POT
22/10/2015 14:48
ADDRESS
NOT PRICE SENSITIVE
REL: 1448 HRS Port of Tauranga Limited (NS)
ADDRESS: POT: Port of Tauranga Annual Meeting: Chair & CE's Address
Chairman's Address:
Our Chief Executive, Mark Cairns, will talk to you in a few moments about our
operational performance over the past year, but first I would like to give
you an overview of recent highlights and progress in our intent to be New
Zealand's Port for the Future.
So to the numbers...
I am pleased to report a new record Profit After Tax of $79.1 million - a
1.1% increase on last year.
Group EBITDA increased by 1.7% to $145 million.
Our land and wharf infrastructures were revalued as at 30 June, increasing by
$81.5 million. $52 million of this uplift arises from the revaluation of our
wharves where the estimation of replacement cost has had to reflect the new
earthquake code provisions.
I am proud that the Company has sustained earnings growth over the last
decade, including throughout the global financial crisis, and in fact has
been one of the best performing companies on the Stock Exchange over a very
long period. Since listing 23 years ago in 1992, the Company has delivered
an average annual compounding total shareholder return of 22.7% as compared
with the NZX All Gross Index moving 9.7% over the same period.
Overall, traffic flows from our expanded freight catchment helped offset the
falls in log exports from Tauranga.
Total trade volumes increased 2% to just under 20.2 million tonnes.
The final dividend of 30 cents per share was paid on 2 October, bringing the
full year, fully-imputed dividend to 52 cents per share. That's an increase
of 4% from last year. Despite our heavy capex programme in recent years, our
balance sheet remains very strong and as previously signalled, the Board
intend reviewing our capital structure next year on completion of the
dredging programme with the intention to maintain our steady growth in
dividends to shareholders.
Across the Port of Tauranga Group, the big change for the year came with our
establishment of Coda. Our subsidiaries Tapper Transport, Priority
Logistics, MetroPack and MetroBox, joined together with Kotahi's Dairy
Transport Logistics to form the new logistics joint venture.
Coda's mission is to find efficiencies across the supply chain, eliminating
waste in the system.
Our investment in PrimePort Timaru continues to gather momentum, with
container volumes going through the Timaru Container Terminal increasing by a
staggering 3.5 times.
PrimePort has also had a strong year in bulk cargoes, and Holcim's new South
Island cement distribution facility is currently nearing the end of
construction at the port. PrimePort is rebuilding its number two wharf to
accommodate the import ships and coastal feeder services that Holcim will
use.
Northport had another good year, and has purchased its first mobile container
crane to expand the cargoes it can handle. The port is also preparing a 2.5
hectare storage site, including refrigeration connections, to manage
containerised cargo.
We're hoping Northport will be able to capture some of the estimated 30,000
TEUs bypassing the port each year on their way to Auckland.
At Tauranga, we are delighted to see the dredging project finally get under
way.
It is the final building block to be put in place to prepare us for the new
era in international shipping.
The average size of ships calling at Tauranga has been steadily increasing
over many years, but we expect this to accelerate when the new generation of
larger vessels is introduced to Australasian shipping routes. We expect
these bigger ships - capable of carrying in the region of 6,500 TEUs - to
start arriving in 12 to 18 months' time.
We have the capacity to handle the larger volumes of cargo heading our way.
We have future-proofed, by making strategic land purchases and buying
equipment that meets our high expectations for efficiency.
And we have also invested in the alliances we will need, such as our freight
volume agreements with Kotahi and our partnership with KiwiRail.
We will help secure New Zealand's global competitiveness and meet our
customers' complex needs. Which is all good news for you, our shareholders.
I would like to thank my fellow Directors for their efforts over the past
year. In particular, I would like to acknowledge John Cronin and Keith
Tempest, who retire by rotation and will not be seeking re-election.
John has served on the Board for more than 13 years and for much of that time
has also served as Chair of the Bay of Plenty Regional Council. His local
government experience has ensured the maintenance of an excellent
relationship with the council and Quayside, our major shareholder.
Keith, who is a former Chief Executive of Trustpower, has served on the Board
since the end of 2010, lending his extensive expertise in capital investment
projects.
We wish both John and Keith well for the future.
I'd like to introduce two new Directors for appointment today. Doug Leeder
is the current Chair of the Bay of Plenty Regional Council and has strong
links throughout the region.
I would also like to formally welcome Julia Hoare. Julia was a partner at
PwC for 20 years before retiring at the end of 2012 to pursue a full-time
governance career.
