Port companies stayed on even keel despite regional variations

Friday 2nd March 2001

By Peter V O'Brien

Port company share prices performed reasonably well over the past year at a time when the organisations' profitability flattened.

The table shows prices on Monday and compares them with the position on March 1 last year (when The National Business Review reviewed the sector) and the highs and lows for 2000/2001.

Last March the stocks were closer to their 2000/2001 lows than to their highs, with the exception of Port of Tauranga and Ports of Auckland.

The improvement over the past 12 months was well ahead of the movement in the NZSE40 capital index, which had a slight decline.

Company reports confirmed the need to look at operations on a regional basis where economic and competitive conditions varied from tight to buoyant.

Lyttelton Port Company, for example, said the net profit of $6.56 million for the six months ended December 31, compared with $7.08 million in the corresponding of the previous year, reflected tight trading conditions, increased dredging costs and higher fuel costs.

Further south, South Port New Zealand earned $910,000, down 4% on the $945,000 recorded in the first half of the previous year.

The company said the "modest decline" occurred when the national economy was "steady if unspectacular" and forecast a slightly reduced profit for the year ended June 30.

The Bluff port operator benefited from buoyant economic conditions in Southland, again showing the difference between regional situations and the overall national economy.

Cargo volumes increased 2.3% over the corresponding period last year, reaching 981,000 tonnes, slightly ahead of budget.

South Port's share price probably benefited from a share buyback in November. Although historic prices are adjusted to reflect buybacks, there is usually a proportionate rise to reflect the adjustment to earnings a share, price/earnings ratios - historic and prospective - and changed balance sheet ratios.

The last was shown in South Port's increase in bank debt and the equity to total assets ratio coming back to 74% from the 80% shown in the last annual report.

Lyttelton Port chief executive David Viles said his company's overall performance highlighted the extremely competitive market, "evidenced by shipping lines working close together with further rationalisation occurring in the international lines both in terms of port calls and aggregation of services."

Ports of Auckland's operations differ from those of the South Island ports because the northern port is the country's main container handler.

Profit for the six months ended December 31 was almost unchanged at $20.9 million, compared with $20.41 million in the first half of the previous year, but the global figure disguised unders and overs.

Ports of Auckland's earnings from marinas was down compared with the previous half-year, which received a boost from activities associated with the America's Cup.

The company said earnings before interest and tax (ebit) in the property division, which included marinas, was down from $6.9 million to $4.4 million.

Port commercial services, the core business, saw ebit go from $23.66 million in the first half of last year to $28.79 million.

Chief executive Geoff Vazey said the company expected the second half to be equally steady, a comment repeated in a variety of terms in the reports from other port companies.

Mr Vazey said the company got off to a good start in January with container volumes and breakbulk volumes both up on last year.

General conditions pointed to reasonable growth for the economy but the low exchange rate may have an impact on import throughput at the ports.

Northland Port Corporation reported in December on the six months ended September 30.

It earned $785,000, well down on the $2.99 million in the first half of the previous year, but took up a loss of $5.01 million on its engineering operation, including provision for anticipated losses on contracts which the company was obliged to complete, and severance payments of $1.45 million.

Gains from sale of assets offset those losses.

Port company results and their share prices reflect both the current state of regional and national economies and, as a spin-off, the market's confidence in listed companies.

The companies handle the country's imports and exports, apart from the relatively small tonnages which go by air, although air freight usually covers comparatively low weight but high-value products.

The market has rerated the companies' share over the past year, despite steady results.

Any more price appreciation probably depends on signs of solid earnings growth.

Port companies share prices' performance (c)

Company	February 26 2001	March 1 2000	2000/2001 high	2000/2001 low	% change March 2000 to February 2001

Lyttelton	173	150	180	135	+15.3
Northland	168	131	190	120	+28.2
Port of Tauranga	600	555	601	490	+8.1
Ports of Auckland	535	500	560	365	+7.0
South Port	122	94	120	88	+29.8
NZSE 40 cap index	1984	1987	2174	1868	-0.15

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