Port of Tauranga rides out big Covid-19 swells to deliver profit lift

Port of Tauranga weathers big Covid swells to post strong 2021 year result. Photo / Supplied

Pandemic storm-tossed Port of Tauranga has safely navigated its way to a group net after tax profit of $102.4 million, an increase of 15.5 per cent in a supply chain choked 2021 financial year.

A 14.3 per cent increase in log exports and a 46 per cent lift in subsidiary and associate company earnings were countered by increased costs and reduced container volumes due to supply chain congestion.

Total trade increased 3.8 per cent on FY20 to 25.7m tonnes, but container volumes fell 4.1 per cent to 1.2m TEUs. The company reported 106 fewer container vessel visits between September last year and June 2021 as a result of shipping disruption.
Imports increased 4 per cent to 9.4m tonnes while exports lifted 3.6 per cent to 16.3m tonnes.

Group revenue rose 12 per cent to $338m. Parent company revenue increased 8.9 per cent to $323.5m. Costs lifted nearly 15 per cent due to congestion effects.

New Zealand's largest port will pay a final dividend of 7.5c per share, giving an ordinary dividend for the year of 13.5 cps.

Chair David Pilkington said the results were very pleasing considering the supply chain challenges of the past year.

"As the world continues to grapple with the devastating effects of the Covid-19 pandemic, there has been major disruption in international supply chains. Constrained capacity in parts of the New Zealand supply chain, especially at Ports of Auckland, has exacerbated delays and restricted our ability to adapt quickly to the needs of importers and exporters," he said.

"International shipping capacity is in hot demand and costs for shippers have skyrocketed."

New chief executive Leonard Sampson, who took over from Mark Cairns in June, said it had been "a very tough operating year".

The result was a good reward for a great effort by all involved, and reflected the benefit of the company's diversified earning sources and cargoes, he said.

Subsidiary and associate earnings lifted 46 per cent to $18.6m.

The company's long term freight agreements with key customers also gave some certainty of cargo volumes in a challenging time.

Pilkington said however it was not efficient to run a container terminal at more than 100 per cent capacity as the port had been required to do. Costs, including straddle carrier diesel use and related carbon emissions had grown as a result of the congestion, and labour shortages had been challenging.

Temporary surcharges for long-stay containers, introduced in January to discourage inefficient cargo flows and relieve yard congestion, helped in the recovery of some of the additional costs.

Sampson said despite the big dip in container vessel calls, the average cargo exchange increased 21.7 per cent due to the decreased frequency and shippers maximising available capacity.

Near record surges of container volumes in October and December, compounded by constrained rail capacity, caused significant congestion, reduced productivity and weeks-long delays transferring import containers by rail to Auckland, he said.

KiwiRail had provided additional trains since May easing the pressure but container vessels were still arriving out of scheduled times and were being handled in the order they arrived.

The outlook for the new financial year remained uncertain, said Sampson.

He was confident the port had resolved land-side congestion issues for now but international supply chains continued to be disrupted.

Auckland port's challenges were unlikely to be resolved soon, he said.

The worsening labour shortage in the sector "could potentially have an impact on operations", he warned.

The company would provide earnings guidance for the 2022 financial year at its annual meeting on October 29.

Supply chain congestion was unlikely to be resolved until vessels could return to schedule and "ports of Auckland is back operating at full capacity", Sampson said.

This highlighted the need for the Tauranga port to expand its capacity to meet future demand.

The port had applied for resource consent for a $68.5m project to extend container berths to the south of existing wharves.

The project was a vital piece of national infrastructure if New Zealand was to meet future cargo demand and have a resilient supply chain, he said.

"We are also pursuing our plans to automate some of the container storage at the terminal to increase our capacity within the current land footprint. Our capability will be further extended with the opening of the inland port at the Ruakura Superhub near Hamilton in mid-2022."

The inland port is a joint development project with Tainui Group Holdings, the commercial arm of Waikato-Tainui.

On cargo flows, the port reported log export volumes bounced back from the 2020 lockdown, increasing 14.3 per cent to 6.3m tonnes. Sawn timber and wood panel export volumes fell 12.4 per cent.

Dairy exports decreased 1.9 per cent to just over 2.3m tonnes, reflecting a later season and a reduction in transship volumes.

Kiwifruit export volumes rose 10.1 per cent.

Coal imports increased "significantly" as a result of lower hydro energy production and declining gas production. Fertiliser import volumes declined 16.9 per cent, while cement imports rose 42.4 per cent, reflecting the strength in the local economy.
Oil product imports increased 11.6 per cent.