We look forward to working with both Doug and Julia.
Looking ahead to the coming financial year, we expect overall cargo volumes
to be flat over the coming year but with continued growth in container
volumes
All of our primary produce sectors are vulnerable to the cyclical nature of
international demand and price fluctuations. Our Company's diverse cargoes
and income streams protect us somewhat from this volatility.
We have built a solid foundation for the future. Fifteen years ago, we saw
the opportunity to extend our reach beyond our Bay of Plenty and Waikato
hinterland. Now, the Group extends from Northport in Whangarei to PrimePort
at Timaru, giving us a national, integrated network for our customers.
Thank you for your attention and I'd like to hand over now to our Chief
Executive, Mark Cairns.
Chief Executive's Address:
Good afternoon Ladies and Gentlemen.
Privileged to be your Chief Executive, I am proud to report on another
successful 12 months for our Company. The past year has been significant in
seeing us commit to the final building block to our growth enabling story and
I'd like to talk about some of those achievements here today.
It was a very proud moment for me to see the Brage R formally blessed by the
Port's Kaumatua Kihi Ngatai and depart number four berth on its first mission
in our long-awaited dredging project.
Following an international tender process, we awarded a contract to Danish
company, Rohde Nielsen, to undertake the dredging project. The 2,000 cubic
metre Brage R started work at the beginning of this month and will be joined
by a much larger dredge, the 6,000 cubic metre Balder R, by the end of the
year.
The dredging project is the culmination of a five year, $350 million
investment programme to future-proof the port for the next 20 to 30 years and
will make us the first New Zealand port able to host container ships with a
capacity of 6,500 TEUs at low water tides.
This year, we have also taken delivery of two brand new tug boats, with
sufficient power to safely handle the larger ships.
The Tai Pari and her sister vessel the Tai Timu (who are named after the
flood and ebb tides) are already hard at work, joining the Sir Robert in our
tug fleet.
Also at Tauranga, we have ordered a further two new super post-panamax size
gantry cranes for the container terminal, in order to continue to provide our
customers with world class productivity and unrivalled berth and crane
intensity options in New Zealand. Our team in the container terminal can
regularly sustain vessel productivity rates in excess of 120 moves per hour,
with another record being set during the year on the Maersk Triple Star
vessel, the JPO Vela which achieved a sustained vessel rate of 138 moves per
hour and an average net crane rate of 41.9 moves per hour.
The two new cranes will be delivered towards the end of 2016, which is when
we expect these larger vessels to start becoming regular visitors.
In the South Island, Timaru Container Terminal has invested in a third mobile
container crane. As the Chairman mentioned, container volumes handled at
Timaru have more than trebled and we are also expecting record container
volumes for October, so the new crane will help ensure that we meet our
customer's productivity expectations at this port also.
Our operations in Timaru are complemented by our new MetroPort Christchurch
inland port facility at Rolleston. MetroPort Christchurch opened for
business in August and is linked to Timaru by road and rail.
We have 15 hectares of land at this ideally located site and will use it to
aggregate cargo in the same way we have established MetroPort Auckland as a
significant inland port and we expect volumes to grow strongly once the big
ships start calling at Port of Tauranga next year.
Looking back over the 2015 year, we saw some significant shifts in the
container volumes we are handling.
Our freight agreement with Kotahi is taking effect, contributing to an
increase of 12% in containers handled. We are now handling 95% of the North
Island's dairy exports, with lower North Island cargoes from Whareroa and
Pahiatua dairy factories now being consolidated across our quays.
Trans-shipped cargo - which is transferred from one ship to another at the
port - increased another 17% in volume, which is a clear indication
Tauranga's emergence as New Zealand's hub port. We expect container volumes
will exceed 1 million TEUs in FY17 upon completion of the dredging project.
Imports increased 8% to 6.9 million tonnes. Imported fertilisers increased
7% in volume but grain imports decreased 13%, reflecting the mixed fortunes
in agriculture at the moment.
Demand from the domestic construction industry contributed to a 55% increase
in cement imports.
We also handled many more imported vehicles than usual, more than double the
previous year.
The increase in imported cargo has resulted in a rise in containers handled
by MetroPort Auckland, and we have increased train traffic from five to six
return services most days. There is significant route capacity on rail to
eventually grow to up to twelve return trains per day.
We consider that the long term commercial sustainability of rail is
absolutely critical to an efficient land transport network for New Zealand.
