LPC
08/11/2013 15:46
ADDRESS
REL: 1546 HRS Lyttelton Port Company Limited (NS)
ADDRESS: LPC: Chairman's address from the LPC Annual Meeting
08 November 2013
NZX RELEASE
CHAIRMAN'S ADDRESS FROM THE LPC ANNUAL MEETING HELD 08 NOVEMBER 2013
It is pleasing to report that LPC had another strong year, with a solid
financial result and increased cargo volumes, as well as significant progress
on earthquake remediation and planning for the Port's future. The result is
testament to our continuing focus on customer service, marketing initiatives
and operational planning, as well as the ongoing robustness of the Canterbury
economy.
Following the temporary repairs programme undertaken post the earthquakes,
LPC continues to plan its substantial reinstatement and development
programme, expand its existing infrastructure and focus on the development of
its people. The substantial reinstatement and development works will ensure
that LPC can continue to contribute to the recovery of Christchurch, and
facilitate economic growth and wellbeing throughout the South Island.
The Te Awaparahi Bay Reclamation has grown to 4.5 hectares and is now
providing valuable car storage.
On behalf of the Board, I thank the Chief Executive, the Senior Management
Team, and each and every member of the staff, as well as our contractors, for
their superb performance. The increased cargo volumes are a testament to
their hard work and determination.
The Company has continued to enjoy positive relationships with customers and
business partners, and has greatly appreciated their on-going and unwavering
support over the past year.
Net Profit after Tax (NPAT)
The Company delivered another solid financial result, with increased
operating revenue from the rise in volumes, a decreased earthquake related
spend, and receipt of insurance proceeds.
The statutory consolidated result, for the year to 30 June 2013, which
includes earthquake effects such as additional costs, depreciation on
earthquake assets, and insurance income, was an after-tax profit of $16.9
million.
The earthquake-adjusted profit after tax was $15.2 million, decreasing 11.1%
from $17.0 million. The Company moved outside its Business Interruption
indemnity periods for the loss of its cruise ship revenues of approximately
$2.2 million and only excludes significant earthquake-related expenditure
from its normalised result.
Operating revenue totalled $110.7 million, up 5.8% from $104.5 million the
previous year.
A reduction in the insurance income accrual of $1.3 million for the year to
30 June 2013 has taken the total accrual to $27.7 million. The Company
received an indemnity progress payment for six of its key harbour structures
of $17.4 million, bringing the total monies received from its insurers to
$53.1 million.
The after-tax result for the financial year reflects the continued underlying
strength of the Company's business fundamentals, as well as its ongoing
business growth. The Company is in good financial heart.
Dividend
The situation remains unchanged since our advice to the market in May 2013.
Whilst additional insurance payments have been received, matters with our
insurers are not finalised and the total financial impact of the earthquake
damage remains unclear. However, the resumption of dividend payments is
expected in the first half of 2014.
The quantum of dividends will be determined by the Directors, having regard
to:
1. working capital requirements;
2. capital expenditure requirements;
3. the timing of reinstatement and development projects;
4. the interests of shareholders; and
5. free cash flow available for distribution.
Insurance Update
Material Damage
During the year progress has been made on the Material damage claim for
earthquake damaged assets. The insurers made a further $17.4 million payment
towards the physical loss and damage suffered as a result of the earthquakes.
This brought the total progress payments received since September 2010 to
$53.1 million. The insurer has allocated this payment to tranche 1 assets,
which are six key harbour structures.
The Company continues to progress its Indemnity calculations for Tranche 2
and Tranche 3 assets. These assets have different natures and require
different calculation methodologies.
Indemnity payments are progress payments on the reinstatement of the
underlying assets. As we reinstate our assets, these progress payments will
be offset against costs incurred in the permanent reinstatement.
Reinstatement and development plan
We received feedback from our insurers on the draft Reinstatement and
Development Plan. The insurers agreed that a number of key assets are
destroyed for insurance purposes, which has enabled us to proceed with
greater confidence in progressing design work on rebuilding those assets.
Reinstatement designs are underway for the Lyttelton Container Terminal
wharves, with construction planned to commence towards the end of 2013.
We remain confident that the Company is taking all necessary steps to put the
plan into action as fast as reasonably possible. The insurers have confirmed
they are proceeding on the basis that the assets are covered for
reinstatement. As the Company reinstates its infrastructure, additional
insurance proceeds are expected to flow as the costs are incurred.
LPC is developing cost estimates on that basis. However, uncertainty remains
over the extent to which this programme of works will be fully funded from
insurance proceeds. The insurers have a view that there is a limit on their
liability per asset, albeit in certain circumstances they reserve the right
to contend that cover is on an indemnity basis. LPC does not accept either
position.
