Port's container volumes at record levels

Ports of Auckland's revenue for the six months to December was up 3.7 per cent. Photo / Kenny Rodger

Container volumes have hit record levels at Ports of Auckland but the ratepayer-owned port is battening down the hatches amid an unprecedented global economic environment.

Revenue for the six months ended December 31 was up 3.7 per cent at $88.4 million, although net profit fell to $9.3 million from $12.6 million the previous year, which had included a one-off $1.5 million tax credit.

Managing director Jens Madsen said the result was not great but acceptable given the circumstances.

Container volumes for the half-year were up 6.4 per cent to a record 455,083 20 foot-equivalent units but Madsen said the result was affected by a 23.7 per cent drop in imported vehicle volumes to 66,493 units.

Containers accounted for more than two thirds of business handled by the port with the rest split between cars and bulk commodities such as iron, steel and cement.

Trade volumes had been weak during January and February but picked up slightly at the start of the export season in March, Madsen said.

"Trade volumes as have been seen in January and February are very likely to continue," he said.

"There's no immediate light at the end of the tunnel.

"We have been seeing decreases compared to last year in the range
of 5-10 per cent, which is quite dramatic."

The trading environment was highly challenging and would remain so for the foreseeable future, he said.

"It is difficult to accurately forecast forward volumes, however we are
encouraged by our recent market share gains and ability to reduce costs."

The port had won bigger services carrying more volume as shipping lines consolidated to cut costs.

About 10 per cent of the global container fleet had been laid up during the past three to four months, with some people expecting that figure to rise to 20 per cent during the next couple of years, he said.

A cutback in capital expenditure was being dictated by the global environment.

Capital expenditure was $7.4 million compared to $26.5 million the previous year, following the completion of projects including deepening of the Rangitoto Channel.

"There's no doubt that we will be running a tight show and that we will defer capital expenditure spend as best we can."

It was critical to keep costs in line with forecast volumes and the current labour model put too much pressure on margins, Madsen said.

"We will do everything possible to minimise the risk of potential job losses," he said.

However, while imports had been on a downward trend since late last year exports were fairing pretty well, Madsen said.

"We're quite excited to see what will happen in March, April and May, which is the traditional export peak," he said.

"That export peak did not materialise last year because of the drought situation so we expect to come out comparatively better than 2008 in regard to exports. Time will show."

First New Zealand Capital head of research Rob Bode said weakness in
January and February stood out in the result, while it was encouraging that exports were holding up.

"You're seeing very large falloffs in manufactured exports from Asia around the world so consumer demand has been slowing," Bode said. "I guess it's the speed and extent of the decline given the comments of things being reasonably solid up till Christmas."

A full capital structure review of Ports of Auckland was under way.

Chairman Gary Judd said the board had taken the unprecedented global economic situation into account and had to consider what was the best thing to do.

"And that involves [forming] a view as to what is likely to be the situation going forward and ... that's very, very difficult at the moment," Judd said.

Madsen said: "The objectives of the review, which will be completed by the first quarter of next financial year, are to lock in longer-term funding and ensure the company's dividend payout policy of 75 per cent of net profit after tax is appropriate."

PORTS OF AUCKLAND

Six months ending December 31

Revenue
2008: $88.4m
2007: $85.2m

Ebitda
2008: $36.8m
2007: $37m

Net profit
2008: $9.3m
2007: $12.6m