LPC
02/11/2012 14:27
ADDRESS
REL: 1427 HRS Lyttelton Port Company Limited (NS)
ADDRESS: LPC: Charimans Address from LPC Annual Meeting held 02 November
02 November 2012
MEDIA RELEASE
CHAIRMAN'S ADDRESS FROM LPC ANNUAL MEETING HELD 02 NOVEMBER 2012
It is pleasing to report that once again LPC has demonstrated its ability to
perform in less than ideal circumstances. The results achieved in the year
ended 30 June 2012 were outstanding.
In the 2012 year the Company achieved a record financial result, despite
disruptions due to temporary repair works, with record volumes of containers
and coal, and increases in almost every other form of cargo.
Exports, imports and tranship cargos all grew strongly during the year and
this reflects the continued expansion of the Canterbury and South Island
economies.
During the year, the reclamation to the east of Cashin Quay has grown to 3.0
hectares, which is over a quarter of the approved 10 hectares.
On behalf of the Board, I would like to 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)
Following a strong first half to the year, the Company delivered an extremely
pleasing full year financial result with an earthquake-adjusted profit after
tax of $17.0 million. This is an increase of 40% compared with the previous
year's result of $12.1 million.
The after-tax result reflects the continuing strength of business
fundamentals as well as strong business growth.
The statutory consolidated result, which includes the impact of the
earthquakes such as additional costs, insurance proceeds and revenue lost, is
an after-tax profit of $17.2 million.
Operating revenue totalled $104.5 million, which was up 14.1% from $91.6
million the previous year.
The spend on urgent temporary repairs required as a result of the earthquakes
totalled $15.2 million during the year 30 June, 2012, with the total spent to
date as a result of the earthquakes now totalling approximately $52 million
as at 30 June 2012.
There were no further write-downs of earthquake-damaged Port assets in the
current year.
Dividend
The Directors have resolved to continue the suspension of dividends until we
have finalised our Reinstatement and Development Plan, and insurance and
funding matters.
We know that this situation is not ideal, and the patience of shareholders is
very much appreciated.
Insurance Update
An additional insurance accrual of $18.4 million has been recognised, taking
the total carrying value of insurance receivables as at 30 June 2012 to $29
million. Approximately $52 million of business interruption losses and
preliminary material damage costs have been incurred to 30 June 2012 as a
result of the earthquakes since September 2010.
Progress payments of $35.7 million have been received from our insurers to
date. We are currently working with Insurers on the adjustment of our $10
million claim of losses and costs that was lodged in late August 2012. As
costs and losses crystallise, the process of lodging progress payment claims
and their adjustment will continue.
Our insurers have confirmed reinstatement insurance for the assets the
Company chose to insure. They have also agreed a number of our key harbour
structures have been so extensively damaged that they will need to be
replaced.
I will now cover off some key items in further detail.
Current Insurance Cover
The Company has increased its limited insurance cover to include business
interruption insurance. Buildings and plant are insured, but earthquake
damaged assets (more than 50%) and infrastructure assets remain uninsured.
All cover excludes damage from natural disasters including earthquakes.
Reinstatement
LPC is committed to the reinstatement of its assets as quickly as practically
possible, whilst also ensuring operational requirements are met. LPC is
carrying out detailed planning so these reinstatement projects are undertaken
in an effective and systematic way. It is clear the reinstatement of key
harbour structures will take a number of years to complete. We expect to
maintain all of our major trades and meet their growth expectations as we
rebuild our key infrastructure.
Throughout the course of the reinstatement of assets, it is anticipated that
there will be many complex issues which we will have to wrestle with.
Business Interruption
Regular meetings are taking place with our Insurers assessors on our Business
Interruption claims. As the claims are both detailed and complex, we have
prioritised them and are working through items in order of priority.
Indemnity Valuations
Our material damage policy entitles LPC to receive indemnity progress
payments on damaged and destroyed assets that we intend to reinstate. To
receive these payments the indemnity value needs to be established.
We believe we have substantial agreement over the methodology to be adopted
for the carrying out of the indemnity valuations; and are working to finalise
this so that the valuations for the first tranche of destroyed key harbour
structures can be commenced.
Going Forward
As the Business Interruption claims are adjusted and agreed, and when the
first tranche of indemnity valuations have been carried out and agreed, we
expect further funds will flow from the Insurers. In addition, as we
reinstate our infrastructure, funds are expected to flow as the costs are
incurred in line with the Pay as You Go process.
LPC is committed to working constructively with its Insurers to resolve
matters expeditiously as they arise.
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 $3.5m, $0.6m below last year's first quarter result.
Total revenue for the quarter is 3% higher than the previous year. Container
volumes are consistent with the record volumes achieved over the same period
last year, and other cargoes and bulk fuels are performing strongly, with 14%
and 17% growth respectively.
At the cost level, some maintenance expenditure that was previously treated
as quake related, are now included in the earthquake adjusted result. We
have taken the view moving forward that maintenance expenditure under $250k
per item, that would previously have been "quake related", will now be
included in the "normalised" result.
With regard to a result for the full financial year, our current forecast is
for an earthquake adjusted result of between $13 million to $15 million. The
reduction from the 30 June 2012 full year result of $17.0m is largely due to:
o The Company moving outside its indemnity period for cruise revenue
o An expected reduction in Solid Energy coal volumes (as announced to NZX on
02 October 2012)
We will provide updates as the year progresses, if the forecasts are outside
the indicated range.
Looking Ahead
Over the next year the Company will commence the long term reinstatement of
assets. Due to the need to keep the Port operational throughout the
rebuild, this will be done over a five to seven year period.
Consultation will also take place with interested groups on the future shape
of the Port.
LPC is also focused on developing land to assist with rebuilding and to cater
for long term growth. One only has to look at the growth in dairy in the
Canterbury region with Fonterra, Synlait and Westland Milk, all announcing
expansions or potential expansions, to see that economic growth is alive and
well in Canterbury.
When we look at future land and facility requirements, we are mindful that
over the last 20 years our container growth rate has been 10.3% compounding.
So while we are rebuilding, we also need to continue to develop to handle
future volumes for Canterbury and the South Island.
We are also working with New Zealand Transport Authority, Environment
Canterbury, Christchurch City Council and KiwiRail to ensure that freight
corridors to the Port are retained and enhanced during the rebuilding of
Christchurch.
Thanks
This year has been one full of activity and this will continue in the future
as we focus on providing for on-going business growth, the continuous
improvement of facilities and services in line with our customers' future
requirements, coupled with the reinstatement of the Port.
Once again, I would like to thank the Management team for the excellent
results of the past 12 months. 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
over the past year. New Directors were elected to the Board in 2011 and we
have worked well together in supporting Management and ensuring that
resources are available to progress the various insurance issues, the
development of the reinstatement plan, while at the same time ensuring that
the Port continues to operate efficiently and effectively.
Finally I would like to acknowledge the support of our major shareholder,
Christchurch City Holdings Limited. The confidence they have shown in
allowing us to get on to run the Company in difficult times is very much
appreciated.
For further information:
Peter Davie
Chief Executive
027 444 1254
End CA:00229277 For:LPC Type:ADDRESS Time:2012-11-02 14:27:20
