Ports of Auckland announces half year results

Friday 16 March 2007

Ports of Auckland announces half year results

Ports of Auckland says revenues and profits in the six months to December 31, 2006, were lower than for the comparable period in 2005. While the Company handled a record 356,355 TEU (standard 20ft container units) in the six month period to December 31, 2006 (up 1% on 2005), breakbulk cargoes (non-containerised) were down by 226,208 tonnes (down 10%). The breakbulk downturn was largely due to fewer imported vehicles.

Total revenue of $82.7 million was down 5.4%, on the comparable period of the previous year and profit on an EBIT basis was down $10m (down 27.7%) to $27 million. Net profit after tax was $10.6 million, compared with $22.3 million in the comparable period. Net profit was impacted by higher interest costs, up $6.5 million on the previous period, largely as a result of an earlier restructuring of the balance sheet and the payment of a special dividend of $120 million to the shareholder in December 2005.

Other factors contributing to the reduced profitability included costs associated with merger evaluation and analysing rugby stadium options, a foreign exchange loss arising from accounting treatment required by the International Financial Reporting Standards adopted during the accounting period, increased depreciation, loss on the sale of an asset (a ten-year-old mobile crane which had become surplus to requirements), and one off major repairs to the berth at Fergusson container terminal. These unusuals amounted to $5.0 million in this half year.

Chairman Gary Judd, QC said the most recent six months were part of a period of considerable change for the Company as it geared up for growth, explored the option of a merger with Port of Tauranga and progressed the development of the Tank Farm with an agreement to divest 18 hectares of land on the Western Reclamation on the waterfront to its Shareholder, Auckland Regional Holdings, by the way of an in-specie dividend.

The Company is close to completing the first phase of the $60 million expansion of its Fergusson container terminal which will increase its handling capacity, enabling it to better handle the significantly increased volume of business that has been placed with Ports of Auckland consequent on the major shipping line Maersk using Auckland as a key transhipment point since January 2007.

The Company has invested in deepening the commercial shipping channel and the approaches to the Auckland port to enable it to handle larger container ships. It has purchased three new-generation cranes and 21 new straddle carriers, 11 of which are already in operation. The new cranes, delivered in December 2006, are much bigger, faster and have greater lifting capacity than the port’s older cranes they replaced. They are already achieving quicker ship turnaround times and enhancing productivity. Some of the 21 new environmentally friendly straddle carriers replace older straddle carriers that have reached their economic use-by date. Additional straddle carriers to handle the greater cargo volumes boost the Company’s straddle fleet to 45. The new diesel-electric straddles are more efficient (handling two containers at a time), emit 90% less exhaust, use 20% less fuel and make less noise than the older diesel-only models. They are also able to provide an alternative electricity source for refrigerated containers in the event of a power outage.

The surge in container volume growth has created considerable challenges for the POAL team who are responding very well. Thirty additional staff have been employed and trained since November 2006 to provide increased operational capacity to match the infrastructure capacity. Other parties in the through Auckland supply chain are to be commended for their roles in handling this surge in volume. These include the shipping lines, the trucking companies, Toll Rail, freight forwarders and cargo interests.

The substantial uptake of use of the Wiri Inland port is proving its value to the through Auckland supply chain.

The cruise ship business continues to grow with the recent visit of the Queen Mary 2 drawing thousands of people to the port to share in the interest of ships and the sea. 48 cruise ships will have been handled during the 2006-07 season and 66 are already booked for the 2007-08 season. Much effort has been put into advancing the potential zoning changes for the Western Reclamation (Tank Farm) and this work continues with Auckland City, Auckland Regional Council and Auckland Regional Holdings.

All this work will culminate in the transformation of this 18 hectare area to an impressive waterfront precinct. Mr Judd said work was continuing constructively on evaluating the issues surrounding a proposed merger with Port of Tauranga.

“Ports of Auckland is now well into the second half of this year, and is enjoying improved profits. It is expected that the second half of this year will be significantly better than the second half of last year and will tend to make up for this year’s reduced first half.

However, the diminished performance in the first half and the balance sheet restructure last year makes it inevitable that profit for the full year will be less than for the previous full year. In the following year, as the increased volumes are fully realised, revenues and profit will continue to improve,” he said. In the full year to June 30, 2006 the Company had made a net profit after tax of $35.5 million.

ENDS

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