levy will partly assist the
company to finance these new assets during the anticipated growth period.
Once the required level of containerised cargo activity is achieved it is
intended that the 2-crane infrastructure levy be removed".
As a result of the two container crane operating model being introduced plus
other generic growth, South Port will be undertaking recruitment over coming
months to supplement its workforce.
In establishing the level of dividend payment, directors took into account
the company's modest profit improvement this year plus its need to fund
future capital expenditure. Accordingly, the Board elected to pay a final
dividend of 16.0 cents. This translates to a full year dividend of 22.0
cents, which is consistent with the prior year (2013 - 22.0 cents).
Full imputation credits will be attached to all distributions. The dividend
payment represents a gross return of 8.8% (net 6.4%) based on a share price
of $3.46 as at 30 June 2014. A dividend payout ratio of 86% results for 2014
(using reported NPAT) and equates to 79% of Free Cash Flow. This level of
income distribution is similar to the prior year payout ratio of 89%.
Total equity is $31.4 million ($30.6 million) after allowing for dividend
payments during the period of $5.64 million ($5.51 million).
Total group assets stand at $45.7 million ($41.3 million). Net tangible
asset backing per share equates to $1.20 ($1.17 per share).
Current assets amount to $11.0 million ($5.5 million), with current
liabilities at $13.9 million ($10.0 million). Term liabilities total $0.4
million ($0.7 million). Property, Plant and Equipment stood at $34.7 million
($35.8 million).
CARGO VOLUME AHEAD
Total cargo volume at 2.72 million tonnes was an increase on 2.51 million
tonnes in FY13 and was just slightly ahead of the prior record volume level
of 2.69 million tonnes set in FY12, said the Chief Executive Mr Mark
O'Connor". "The 8% improvement in volume was largely driven by stock food
and logs while other cargo categories maintained their more recent buoyancy".
Imported stock food volume was double the FY13 level, registering a new
record for this cargo category.
Log exports through South Port surged to their highest level at 390,000
tonnes, mostly to the Chinese market; however, this demand has since
softened, bringing with it a corresponding drop-off in export activity.
Nevertheless, forestry exports (logs/woodchips and sawn timber) now represent
close to 25% of the total cargo volume being handled by South Port.
Fertiliser and petroleum products remain sizeable bulk cargoes and contribute
positively to the Port's overall performance. Both of these cargo categories
delivered volumes which tracked closely to the prior year's buoyant levels.
After a slow first quarter in FY14, annual containerised cargo totalled
32,700 TEU compared with 34,800 TEU handled the previous year. Full
container numbers increased year on year from 19,700 TEU to 20,700 TEU
highlighting the lift in full imported containers of which stock food and
feed supplements were a significant component.
NZAS related tonnages were steady and the Tiwai plant continues to focus on
achieving further business efficiency gains.
"Key decisions will be required by this significant customer within the next
18 months as it works through the implications of potentially securing a
reduced contracted parcel of electricity from Meridian Energy, notes South
Port. NZAS currently sources 572 MW annually under contract from Meridian
Energy but an opportunity for this supply commitment to reduce to 400 MW
exists under the 2013 renegotiated agreement entered into by the parties.
The downturn in the international softwood chip commodity market resulted in
lower 12 monthly volumes through South Port. "It is unclear when the market
for this product will recover," said Mr O'Connor.
"Despite a recent trend of falling global dairy prices, participants in this
sector would have experienced strong financial returns over the past season.
The dairy industry continued to be an important contributor to South Port's
overall activity providing a growing volume of import and export cargoes".
Shell NZ, together with its consortium partners OMV NZ and Mitsui E&P
Australia will be advancing exploration in the Great South Basin (GSB) around
the first quarter of calendar 2016. This exploration activity is likely to
involve a 50-60 day operating period and a one well drilling exercise is
estimated to cost NZ$200 million.
Bluff is able to provide the necessary service infrastructure when it comes
to meeting the requirements of an exploration/production base, said Mr
O'Connor.
