Ports of Tauranga performance during downturn applauded

Tuesday 20th October 2009

Port of Tauranga has done a remarkable job of maintaining profitability against the tumultuous backdrop of the global economy said Morningstar research unit, AspectHuntley.

Shares of the port company edged up 0.7% to $7.25, nudging the $7.26 record it reached in mid-2007. The shares have climbed 49% from their low in March. AspectHuntley commenced coverage of the port company with a ‘hold’ rating, saying the stock is fairly priced given its rally.

Net profit rose 7.3% to $45 million, boosted by a lower corporate tax rate, while the company generated $27 million free cash last year. As the largest New Zealand port by trade volumes, POT's June 2009 revenues were $130 million, versus $138 million in 2008. Total trade for the year was down 5% to 13.5m tonnes, primarily blamed on imports being down 11% to 5m tonnes.

Most of this drop was due to a double digit decline in fertiliser imports, and a 6% fall in oil imports.

However, log exports grew 27%, with dairy exports up 24%, with bulk cargo accounting for 60% of trade, containers the rest. Logs make up 37% of POT's export volumes, and on the back of sustained Chinese demand port management is starting to plan infrastructure that can handle annual log volumes of over 5mt over the medium term.

The AspectHuntley report said POT's Metroport containerised cargo marshalling business in South Auckland is the fourth largest container terminal in NZ, accounting for 25% of POT's total containers handled.

A merger between POT and Ports of Auckland could make sense, though at this stage "on all metrics, whether it be profitability, balance sheet strength or return on capital, POT is far superior to POA," the report said.

"The advantage POT has over POA is that it is capable of handling larger ships with lower capital investment. POA would have to spend north of $200 million to have the same capabilities."

A merger could stop overinvestment in cranes and dredging. POA is mainly a container port with annual container volumes of over 800,000 twenty foot equivalent (TEU) movements a year. POT handles bulk as well as container ships, and "the merged company will be able to extract significant cost savings," the report said.

"As one of Australasia's most productive and efficient ports, its strong balance sheet and sizeable land bank, POT is well placed to grow its container and bulk business," the report said.

"However a high NZ dollar and an uncertain global economic outlook might impact volumes in the near to medium future. At the right price the stock will suit long-term investors with a modest appetite for risk."

Businesswire.co.nz

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