South Port has recorded a strong start to the 2021 financial year due to an excellent operational performance.
“Of our various business activities, containers, cold storage and the marine operations were standout performers in the half-year to 31 December,” said South Port Chairman, Mr Rex Chapman.
“This result was secured based on the Port’s bulk cargo volumes which were consistent with the corresponding period of 2019 and remain the backbone of the Company’s cargo mix.”
“COVID-19 continues to play a significant factor in trade lanes worldwide,” he added.
“Globally, restrictions placed at borders, lockdowns and the lack of trained staff to work at ports on cargo/container vessels has negatively impacted the efficiency of the supply chain.”
“This will take a number of months to improve and will continue to create uncertainty in the marketplace until there is a successful rollout of a vaccine.”
“Given these realities, South Port’s operating revenue and net profit after tax for the first six months of FY21 are reassuringly strong.”
Revenue for 1H21 was $23.30 million, up 8.4% (1H20 $21.60 million) and NPAT was $6.1 million, a 33% lift in profitability (1H20 $4.6 million).
Several factors impacted on this record interim result including:
Post-balance date, on 14 January 2021, Rio Tinto announced a new electricity agreement with Meridian Energy that allows New Zealand’s Aluminium Smelter (NZAS) to continue to operate the Tiwai Point Aluminium Smelter until 31 December 2024.
“This extension provides certainty to the Port and the region for the next four years and will allow planning to start in earnest for a potential future without NZAS,” says Mr Chapman. Rio Tinto has stated they will continue to negotiate with the Government to secure a fairer transmission pricing agreement in the coming months.
“NZAS represents approximately 30% of South Port’s cargo flow and 20% of NPAT.”
Increased Cargo
Total cargo activity was 1,720,000 tonnes compared with 1,687,000 tonnes in the prior year interim period.
“This represents an increase in cargo flows of 33,000 tonnes or 2%,” said Mr Nigel Gear, South Port’s Chief Executive. “There was a pleasing increase in log volumes (+125,000) however other bulk cargoes were negatively impacted with fertiliser (-20,000), woodchips (-23,000) and NZAS cargoes (-70,000) all down from the prior half year.
Containerised cargo increased 28% to 27,000 TEU (FY2020 21,000 TEU). The main increases were reflected in dairy, timber and refrigerated cargoes.
A new reefer tower was recently constructed and has been operational since late January 2021. This tower has created additional capacity for refrigerated containers and provides storage efficiencies in the terminal.
Record volumes of dairy products have been received and packed at the Port during the last quarter of 2020 for Open Country Dairy. “This is the result of the commissioning and operation of the new third dryer at Awarua and the improvement of market conditions for dairy products.”
“International container supply chains have been significantly disrupted due to the COVID-19 pandemic,” said Mr Gear. “This has led to an increase in the transshipment and supply of empty containers through the Port as a result of a temporary reconfiguration of the Mediterranean Shipping Company’s Capricorn Service in New Zealand.”
Future-proofing of the Port continues with new storm bollards successfully installed on Berth 4 and currently under construction on Berth 8. “These new bollards will significantly improve our safety margins for the mooring of larger vessels currently calling at the Port.”
The installation of the Impressed Current Cathodic Protection (ICCP) system on the Access Bridge continues to make excellent progress. Seven bays (of 14) have been successfully completed with at least two further bays to be upgraded in this financial year.
Strategic Projects
South Port has undertaken extensive consultation and completed several environmental assessments in preparation for an application for a resource consent for a channel improvement project which is expected to be lodged by March 2021.
The Port plans to remove the high spots within the channel to achieve a deeper draft to provide for a safer transit through the channel and increase the efficiency of loading vessels. A final decision about the project and the timing of it will be subject to a resource consent being granted.
The Port is investigating the purchase of a 65 tonne bollard pull (BP) tug. The Port currently operates two tugs with a combined BP of 75 tonnes. “A new tug will increase our total capacity to 105 tonnes BP which would provide greater safety margins for the larger vessels that are now calling at the Port.”
Outlook
COVID-19 will continue to influence the supply chain and create uncertainty in the marketplace until there has been a successful rollout of an effective vaccine worldwide.
“The export log market into China is performing well with higher prices for A grade logs being received and low levels of inventories which bodes well for sales of New Zealand Radiata softwood into this region,” said Mr Gear.
“The dairy industry forecast for the coming season is also very positive with early signals of $6.90 to $7.50 per kilogram of milk solids for the current season.”
“The impact of the COVID-19 pandemic on restaurants globally, together with an improvement in the utilisation of the existing storage space, has increased the level of refrigerated cargoes held in our cold stores.”
“This, coupled with the high utilisation of our new blast freezer, has improved the returns on this facility at the Port.”
“There is still however some uncertainty in other cargoes and market destinations for New Zealand goods, especially in economies impacted severely by COVID-19.”
Based on all known factors at the date of releasing its 2021 interim result, South Port estimates that its full year earnings should fall in the range of $10.00 million to $10.50 million (FY2020 - $9.43 million).
Dividend
Anticipating this year end result, the Directors have declared a fully imputed interim dividend of 7.50 cents per share (1H20 – 7.50 cents) payable on 8 March 2021. In the event that the FY21 year-end profit falls within the above forecast range, the Directors are confident that the full year dividend payment will be consistent with the previous year.
