SPN
22/10/2015 10:33
FORECAST
PRICE SENSITIVE
REL: 1033 HRS South Port New Zealand Limited (NS)
FORECAST: SPN: South Port Annual Meeting 2015
South Port New Zealand Limited - Annual Meeting
22 OCTOBER 2015
NZX AND MEDIA RELEASE
Diversified trades cushion South Port
South Port New Zealand's strategy of diversifying earning streams has
protected the Company's revenue from adverse economic cycles.
The Chairman, Mr Rex Chapman told shareholders attending the Annual Meeting
in Bluff today, the 2015 result is "particularly pleasing because this time
last year we did not predict such a good result, given the growing
competitive pressure in container activity and falling commodity prices."
South Port has earlier reported another record cargo throughput at Bluff of
2.68 million tonnes, a 5% increase on 2014, which resulted in another record
net profit after tax of $7.7 million, up 15% on 2014.
The Company has diversified across container and bulk cargoes transfers,
warehousing, cold storage, property and infrastructure leasing and this has
been rewarded.
Stronger-than-expected volumes of imported bulk cargos, notably of stock food
and fertiliser, contributed to the record performance. "We were pleasantly
surprised that these particular cargos held up so well in such a difficult
period for the dairy sector."
Mr Chapman said, "Over the last five years, South Port has steadily increased
dividends from 20 cents per share to 24 cents per share. Since listing in
1994, the Company has delivered about $165 million to shareholders through
share price appreciation and annual dividends."
South Port's strategy is to maintain good working relationships with all of
the New Zealand ports in order to take advantage of "inevitable changes" in
the port sector.
"Just as Tauranga has now reached into the South Island through Timaru, it is
expected that other ports will be seeking to enter into working relationships
with one another in order to capture regional cargo outside of their
immediate catchment area."
New supply chain agreements such as that between Kotahi and Port of Tauranga
have triggered "intense competition between shipping companies for the
remaining cargo and shipping rates are at unsustainably low levels," said Mr
Chapman.
Some New Zealand ports were undertaking dredging to ensure they could accept
larger container vessels up to 6,500 TEU in capacity.
"This will mean that the ports, at which larger vessels will call, will have
to look beyond their own backyard for containerised cargo to fill the
vessels. Inland ports and freight centres are the key to aggregating this
cargo."
INLAND FREIGHT HUB
He confirmed that South Port is advancing plans for an inland facility, as
signalled at last year's annual meeting.
"The facility, to be known as the Invercargill Freight Centre (IF), might be
'modest by comparison' to similar developments in other provinces; however,
it is an important development being provided in response to changes in the
supply chain landscape", said Mr Chapman, "and could lead to further
commercial opportunities."
As well as providing a cost competitive and efficient import-export service
for the southern region, the IFC would further diversify South Port's
earnings. Construction is to start this summer, on a 0.80 ha. site in Mersey
Street, Invercargill, adjacent to the KiwiRail rail-head, with the target of
a July 2016 completion date.
South Port's container shipping customer MSC faces competitive pressure to
retain and attract cargo out of Bluff and the Port operator is working
closely with the shipping line to support continuation of its call at Bluff.
South Port had invested $6.5 million in capital expenditure to retain the MSC
connection. Chief Executive, Mark O'Connor said, "the second crane model has
improved Port productivity and the five year target was 50,000 TEU annual
throughput."
Over a 7-year period the cargo profile has grown by 54% and that translated
to a sustained lift in profitability in that same time frame. Assets
utilised have grown by 47% in the same period.
The dairy sector brought many spin-offs across imports of fuel, fertiliser,
bulk liquids and raw materials plus exports of finished product.
Rayonier resumed the direct export of logs in 2015 and there is a likelihood
of forestry growth. However, while the prospects for Great South Basin oil
and gas exploration remain positive, activity is delayed by the weak global
energy market.
The potential outlook for the NZAS aluminium trade has improved with greater
certainty about the ongoing activity at Tiwai Point following the August 2015
negotiation between NZAS and the Smelter's energy supplier Meridian Energy.
Despite having to manage a low point in the aluminium commodity cycle, this
means that the Smelter's owners and management have a focus on an operating
period out to 2030 rather than 2017. Further necessary value could be
secured through a revised electricity distribution pricing model.
OUTLOOK
"With just over a quarter of the FY16 year completed and at the start of the
export season, it is difficult to predict what lies ahead for the current
year", said Mr Chapman.
"The FY15 record result underscores the contribution from bulk cargoes,
several aligned to the dairy sector", he said. "It has been a relief to see
recent gains in the GlobalDairyTrade auction price, which will hopefully lead
to the milk price forecast moving back above $5/kgMS. The low pay out is
expected to result in a 5-10% drop in annual milk supply this season."
The effects of the lower pay out on stock food import volumes are unclear.
The use of supplementary feed in Southland is lower than in other provinces
and volumes may be less affected.
Log export activity is consistent and could expand over the next few years,
assisted by larger harvests, opening of new markets, a lower currency and low
freight rates.
With market conditions more subdued, the Company is forecasting a slightly
lower level of net profit for FY16. An update on earnings guidance will be
provided when the 2016 interim result is released.
FOR FURTHER INFORMATION PLEASE CONTACT:
Mr Mark O'Connor
Chief Executive
South Port New Zealand Ltd
Tel (03) 212 8159
Mr Warren Head
Managing Director
Head Consultants Ltd
Tel (03) 365 0344
Mobile 021 340 650
End CA:00272163 For:SPN Type:FORECAST Time:2015-10-22 10:33:47
