Ports of Auckland promises changes as new strike looms

The Ports of Auckland. Photo / Dean Purcell

Ports of Auckland appears resigned to the likelihood that next week's planned strike action by the Maritime Union will go ahead.

But chief executive Tony Gibson says that regardless of its outcome, changes will need to be made to the way the company operates if it is to provide an adequate financial return to its owner - Auckland Council.

The company is on the verge of losing its biggest export customer, Fonterra, after the dairy co-operative said on Wednesday that it would move all its export shipments from Auckland to other ports from the end of January.

Fonterra, in a thinly veiled reference to the impending strike action, said it had made the decision to ensure certainty of supply for its international customers.

Disagreement over an employment contract sparked a strike and a lockout last month. Further strike action is planned for a 48-hour period starting on Monday.

Last month, international shipping giant Maersk said it was switching its Southern Star container service from Auckland to Tauranga. It said industrial action at Auckland had played a part in the decision.

Ports of Auckland's final offer included a 10 per cent rise on hourly rates, performance bonuses of up to 20 per cent on hourly rates, and the retention of existing benefits and entitlements in return for a new roster system aimed at increased flexibility.

Gibson said the union had been kept abreast with the company's key objectives, the first of which was to meet its cost of capital.

"We are not meeting the cost of capital so every dollar we invest is a dollar we destroy," he said. "We can't invest at the moment based on the returns that we have."

The company's total container volumes represent 63 per cent of the Upper North Island container trade, 51 per cent of the North Island container trade and 37 per cent of New Zealand's total container trade.

The port company pays around $18 million in dividends to Auckland Council a year. The company's shareholders equity - its total assets minus its total liabilities - sits at just over $400 million. Gibson said that, historically, the port's financial performance had been below par.

The company's "normalised" profit for the 2010/11 year was $24.9 million after tax, up 2.1 per cent on the previous year's result.

The ports most likely to benefit from Fonterra's move are those at Tauranga and Napier. The Port of Napier, which is owned by the Hawkes Bay Regional Council, has been working closely with Fonterra, Kiwi Rail and shipping lines for some time to increase cargo volumes.

The prospect of more business has given Port of Tauranga's share price a boost. The stock rallied by 15c to close at $10.20 - having soared by 36 per cent over the past 12 months.

Port of Tauranga chief executive Mark Cairns said the rally represented the market's view of the company's growth potential.

Fonterra represented about $100,000 in lost business for Ports of Auckland. To date, the industrial action has cost it $2.82 million in lost revenue.

Cairns said Port of Tauranga and Ports of Auckland had competed vigorously for the dairy trade over a number of years.

The company was still in talks with Fonterra on how the trade would be divided up between itself and Napier.

Cairns said the issue came down to port productivity.

"It really does give me cause to reflect on the industrial relations climate that we have," he said. "Being a listed public company, a lot of our staff are shareholders in the company and they behave that way."

Ports of Auckland, which delisted from the NZX in 2005, is 100 per cent owned by the Auckland Council, whose other trading assets include a 22.4 per cent holding in Auckland International Airport.

- APNZ