Port of Tauranga bucks downturn

Tauranga plans to extend its wharf and dredge to allow larger vessels. Photo / Supplied

Port of Tauranga is investing to handle bigger ships and expects earnings to grow despite an uncertain global economic outlook, says chairman John Parker.

The NZX-listed port said underlying profit was a record $57.9 million for the year ended June 30, up from $49.4 million the previous year.

"Despite the patchy economic recovery, we have enjoyed strong growth in trade volumes," Parker said.

Trade volumes were up 12 per cent to 15.4 million tonnes, while container traffic increased 15 per cent to 590,506 20ft equivalent units (TEU).

Exports of logs were up 14.5 per cent to 4.4 million tonnes, kiwifruit was up 3.8 per cent to 757,000 tonnes and dairy was up 4.6 per cent to 588,000 tonnes.

"We must think about what the port may need to provide in five years, in 10 years, and even 50 years," Parker said. "For that reason, the board supports an ongoing capital expenditure programme that will see significant investment over the next few years."

Work would include wharf extensions and dredging the shipping channel and berths to handle larger vessels.

"The board endeavours to strike a balance between the potentially higher returns possible with more borrowings, versus the security afforded by a sound capital base," Parker said.

The company had reduced its net debt by $12.4 million during the year to $186.1 million, while debt to debt plus equity was 29.3 per cent compared with 30.1 per cent the previous year.

"We regard this level of debt to be a prudent position in the current economic climate," Parker said.

Port of Tauranga's share price closed up 10c at $9.38.

First NZ Capital head of research Rob Bode said the result had been pretty well anticipated by the market.

"There was nothing particularly unusual, their associates did a little bit better than we anticipated ... and the outlook is kind of as we thought really," Bode said. "They run a pretty tight ship, they're doing an outstanding job."

Chief executive Mark Cairns said he was proud of the result. "I think it was a cracker year across all parts of the business and positive about the coming year, in particular around the container terminal side of the business."

The company was expecting double-digit volume growth in the container terminal over the coming year.

The port was planning to invest about $40 million in the coming year, with possibly a total of $150 million during the next three years depending on growth.

"I think we've got that balance sheet capacity to make these investments without taking on any significant debt," Cairns said.

The largest ships handled by the port were about 4500-4600 TEU, which investment could increase to about 8000 TEU.

Kiwifruit volumes had held up during the year but the bacterial vine disease Pseudomonas syringae pv actinidiae was likely to weigh on export volumes as it begins to harm plant productivity, Cairns said.

Log export volumes had strengthened during the year and demand for New Zealand commodities looked robust for the foreseeable future with increased demand primarily from China and growth from India.