Report Card: In age of credibility, Lyttelton Port scores highly

By David McEwen

Friday 20th September 2002

Christchurch is said to be a weather vane of New Zealand. It reflects economic trends in GDP growth, consumer prices, imports and exports, without the booms and busts of Auckland.

Lyttelton Port is at the centre of that economic hub, with some 15,000 fulltime jobs about 8% of Canterbury's workforce dependent on it.

Proudly South Island, the port named its $7m tug Blackadder because, like its rugby namesake, it represented "hard work, honesty and strength" the Canterbury spirit. Its latest annual report also displays the Canterbury scarf in black and red on its cover.

It's been a good year for the port. Total revenue was up 6.4% to $62 million for the year ended June 2002. And because a firm hand was kept on operating expenses, which increased only 1.1%, earnings before interest and tax shot up 15.1%. A fall in finance costs lifted the net profit after tax 19.4% to $16.3 million.

The increased revenue was on the back of better trade volumes in most areas: Car volumes were up 9%, dry bulk goods 37%, coal 10%, containers 10% and logs 93%.

The good returns farmers earned last year against most predictions was reflected on the wharf, the company says, with record levels of imports in fertiliser and farm machinery.

Chairman Brent Layton, however, feels compelled to report on what he calls, "some dark spots." He appears to see Lyttelton Port's lack of a true monopoly as one of these. It is too close to other major ports to claim that happy status.

"The loss of a major container-line service to Timaru was a major blow," he laments. The proximity of Timaru was part of the reason. But another was "the inability to guarantee container ships at the terminal will be worked as soon as they arrive at maximum intensity until they are ready to depart."

This seems to be a roundabout way of saying it doesn't have infrastructure for handling a rush of container ships.

Layton elaborates: "Your directors recognise that more business and work at the port, and the Canterbury region, could be lost until such time as a guarantee of this kind can be given. The high daily costs of the capital tied up in the larger and modern container ships means shipping lines will not tolerate downtime at ports."

In his report, managing director David Viles explains what's being done to improve service flexibility at the port. Capital expenditure has picked up, with investment in a new straddle carrier, to increase the port's ability to "simultaneously meet ship, road rail and maintenance requirements." The new tug, Blackadder, arriving this month, "will be one of the most powerful harbour tugs in the country and has the capacity to manoeuvre these large vessels."

He also talks about a change of attitude toward customers, with a complete "port-wide pricing review to address pricing anomalies experienced by some customers" and improved quality of service through better information flows "and more focus on what our customers want."

There's a lot to learn from Lyttelton's annual report, which dispenses with positive spin and deals honestly with its shareholders. "We have a problem and this is how we intend fixing it," is the tone of the report.

To a large extent, the era of PR rubbish filling an annual report is coming to an end. The internet will see to that, because information is now freely available on almost every listed company in the world.

Directors who deal honestly with shareholders have a lot to gain. It is a principle of communication that if a director is prepared to reveal problems and challenges honestly, then everything else he says will have credibility.

This is the age of credibility and the Lyttelton annual report scores high in the area.

David McEwen is an investment adviser and author of weekly sharemarket newsletter McEwen's Investment Report. Web: www.mcewen.co.nz, Email: davidm@mcewen.co.nz

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