Media Release
15 September 2009 - for immediate release

Ports of Auckland lays foundation for future growth

Ports of Auckland today announced normalised earnings* before taxation of $15.7m for the year ended 30 June 2009 (2008: $22.3m).

EBITDA for the Ports’ container division, the largest part of the business, was up 1.4% on 2007/08. Overall container volumes reached a new high of 843,590 TEU, an increase of 0.3%, with terminal division volumes up 2.1%.

Managing Director Jens Madsen said Ports of Auckland had increased its share of the upper North Island container market from 59% to 61%, and now held 36% of the entire New Zealand container market.

“These market gains, combined with substantial capital investment since 2003 in new cranes and straddles, and recent capacity enhancements via channel dredging and land reclamation, have further strengthened our position as the country's most important container port,” said Mr Madsen.

“Ports of Auckland’s prime location significantly reduces supply chain costs and emissions for importers and exporters. Cargo worth 15% of New Zealand’s GDP is handled by the Ports annually.”

“Ports of Auckland is emerging from a challenging transitional period to a position of renewed strength, and with a focus on capturing new opportunities,” said Mr Madsen.

Mr Madsen highlighted a series of strategic milestones achieved during the year, including the consolidation of the stevedoring workforce and container volumes, a construction start on the Wiri Inland Port rail exchange, the sale of Queens Wharf and the settling of a Collective Employment Agreement with the Maritime Union of New Zealand.

Mr Madsen said productivity continued to improve, with average crane rate up 6.6%; straddle carrier moves per hour up 4.6% and staff hours per container down 7.7%.

“Very encouraging progress has also been made in reducing costs, with an estimated $5m in operational savings to be delivered by the end of the new financial year. We are a significantly leaner and more efficient port than we were 12 months ago.”

“Ports of Auckland has worked closely with the cruise ship industry and visits were steady at 69, up 40% compared to three years ago, and adding more than $100m per annum in GDP to the New Zealand economy.”

However, imported vehicle volumes were down 36.2% to 110,560 units from 173,373 units, and as such were the main contributor to a decline in overall break-bulk (non-containerised) volumes, down 27.4% to 2.7m tonnes.

Write-downs on investment property and Northland Port Corporation shares, as a result of international financial reporting standards (IFRS), adversely impacted the result by $10.3m. There was no impact on cash flows as a result of these write-downs. No investment property was sold and Ports of Auckland is retaining its 19.9% shareholding in Northland Port Corporation.

The final result was a Net Profit after Tax (NPAT) of $5.4 m, compared to $21.1m in 2007/08.

Mr Madsen said that, like many other companies internationally, Ports of Auckland had been prudent in seeking to review its capital structure and funding arrangements with the aim of dealing, as best as possible, with the global economic crisis.

Between June 2005 and December 2008 Ports of Auckland had paid $522.5m in dividends and in-specie distributions to its shareholder Auckland Regional Holdings.

“Given the global economic crisis it was appropriate to reassess our debt levels. Accordingly on 31 August this year Ports of Auckland issued 50 million $1 new equity shares to Auckland Regional Holdings with $40m being called and received on 4 September 2009. A shareholder loan of $20m has also been put in place.”

In addition, $40m from the sale of Queens Wharf was received on 18 August 2009. Ports of Auckland will record an accounting gain of around $20m on the sale in the 2009/10 financial year.

Since 1996, Ports of Auckland has reduced its waterfront footprint by nearly half, from 140ha to 77ha. It now occupies less than 2km of the 15km stretch between the Harbour Bridge and St Heliers.

“All the funds received have been used to reduce bank debt and further renegotiation of bank debt facilities is well advanced,” said Mr Madsen.

“The recapitalisation has improved our financial and strategic position. We appreciate the confidence shown in us by our shareholder, Auckland Regional Holdings, and its long-term view of Ports of Auckland’s strategic importance to the Auckland region.”

Mr Madsen estimated that Ports of Auckland would save an estimated $5m in interest costs annually as a result of the recapitalisation and sale of Queens Wharf. “The savings will go straight to the bottom line.”

“We are quite pleased by recent positive trends in trade volumes. In the month of August 2009 we handled 60,698 TEU through our container division – an all-time high for August.”

‘We anticipate further strengthening of trade volumes as a result of Fonterra’s decision to route more business through Ports of Auckland.”

“Despite these encouraging signs, we remain concerned about what is undoubtedly a crisis of over-capacity in the international shipping sector. While Ports of Auckland anticipates an improved financial result in 2009/10, the market remains volatile and we are cautious about the overall outlook,” Mr Madsen said.

Additional Detail – Full Year Result

• Export cargo container volumes up 2%.
• Trans-shipment volumes up 10%.
• Container volumes at Wiri Inland Port increased by 22%.
• As a result of rationalisation and improved capacity utilisation by shipping lines, total ship calls were 1,620, down 145.
• One-off redundancy costs of $2.1m were incurred in association with the move to a single stevedoring workforce, offset by a reduction in provisions
• Capital expenditure on property, plant and equipment was down by more than half to $16.0 m.
• At 30 June 2009, net debt levels were $348m, compared to $355m the previous year.
• Interest costs were down 6.0%, by $1.7 m.
• Port Operations Revenue was down 3.5% to $163.4m.
• Overall Port Operations EBITDA was down 6.4% to $67.3m, with EBIT down 12.9% to $46.0m.

* Normalised earnings represent net profit after tax excluding NZ IFRS accounting adjustments for net unrealised write-downs relating to investment property and listed equity investments.

ENDS

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