Good sound year for five ports

By Peter V O'Brien

Friday 5th July 2002

Listed port companies continued to produce good capital gain over the past year.

Share prices for the five groups last week and at the end of August 2001 are in the table.

Percentage movements based on actual prices on the two dates. Total shareholder gains for Port of Tauranga and Ports of Auckland need to be adjusted for returns of capital.

Port of Tauranga cancelled one in eight shares and gave shareholders a tax-free distribution of $7 for each share cancelled. Ports of Auckland cancelled one in five shares and repaid $5 a cancelled share.

Both cancellations/distributions should be considered when calculating the actual gain to a shareholder owning stock as at August 31 last week. The companies' decision to repay capital were in line with a desire to reduce overcapitalisation.

Ports of Auckland's situation was discussed in The National Business Review on April 5, when abridged statements of financial position as at June 30, 2001, were presented, showing the position as reported, with a shareholders' equity/total assets ratio of 81.91% and figures adjusted for a share cancellation. The latter resulted in debt replacing $132.5 million of surplus capital. It reduced the ratio to a pro forma 44.3%.

The April 5 discussion used June 30 figures, rather than December 31's, because the former were audited while the latter were unaudited.

Ports of Auckland's financial structure changed again after six months trading for the year ended June 30 but the exercise showed the effect of a capital repayment on a more efficient use of financial resources.

Port of Tauranga's position was more difficult to assess. Capital was repaid on February 15, after the half-year ended December. The company entered a commercial funding facility allowing it to borrow "up to $250 million" from institutional lenders.

A floating facility would affect the debt/equity ratio differently at different times depending how much was on the books when a calculation was made. Port of Tauranga chairman Fraser McKenzie said the fundraising and return of capital would significantly change the balance sheet structure but it would remain sound and be managed within "conservative parameters."

Recent financial changes show three of the five port companies are now within the "normal" range of corporate debt/equity ratios.

Northland Port Corporation and South Port maintain high ratios, the former extraordinarily high. There was no indication in Northland Port's brief preliminary report for the year ended March 31 that the structure would change, although the matter may be under consideration.

The company had no debt of any kind. Its only liabilities apart from shareholders' equity were accounts payable, the normal current amounts appearing in any company. They were $3.28 million, about the same as in the report for the six months ended September.

Cash holdings were $19 million. A segmental reporting note said the assets of "other activities" included the group's significant land holdings in the Marsden Point area and "substantial cash reserves."

Deposits at call were $18.76 million, compared with $22.73 million in March, 2001. Interest received for the year was $1.43 million, higher than the $1.2 million received in the previous year and 7% of the average of year-ended deposits at call.

The company performed well in the latest year, earning $5.03 million, compared with a half-year forecast of $4.2 million. Return on shareholders' equity was 11.7%, a reasonable figure but not extraordinary, although the high level of equity would affect the return.

Other listed port companies ended their years on June 30 and will report in the period to mid/late August. They did well in the six months ended December, a matter reflected in their share-price performances.

Strong growth during a period of buoyant economic conditions, particularly in primary production, and gains from streamlined and more efficient operations assisted profit.

Some slowdown can be expected soon as the companies move through economic cycles and reach optimum efficiency.

PORT COMPANIES' SHARE PRICES

Company	June 28 2002	Aug 31 2001	% change Aug-June	2002 high	2002 low	Equity/total assets% ¹

Lyttelton	$1.81	$1.70	+6.5	$1.90	$1.65	59.3
Northland	$2.50	$2.08	+20.2	$2.86	$2.20	92.9
Pt Tauranga	$7.25	$7.20	+0.7 ²	$8.00	$6.95	75.5
Pts Auckland	$6.50	$5.66	+14.8 ²	$7.12	$5.80	84.2
South Port	$1.74	$1.28	+35.9	$1.75	$1.40	76.8
NZSE40 capital Index (rounded)	2068	2060	+0.4	2161	2042	N/A

¹ Based on latest published accounts; unadjusted for capital repayments
² Unadjusted for capital repayments

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