Satisfactory result for Ports of Auckland

MEDIA RELEASE

Monday 3 March 2008, 3.00pm

Satisfactory result for Ports of Auckland in a difficult market environment

Ports of Auckland Limited today announced an interim net profit after tax of $12.6 million, up 19% for the half year to December 2007 (December 2006: $10.6 million).

Jens Madsen, Ports of Auckland Managing Director, said the relatively satisfactory result reflected good growth in container volumes over the six month period, with total TEU* volumes up by 20%.

"Shipping line and service changes have impacted volume flows for many New Zealand ports, some of which have benefited Auckland during the six-month period under review," said Mr Madsen.

"While such changes have been and still are the norm of the shipping industry we expect the current volatility to remain throughout 2008."

Mr Madsen said Ports of Auckland will work to build on the positive half year result and further business volume growth by targeting opportunities in the period ahead. The volume growth at the Port will be supported by the Port Company's continued focus on productivity.

Business and financial performance

Total container volumes for the six-month period were 427,867 TEU, up 20% with full import and full export container volumes up 9% and 7% respectively. There was very significant growth in trans-shipment volumes as more cargo was hubbed over the Port of Auckland.

Breakbulk (non-containerised) cargo volumes were down 13% to 1.878 million tonnes largely due to the transfer of Wynyard Wharf (bulk cargo) as part of the Tank Farm in-specie distribution to its shareholder Auckland Regional Holdings on 1 April 2007. The Company continues to manage Wynyard Wharf on behalf of Auckland Regional Holdings.

Port Operations, which includes all cargo operations and marine services, recorded increased container and breakbulk revenue for the six month period. Port Operations EBIT (Earnings Before Interest and Tax) was $29.5 million (adjusted for one off unusual items), up $2.4 million (9 %) on 2006 (December 2006: $27.1million, adjusted for one-off unusual items).

Due to the in-specie transfer of the Tank Farm assets there is no property EBIT in the half year result.

There is also a deferred tax credit of $1.5 million included in the interim result due to the completion of the property transfer and sale.

Interest was $14.0 million compared to $11.5 million in the first half of 2006/07.

The result includes associate earnings, up due to improved performance and a special dividend from Northland Port Corporation in which Ports of Auckland has a 19.9% stake.

Debt levels at 31 December 2007 were $360.3 million, similar to debt levels at 30 June 2007 ($362.2 million).

A dividend of $9,534,000 was paid to the shareholder, Auckland Regional Holdings, on 20 February 2008.

Capacity, capability and customer service
Ports of Auckland continued a programme of investment in capacity and capability measures during the six month period. This has ensured that plant and infrastructure resources are available to well service current requirements, as well as efficiently handle future growth.

Recent infrastructure projects completed include the final phase of Stage One (5.8 of the planned 9.4-hectares) of the Axis Fergusson container terminal extension and the related commercial shipping lane deepening. The shipping lane, now 12.5 metre chart datum to accommodate the next generation of container vessels, was officially opened in the early part of the financial year and the Fergusson extension is providing an increased capacity of well in excess of 100,000 TEU per annum.

The Company also invested in ten more new diesel-electric straddle carriers for the container terminal operations. The straddle fleet now totals 44, with 35 being new diesel-electric "eco" straddles. This investment was part of a port-wide upgrade in plant with the Auckland Port now offering eight cranes, the best crane intensity of any New Zealand port and twice as many as the second largest container port in the country).

Future capacity and capability options are also being investigated. Options include higher container terminal stacking operations, similar measures to increase capacity for breakbulk cargo, a rail connection between the seaport and Wiri Inland Port, further reclamations within the existing port and a new container ship berth on the northern end of the Fergusson container terminal.

In November 2007 the Port introduced a Vehicle Booking System (VBS) to future proof operations for expected business growth in years to come. The system is directly linked with an average10-minute decrease in average truck turnaround times at the Company's container terminals. The VBS was first implemented at the Company's larger Fergusson terminal with the team looking to implement it at the Bledisloe terminal in the future.

Mr Madsen said the Company continues to work positively towards a conclusion of the Collective Employment Agreement with its staff represented by the Maritime Union of New Zealand, Auckland Local 13.

"The entire team, from frontline to office staff, must be complimented for their excellent handling of our substantial increase in business volumes during the period and the considerable degree of change the Company is going through.

"Our staff is key to ensuring we become world-class. Ports of Auckland has stepped up its investment in training programmes that benefit both the staff personally and the Company as a whole," said Mr Madsen.

Rational supply chain investment
Ports of Auckland's commitment to the development of an efficient and cost effective container supply chain has led to significant investments and improvements inside the 'Red Fence' and a call for more rational supply chain infrastructure investment outside.

Ports of Auckland operates 24-hours a day, seven days a week, servicing rail and road at all hours. The Port Company continues to work closely with the trucking community in encouraging their use of the Port's night service to bring further efficiencies to the supply chain. At present an average of 44% of all container truck moves occur outside the peak period (from 7pm to 7am weekdays and weekends).

The Company continues to seek funding from Treasury for the rail siding at the Wiri Inland Port, one of two strategically placed Inland Ports owned and operated by Ports of Auckland.

"New Zealand must ensure it has the most efficient and sustainable supply chain in order to stay competitive on an international scale and optimise trade. This means the Government's allocation of investment money in transport infrastructure must be prioritised and coordinated to provide the cheapest, quickest and greenest options for importers and exporters", said Mr Madsen.

He explained that through logical transport infrastructure investment, increased international hubbing, coastal feedering and the use of inland ports, more sustainable and efficient supply chains could be developed.

"As key stakeholders in the New Zealand supply chain, all New Zealand ports need to play a role in supporting the government's objective to halve New Zealand's carbon dioxide emissions by 2040. Domestic transport currently comprises 42% of New Zealand's total carbon dioxide emissions.

"It would be unfortunate to see some ports continue to support and maintain irrational supply chains that include unnecessary container moves to the detriment of the environment and which add cost to the supply chain," said Mr Madsen.

* Container volumes are measured in TEUs (20-foot equivalent units – or the size of a standard 20-foot container).

ENDS

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