During the period, we have negotiated with KiwiRail, an extension of our long
term partnership out to 2023. Last year, the volume increase on MetroPort
trains was an impressive 25% and now northbound and southbound loads are
perfectly balanced, and with the highest train load utilisations that I have
seen in my decade at the Port.
Total exports dipped slightly, by 1%, to nearly 13.3 million tonnes.
This was driven primarily by the decrease in log exports, which fell 11% to
just under 5.6 million tonnes, due to high inventories and ongoing price
pressure in China.
Sawn timber exports dropped 2% as domestic demand remained strong, while
frozen meat exports increased by 32%.
Kiwifruit exports have bounced back from PSA, and in the 2015 year increased
by 19% in volume.
Kiwifruit is a New Zealand success story with Zespri International gearing up
for strong export growth over the next few years. By 2019, volumes are
expected to be 70% more than in 2013. This is another industry that will be
investing in production, storage and transport components of the supply chain
to meet the forecast growth.
We had another successful cruise ship season. We consider facilitating the
growth in cruise ship visits is very important in terms of the Port's licence
to operate in the community. Eighty-four cruise ships brought nearly 150,000
passengers to the Bay of Plenty, generating an estimated $35 million of cash
spent in the region over the season.
Our dredging project is not only to cater for container ships. One of the
first big ships we will host post-dredging is the giant cruise ship Ovation
of the Seas, in its maiden voyage to New Zealand in the summer of 2016/2017.
This Royal Caribbean vessel is 348 metres long, more than 50 metres high, and
can host nearly 5,000 passengers and 1,500 crew members.
We will also get larger bulk vessels. Just in the last few weeks, we had a
visit from the SV SBI Maia, the world's largest specialised log carrier, on
its maiden voyage.
We are working closely with the Nga Matarae Trust, which was established with
local iwi organisations to help mitigate any impact on cultural and spiritual
values from the dredging work.
The Trust has given us a great platform for ongoing discussions about how we
can maintain and improve the health of the harbour, and raise any issues of
concern.
We've also taken a collaborative approach to addressing biosecurity. We've
formed a working group with Kiwifruit Vine Health, the Ministry for Primary
Industries and other organisations to look at initiatives to improve
awareness and compliance.
Speaking of awareness and compliance, I am extremely pleased with the
progress we have been making across the Company in our health and safety
capability.
We have reduced our lost time injury frequency rate by a further 6% to 2.9
per million hours worked.
However, I still consider any injury, no matter how minor, one too many, and
we will continue to insist that safety remains our number one priority.
Above all else, we value human life and expect that all of our port
colleagues will go home to loved ones at the end of their shifts in the same
condition that they entered the port gate.
Once again, I am hugely proud of our Port People, who provide the Company
with our greatest source of competitive advantage. Our people work around the
clock, in all weathers, and thrive on the challenges presented to them. They
make my job look easy by continually striving to do things better and
demonstrate an enduring "can do" attitude to doing business with our
customers.
Before I wrap up, I'd like to update on our performance in the first quarter
of the 2016 financial year and contrast with the same period last year.
We have trade down 2%, largely due to log exports being down 17%, which is
partly due to the conversion of approximately one million tonnes of
previously exported logs now being processed into square lumber by the new
Lumbercube mill in Rotorua. This has been offset by dairy volumes being up
21% and container volumes continuing to grow a further 8%, reinforcing our
emergence as a hub port. We have Group EBITDa flat and Net Profit After Tax
down 2% on the prior corresponding period, reflecting the interest and
depreciation expense on the significant $350 million investment we have
completed, ahead of the big ships calling next year.
Despite the positive increase in container volumes, due to the uncertainty
around log and dairy volumes, along with the flow on effects to imports of
farms inputs such as fertiliser and stock feed supplements, at this early
stage we expect to achieve full year earnings similar to last year. Having
said that, we do note the recent Agrifax report released earlier this week,
reporting of a pick-up in demand, which has significantly reduced inventories
on Chinese ports from 4.7 million tonnes to approximately 3 million tonnes,
supporting an increase in average wharf gate prices.
Finally, I would like to thank most importantly our customers. They have
supported us in meeting our challenges and aspirations - by working together,
we have created New Zealand's Port for the Future.
I'm excited about the new era we are heading into and I thank you for your
support as we continue on this journey.
Thank you Ladies and Gentlemen.
End CA:00272192 For:POT Type:ADDRESS Time:2015-10-22 14:48:01
