Auckland port's financial results reignite questions about council ownership

Ports of Auckland's 2020 financial result makes disappointing reading for ratepayers. Photo / File

Whether Auckland Council is the best owner for the financial health of the city's port - and ratepayer pockets - is again in question after Ports of Auckland's annual performance across most markers.

Revenue for FY20 was down 6.7 per cent to $231.4 million, reported net profit after tax fell from $53.9m last year to $23m, and cargo volumes across all classes were down.

The $4.9m dividend it pays the city this month will be 20 per cent of after-tax profits instead of 80 per cent, to fund its investment programme for growth. The council was aware the dividend would lower.

The port company laid the blame for the results on the impact of Covid-19, its chairwoman and chief executive in the annual report highlighting "a year of two halves".

But for observers, including ratepayers, it was yet another disappointing result from a major New Zealand port.

However, Auckland Business Chamber chief executive Michael Barnett believes the revenue dip reflects a supply chain issue New Zealand is going to see more of due to Covid-19.

"I am seeing the downstream effects of what they are (experiencing). I wasn't surprised."

Barnett recently told the Herald it was time Auckland Council, and other New Zealand councils, questioned whether they should be owning billions of dollars worth of assets.

He said all councils should have been considering the question anyway, but Covid-19 had accelerated the need for a rethink. The need for a local authority to own assets was a 100-year-old concept, he said.

Milford Asset Management director Brian Gaynor, who recently penned a highly-critical comparison analysis of Ports of Auckland's performance against part-NZX listed, part-local authority owned Port of Tauranga, said the Auckland port "continues to under-perform" and "consistently doesn't perform".

The Auckland company was much better off when part of it was in listed on the NZX and subject to private investor scrutiny, he said.

"Under the sharemarket it did very well, it was reasonably dynamic and seemed to be improving under mixed public/private ownership. It was a lot more transparent. Then it went back into public (council) ownership. Now it only gets looked at for one or two days a year (financial result time)."

The Auckland port company's financial result is a stark contrast to that of Port of Tauranga, which also took a big hit to volumes because of Covid-19.

PoT recently posted a group net profit of $90m for the year to June 30 (2019: $100.6m). The company's earnings guidance, before it was withdrawn in March lockdown, was $94m-$99m. This in turn had been revised down in February because of international Covid-19 concerns.

PoT will pay a final dividend of 6.4c a share, making a total ordinary dividend of 12.4c a share, compared to 13.3c last year.

Auckland mayor Phil Goff in a written statement: "It was to be expected that with Covid-19 and the closing off the cruise industry, reduction in car importati8ons and impact on the continer trade, in addition to the major investment in the last year in automation, that the dividend would be significantly reduced."

Auckland Business Chamber CEO Michael Barnett. Photo / Supplied

Ports of Auckland chairwoman Liz Coutts and chief executive Tony Gibson in the 2020 annual report were upbeat, both citing a "year of two halves".

Coutts sounded a defiant note to recent heightened debate about the port's likely ability to continue to operate in the Auckland CBD and suggestions operations should be moved to Northland or elsewhere in the greater Auckland region.

"Covid-19 has highlighted what is at the heart of our business. We are Auckland's port. It is a major infrastructure investment owned by the people of Auckland... We belong to Aucklanders, no one else."

She said the continuing debate over the port's location "has not been good for business".

"...I should point out that reaching capacity does not mean the port will cease to function; it simply means it can't grow. It could, if the people of Auckland wish it, continue to operate on its current site indefinitely, just with its capacity capped.

"When you look at that way, it becomes clear that if the port is moved from its downtown site, it will be more to do with how it looks than how it works. And it will involve great cost to do so, reduced returns and adverse environmental impacts, depending on where it might be shifted to."

Ports of Auckland recently received resource consent to deepen the city's shipping channel. The consent is being appealed. The company hopes to start dredging work next year.

Chief executive Gibson in the annual report said first half of the year cargo volumes were in line with forecast - the second "anything but".

"In the first half we were on track for a record cruise season - in the second half cruise ships disappeared. In 2019 one report said we should shift to Northland; in 2020 another said we should stay put.

"Ports are not short-term businesses that should change direction with the wind. Yes, we need to be agile and prepared to adapt but we live in a long-term environment. Port infrastructure takes a long time to build and lasts more than a lifetime.

"We must look out into the future and plan accordingly... we are till focused on delivering our 30-year master plan to provide sustainable capacity for Auckland's freight growth to the middle of the century. And beyond if needed."

On that front, Gibson said, the company was doing well, with good progress on three major master plan projects under way.