Ports of Auckland scans the big picture

By PAM GRAHAM

Products don't compete any more, supply chains do, Ports of Auckland's chief executive Geoff Vazey said when releasing the port's annual profit.

The concept did not wow the market, which subsequently downgraded the stock because it no longer looked like such a great property play.

The full proceeds of the $54 million sale of Westhaven and Hobson West marinas were not returned to shareholders as a special dividend.

Just 75 per cent of the $15 million profit went their way via an increased final dividend.

The shares fell 14c on the day of the report's release, even though profits were up 20 per cent care of the marinas' sale. The price had steadied by Friday, though, rising 1c to close at $7.

Chairman Neville Darrow said the gross proceeds were not paid out because the port was clarifying its strategic direction with its new 80 per cent shareholder, Auckland Regional Holdings, and was looking at new investments too sensitive to detail.

Vazey's statement about supply chains is central to the port's view of future strategy.

"We strongly believe that an optimised supply chain will bring business growth for Ports of Auckland, to the benefit of our stakeholders, the Auckland region and the country as a whole," he said.

Ports of Auckland competes fiercely with Port of Tauranga.

Tauranga's pitch to shipping lines is that it can still get imports into Auckland using rail, and ships can be filled with exports from the Bay of Plenty and Waikato.

Auckland could counter that by having a rail link down-country to add more agricultural exports to its base of manufactured exports.

It is, as Vazey says, about competing supply chains.

Ports go out of their way to provide facilities for shipping companies but they do not get any guarantees that they will continue to call.

Witness the decision by P&O Nedlloyd to cut Auckland out of its Asian service when reducing port calls this year.

Vazey believes the shift was not about service. It had to be price.

Auckland-based customers like Panasonic have said they were not happy with the shift to Tauranga.

But the loss of the service was unsettling for Auckland because P&O brings in the biggest ships that come to New Zealand on its European services, the 4100s.

The trend in the movement of goods around the globe is for bigger ships calling at fewer ports.

There are now ships carrying 8000 containers and Marsden Pt's deepwater port would be the best-placed to handle them.

Vazey says they are moveable conveyer belts of goods.

P&O has a fleet of ships that can carry 4100 containers purpose-built for this market with extra plugs for refrigeration. They call at Auckland.

"We've got the big ships and we are servicing them well. This is the reality here in Auckland," Vazey said.

P&O Nedlloyd New Zealand chief Tony Gibson was not available to talk about supply chains in NZ but he has talked before about the importance of connections from ports inland and how some chains have dominated over others in Europe.

Analysts expected the big ships to stay in Auckland but the market had been favouring Tauranga as an investment because the Bay of Plenty port had a better growth story.

A key piece of any supply chain is rail and it is under new management.

"There are a number of opportunities that we are talking to Ports of Auckland about," Toll NZ chief executive David Jackson said.

Auckland, like any other port, would be taken into consideration in Toll's capital investment plans.

Auckland is looking for a rail link to an inland site it is developing in Wiri and is not saying what else.

Tauranga is expanding its Metroport site in Auckland and has never disclosed the economics of the rail link to Auckland.

Tauranga reports its annual profit on Wednesday and Toll NZ reports a day later.

Toll Holdings of Australia is very much into supply chains.

It would like to own ports in New Zealand but none are for sale. Auckland Regional Holdings is expected to be a more proactive shareholder in Ports of Auckland than Infrastructure Auckland was but there is no indication it will sell shares.

Toll Logistics is awaiting regulator's approval of a log-marshalling and stevedoring joint venture with Port of Tauranga that works 12 ports in this country.

Ports of Auckland said some of its decisions on supply chains were due within months.