South Port NZ Ltd – 2022 Annual Meeting

The diverse opportunities for South Port New Zealand Ltd – represented by a growing range of regional producers operating in Southland – were highlighted at the company’s annual shareholders’ meeting in Bluff today.

In fiscal year 2022 to June 30, bulk cargo again played a significant role in financial performance.

Reported profit of $12.8 million was impacted by two one-time adjustments, an after-tax interest rate derivative gain of $980,000 and a deferred tax adjustment of $680,000, with normalized after-tax profit up 6.8% to $11.16 million.

“This year, bulk freight volumes increased by 6.1%, with the main contributor being food volumes, influenced by weather conditions and a higher milk price,” said chairman Rex Chapman.

Despite the cost of infrastructure upgrades over the past five years, “South Port has been able to maintain an impressive record of total shareholder return,” Mr. Chapman said, noting that the 10-year cumulative TSR was 250%.

The annual dividend of 27 cents per share represents a payout of 55% of NPAT and also 73% of free cash flow.

The strength of the regional economy had given the port the confidence to invest in infrastructure development.

Chapman said spending under the company’s asset management plan peaked in FY21 and spending for FY22 was 35% lower at $2.8 million (4 .3 million for FY21).

In August, the company obtained resource consent for a dredging project, with the objectives of a zero chart depth of 9.7m in the channel, 10.7m in the mooring pockets of Island Harbor and 9.5 m in the passing basin.

Mr Chapman said a full meter increase in operational draft “will improve the margin of safety for vessel movements and provide greater capacity for vessels to take on additional cargo”.

“The importance of this project to the future of the Company cannot be underestimated,” said Mr. Chapman. “This will be the first opportunity to deepen the channel entrance since the early 1980s, and increasing our draft aligns with our goal of facilitating the best logistics solutions for the region. “

Work undertaken 40 years ago to deepen the channel used dredging equipment unable to remove fractured rock, leaving the channel at a draft of 8.5m.

Heron Construction was recently contracted to remove this fractured or fragmented rock which proved to be more effective than expected, with the result that we expect to achieve a baseline of 9.7m in the harbor entrance channel without require additional drilling and blasting activities, with estimated cost savings of approximately $10 million.

“We are currently in the process of contracting a suction dredge to deepen the swing basin and mooring pockets as permitted by resource consent and this work is expected to be completed in July 2023.

“When completed, the increased draft of 9.7m will allow for greater cargo volumes on currently calling vessels and the possibility of some increase in vessel size.”

Managing Director Nigel Gear said critical risks are a priority for the port industry. He noted the formation of an industry health and leadership group which includes ports, stevedoring companies, the port industry association, unions and regulators to focus on harm reduction At work.

The demolition of Hangar 6 allowed the port to separate container repairs from container terminal operations, reducing the risk profiles of both activities. The move also provided much-needed additional container storage.

“There were a number of times where there wasn’t enough space to store export containers, especially during peak season.”

The recently completed paving of South Rail’s 14,000m² log storage area will increase utilization, improve safety in log sorting and protect market eligibility for export logs.

Work is nearing completion on the Island Harbor access bridge with a single bay requiring the installation of impressed current cathodic protection; which is expected to extend the life of the bridge by 25 to 30 years.

The $11M upgrade to Town Wharf’s fueling dock and ancillary infrastructure was recently completed and will provide at least 50 years of additional use.

Regional projects

“The Port sees itself as a cornerstone of the regional economy and, as such, involved in ensuring the continued progress of the region.

Mr Chapman said: “We are now optimistic that NZAS will continue to operate beyond the current closure date of December 2024.

Key to this will be successful commercial negotiations for electricity supply and satisfaction of regulators and stakeholders with improved environmental outcomes and site remediation.

One such growth opportunity is the potential development of large-scale renewable hydrogen production in the Southland, promoted by Meridian Energy and Contact Energy.

Ngāi Tahu Seafoods and Sanford are working on an aquaculture opportunity for Southland.

The Ngāi Tahu Seafood Resource Consent Application has been accepted for processing under the Covid-19 Recovery (Expedited Consent) Act 2020. Stewart Island.

Sanford filed a consent to establish an offshore farm in the southern Strait of Foveaux. Their application is currently on hold pending further engagement from stakeholders.

“These apps are a vote of confidence in the southern region for large scale open water salmon farming and will present service opportunities for South Port.”

Securing the future of smelting and growth opportunities, such as green hydrogen and aquaculture, would be a very positive outcome for Southland’s economy, and potentially for South Port.

Mercury Energy has begun preparation for the first stage of the 240 MW wind farm at Kaiwera Downs, near Gore. “Components are expected to move through the port, which should be a welcome addition to next year’s cargo volume.”

Outlook

Mr Chapman said: “There are always uncertainties in any outlook and this year is no exception. Although global supply chains are beginning to normalize with previous congestion and the easing of high freight rates, there is still uncertainty in global markets. Record inflation rates globally, leading to higher central bank interest rates, are increasing the risk of recession in many economies.

“However, as a company, we have reason to be optimistic about our prospects, at least in the medium term. We expect to have a new mining project by the middle of next year. The port handles a range of diverse cargoes and there are short term opportunities with handling wind farm equipment and longer term opportunities in hydrogen and aquaculture.

“Trade for the first quarter of fiscal 2023 follows the development of fiscal 2022, which is encouraging and in line with expectations.”

“Logs and containers are still impacted by market conditions, but all other bulk cargoes follow in line or slightly ahead of fiscal 2022.”

“The roundwood market faces ongoing uncertainty due to lockdowns in China affecting residential construction rates in the market. We expect the decline in demand for logs shipped from New Zealand to last until the end of this calendar year. »

However, yields at the New Zealand docks have increased due to lower shipping costs and the recent weakness of the New Zealand dollar against the US dollar. Logs are traded in US dollars. The cost of shipping logs has fallen more than the cost of containerized freight.

ANZ Bank noted that this has been particularly helpful as freight now accounts for a significant portion of the cost of logs landed in China.

In recent months there has been a sharp reduction in spot freight rates on major shipping lanes and in charter costs. In the New Zealand context, freight rates are expected to decline at a slower pace and the return to reliable schedules for ship calls in the port industry remains uncertain.

In a volatile phase of global shipping, South Port has consistent and stable services from Mediterranean Shipping Company, one of the largest lines in the world.

Australia and New Zealand are seeing interest from new shipping companies. South Port is watching these new developments with interest, knowing that such businesses will need to attract long-term customers to ensure their future viability.

The cruise industry has made a welcome comeback with several ships on the coast. Although only a very small number of ships are expected to call at Bluff, we do provide pilot services for those visiting Fiordland.

“At this stage, we expect our full-year earnings to be consistent with last year and, based on this, we aim to maintain the current level of dividend.”

ENDS.

South Port NZ Ltd – Annual Meeting 2022 – Press release

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