20 OCTOBER 2016
NZX AND MEDIA STATEMENT
South Port benefits from cargo growth and productivity gains
South Port New Zealand has responded well to the strong cargo growth it has
been fortunate to achieve over the last five years, Chairman, Mr Rex Chapman
told shareholders attending the Company''s Annual Meeting at Bluff.
"This year we serviced record log volumes and a substantial increase in
exported wood chips, cargoes that are very much influenced by overseas
prices.
Conversely, as we predicted this time last year, inbound stock food volumes
decreased by approximately 25% directly as a result of the low dairy pay out.
This demonstrates how external factors can affect cargo flows."
However, over the last 10 years cargo has increased 50% from 2 million tonnes
to 3 million tonnes, which Mr Chapman said was partly explained by positive
regional economic growth. "South Port has responded well to that growth by
matching the volume lift with the appropriate resources to service it."
For the second consecutive year, South Port achieved record after tax profit
and cargo volume (3.05 million tonnes). FY16''s net profit of $8.71 million
is a 13% increase on FY15''s profit of $7.74 million.
"The proportion of profit increase (13%) is both greater than the increase in
cargo volume (7%) and greater than the increase in total revenue (also 7%),"
said Mr Chapman.
"This demonstrates that costs are being contained, overall productivity has
increased, and the Company is making better use of its fixed infrastructure.
This represents overall business improvement".
"Working smarter and more efficiently is important for a business such as
ours. We cannot always rely on revenue and cargo growth because to some
extent these two factors are not within our direct control and are heavily
influenced by commodity cycles and regional growth."
Mr Chapman emphasised that the first of South Port''s core strategies is to
provide a safe workplace.
"Ports are inherently hazardous environments and we all need to remain
committed to the health and safety goal. A serious or fatal accident is
always a real risk."
As part of the new H&S legislation introduction, South Port has completed a
planned independent third party review of its health and safety systems this
year and established a Health & Safety Panel. This Panel comprises of the
full Board, management, and staff representatives and meets regularly for
onsite visits to port operational areas.
South Port''s $4.5 million Intermodal Freight Centre was opened at Mersey
Street, Invercargill, by Transport Minister Simon Bridges in September. The
IFC is primarily targeting containerised import cargo. "We are confident
that over time short term storage and packing of export cargo will also occur
at this site."
He said the facility is port and transport operator neutral. "This means
that the port of entry or exit for the container could be LPC, Port Chalmers
or Bluff, all of which are connected to the site by rail."
Intense competition between shipping lines for cargo, with unsustainable low
shipping rates has led to some major shipping casualties "with probably more
to come."
He said all shipping lines are affected by the problem of surplus capacity,
following a rapid increase in the number of very large container vessels
built with carrying capacity in the 12,000 - 19,000 TEUs range now displacing
smaller vessels on the main trade lanes.
"With the widening of the Panama Canal, Panamax vessels of ~4,500 TEUs have
also been able to be deployed to other trade lanes, including those servicing
New Zealand."
He said, all-time low box freight rates cannot be sustained. "It appears
inevitable that this scenario will lead to further shipping line failures,
the scrapping of ships before the end of their productive life and further
consolidation of shipping lines and/or services."
"Vessels in the 4,500 TEU class currently service the New Zealand market and
the abundance of these vessels is likely to mean, in the medium term, the
larger sized container vessels will not call at New Zealand ports or will do
so less frequently.
"This is likely to mean that for the foreseeable future, there will be a
continuation of international container shipping calls at a range of New
Zealand ports including South Port."
Mr Chapman said that given the relatively small size of New Zealand ports,
collaboration between ports who are not in competition with each other will
increase "and that is a very welcome trend, especially for a smaller port
like ours."
OUTLOOK
Mr Chapman said the economy as a whole is doing well and apart from dairying,
which is recovering, the regional economy is also reasonably buoyant. South
Port expects main export cargoes to remain stable. Fertiliser and stock food
may be constrained by the dairy sector which is recovering.
Increased maintenance costs will impact FY17 earnings, which overall are
expected to reduce by ~15%. The Board will seek to maintain current dividend
levels.
FOR FURTHER INFORMATION PLEASE CONTACT:
Mr Mark O''Connor
Chief Executive
South Port New Zealand Ltd
Tel (03) 212 8159
Mr Warren Head
Managing Director
Head Consultants Ltd
Tel (03) 365 0344
Mobile 021 340 650
End CA:00291174 For:SPN Type:ADDRESS Time:2016-10-20 08:57:23