"Shareholders need to also be aware that should oil and gas industry
participants choose to undertake exploration drilling in the GSB, the choice
of an exploration base will be significantly influenced by the ultimate
location of the exploratory wells," said Mr O'Connor.
WAREHOUSING CONTRACT
A new warehousing contract signed in May with Open Country Dairy (OCD) will
accommodate increased dairy output from its Southland production plant. OCD
has chosen to expand its milk powder production base at Awarua (15 kms from
Bluff). The second milk powder dryer is currently under construction and
will be commissioned in spring this year resulting in a doubling of Southland
production over the next two seasons.
All available dry warehouses located on the port environment are now fully
tenanted for the coming financial year.
OUTLOOK
A major topic preoccupying the freight industry is the flow on effect for
cargo providers of a new freight alliance formed, said Mr Chapman. "We
believe that the significant scale of the freight now being directed by
Kotahi/Port of Tauranga/Maersk will send ripples out into the NZ market.
Whether this ultimately results in less competition and capacity and as a
result creates higher costs for some exporters and importers will take some
time to become clear".
"South Port maintains a view that market forces will ultimately dictate what
level of service capacity and frequency is required by NZ exporters and
importers. If collaboration enhances the form and efficiency of freight
movements then it is to be applauded.
"If it has the opposite effect then at some point decisions will be made by
cargo providers which will target restabilising the freight market
equilibrium. In South Port's case it will continue to work hard to provide
cost effective freight solutions for Southern regional operators to assist
their businesses participate in global markets. The investment in the second
mobile harbour crane is aimed at maintaining competitive shipping options for
local shippers"
Turning to the cyclical weakness for dairy and forestry goods, he said the
immediate outlook for these products "is certainly not encouraging and will
place downwards pressure on certain cargo categories. South Port and its
customers operating in these sectors are taking a more conservative view of
projected activity for the coming season".
"Taking into account the above cyclical cargo factors, South Port is
forecasting a similar overall cargo level but a slightly lower level of
tax-paid profit for the 2015 financial year".
"This forecast takes into account both anticipated challenging conditions in
certain sectors and the impact of investing in new container handling
infrastructure which will require a number of years of container cargo growth
to generate an appropriate financial return".
BOARD
Mr Rex Chapman and Mr Jeremy McClean retire this year by rotation and being
eligible are up for re-election.
Long serving Manager Russell Slaughter who had responsibility for the
Infrastructure and Marine areas of the business retired at the end of F2014.
"The company acknowledges the valuable contribution made by Russell over
several decades and wishes him well for his retirement," said Mr Chapman.
FOR FURTHER INFORMATION PLEASE CONTACT:
Mr Mark O'Connor Mr Warren Head
Chief Executive Managing Director
South Port New Zealand Ltd Head Consultants Ltd
Tel (03) 212 8159 Tel (03) 3650 344
Mobile 021 340 650
SOUTH PORT FACTS
- Owns and manages assets which have a book value of $45 million
- Directly employs more than 77 full time equivalent staff
- Is the only Southland based company listed on NZX - market capitalisation
as at 30 June 2014 equates to $91 million
- Handles in excess of 2.6 million tonnes of cargo in a normal trading year
- Offers full container, break-bulk and bulk cargo capability and services
the following main cargoes:
- import - alumina, petroleum products, fertiliser, acid, fish, stock food
and cement
- export - aluminium, timber, logs, dairy, meat by-products and woodchips
- Has split its land-based operating resource into four main divisions -
dairy warehousing, containers, cool & cold storage and general cargo
- Undertakes its primary port operation on a 40 ha man-made Island Harbour
situated at Bluff
- Operates a separate dedicated fuel berth at Bluff Town Wharf plus provides
the Tiwai Wharf facility to NZAS under a long term licence
- Services vessels carrying approx 1.0 million tonnes of cargo destined for
movement across the Tiwai Wharf each year, of which 2/3 is raw material
imports while 1/3 is finished aluminium product
- Has approximately 7 ha of on-port land available for further port
development or industry establishment
End CA:00254132 For:SPN Type:FLLYR Time:2014-08-20 14:42:40