Many complex issues are expected throughout the course of the reinstatement
of assets. However, LPC is committed to working constructively with its
insurers to resolve matters promptly as they arise.
Business interruption
An additional $2.5 million was received from our insurers after the financial
year end. This forms part of the $19.0 million accrued Business Interruption
insurance proceeds as at 30 June 2013.
Over the past year in particular, dealings with our insurers have been
constructive and we have made progress in a number of areas, including the
receipt of almost $20 million against our material damage and business
interruption claims.
We have undertaken a huge amount of work over the last three years in the
assessment and management of our claims. We have engaged over 30 experts
during that time to assist us in this process, across the wide range of our
damaged and destroyed assets.
Since our last update in the Annual Report we have agreed to have mediation
discussions with Vero, our lead insurer, between 16 and 18 December 2013.
The mediation is designed to resolve all of the insurance issues and result
in a settlement.
Operations
During the year the company commissioned four new diesel hybrid straddle
carriers and announced an investment in a fourth ship to shore container
crane and four additional diesel hybrid straddle carriers. These investments
total $23M on plant and equipment for our container terminal, expanding our
capability and investing in reliable service delivery for our customers.
LPC continues to focus on minimising its environmental impact. This is
demonstrated by our procurement of diesel hybrid straddle carriers and the
beneficial reuse of demolition fill in our Te Awaparahi Bay reclamation.
Health and Safety
During the year, the Directors continued to take a direct interest in the
Company's health and safety performance. The Company is committed to a
strategy to achieve a position of Zero Harm; through leadership, educating
staff to take personal responsibility, and ensuring best-practice processes.
The Zero Harm strategy is linked directly to the Company's operational vision
to be a high-performing service organisation.
Key highlights from this strategy have been:
- The implementation of a behavioural safety programme
- The implementation of leading indicator reporting
- The Company has joined the Business Leaders' Health and Safety Forum
- The Company has retained its Tertiary Status under the ACC Workplace Safety
Management Practice Programme
- The accident severity of the lost time incidents has reduced by 63% in the
last year
It is pleasing to note the reduction in lost time injuries but most
importantly, the severity of those injuries. All of the Directors and Senior
Management are participating in a Safety Observation Programme, which
involves regular engagement and safety conversations with employees on all
our sites.
A Health and Safety Report is presented to the Board by the Chief Executive
at all Board meetings, and Health and Safety performance is the first item in
Management Team meetings.
First quarter performance and full year forecast
Now, turning to our results for the first quarter and then looking to the
future.
The result for the first quarter was an earthquake adjusted net profit after
tax of $2.8m, $0.7m below last year's first quarter result. Higher revenues
have been offset by increased maintenance costs, increased employee
expenditure and additional support from advisors, whilst planning for the
rebuild.
Container volumes are up 10.7% over the same period last year. Coal and logs
are well ahead of last year's volumes.
With regard to a result for the full financial year, our current forecast is
for an earthquake adjusted result of between $15 million to $16 million.
Thanks
Looking forward, the Company is in a strong position to deliver ongoing
business growth, while at the same time reinstating earthquake-damaged
facilities and undertaking development projects to meet the demands of
long-term growth.
Once again, I would like to thank the Management team for the excellent
results of the past year. Whilst having to work through disruptive and
challenging work conditions, the team has remained focused on managing and
enhancing the business.
I would also like to thank my fellow Directors for their continued support
and guidance over the past year. The Board continues to work well together
in supporting Management to ensure that the Port continues to operate safely,
efficiently and effectively, and ensuring that resources are available to
progress the various insurance issues, and the development of the
reinstatement plan.
Rodger Fisher retires at this meeting following six years as Chairman and 10
years as a Director of the Company. I would like to thank Rodger Fisher, and
on behalf of the Board, acknowledge the major contribution that he has made.
Rodger Fisher has helped steer the Company through a period of sustained
growth and significant challenges.
During Rodger's time on the Board, container volumes have grown from 130K
TEU's to 350K TEU's. Rodger's contribution to the Company through an
exceptionally challenging earthquake affected period cannot be under
estimated. I am privileged to take over as Chair of the Company when it is in
such a good state.
Trevor Burt
Chairman
Lyttelton Port of Christchurch
For further information contact:
PETER DAVIE
Chief Executive
Lyttelton Port of Christchurch
(03) 328-8198
End CA:00243560 For:LPC Type:ADDRESS Time:2013-11-08 15:46:40
