South Port NZ Ltd – Annual Report 2022

South Port New Zealand Limited’s annual report for the year ended 30 June 2022 is now available on our website. You can view the report at: http://(URL)

South Port made an after-tax profit of $12.83 million (2021 – $10.71 million), an increase of 19.7% over last year’s result, and ahead of the forecast provided in our 2022 interim report. This result includes two one-off adjustments, which impacted our profitability.

First, we recorded an interest rate derivative gain of $0.98 million after tax, realized due to recent increases in the variable interest rate, and a $0.68 million adjustment to our calculation of deferred tax due to historical legislative changes related to the depreciation of buildings. To provide comparative figures to shareholders, removing all one-time items, normalized profit after tax for fiscal year 2022 is $11.16 million (2021 – $10.45 million), representing an increase of 6.8% compared to the result of the previous year.

This result was positively influenced by a 2.9% increase in cargo handled through the port to 3,554,000 tonnes (2021 – 3,454,000 tonnes). This is a very satisfying result, considering both the disruption to the global container supply chain and the fluctuating log market conditions experienced over the past 12 months.

Bulk cargo volumes increased by 6.1% to 3,123,000 tonnes (2021 – 2,942,000 tonnes), driven by a 148,000 tonne increase in food inventory volumes imported into the region. Log and timber volumes collectively decreased by 13.9% to 667,000 tonnes (2021 – 775,000 tonnes) and container volumes decreased by 18.5% to 44,000 TEU (2021 – 54,000 TEU).

Ship activity at the port was also down from the previous period, recording 305 calls (2021 – 331 calls). The main impact on this activity was a 24% reduction in container ship calls at the port.

COVID-19[feminine]

We have been fortunate at the Port to not have experienced large scale absenteeism from work due to COVID-19. The systems that have been put in place to date have worked extremely well to protect our staff from contracting and spreading illness at work.

To manage chilled meat destined for the Chinese market, additional procedures have been established in the cold store to maintain market access for this critical export destination. All freight operators must pass daily RAT/temperature tests and wear masks when operating in cold storage. Although requirements are easing in most of our business activities, this operation remains subject to strict controls.

Marine operations

The Rakiwai, our new $10 million, 65 ton ATD tug, has been in service for several months now. The tug is proving to be a great addition to our marine fleet, providing the added capacity to handle larger vessels and loads being carried in port.

It’s nice to say that we now have four fully qualified, unrestricted pilots working at the port, for the first time in six years. We also have a fifth pilot in training, who should also reach this standard within the next 12 months.

Input channel

The Rakiwai, our new $10 million, 65 ton ATD tug, has been in service for several months now. The tug is proving to be a great addition to our marine fleet, providing the added capacity to handle larger vessels and loads being carried in port.

It’s nice to say that we now have four fully qualified, unrestricted pilots working at the port, for the first time in six years. We also have a fifth pilot in training, who should also reach this standard within the next 12 months.

Channel Dredging – 1980s Consent

In August of this year, a backhoe dredge arrived at the port to carry out the dredging in the port entrance channel.

In the early 1980s, a drill and blast campaign was conducted to deepen the channel to $10.24 million. Unfortunately, due to the dredging equipment used, there was not enough capacity to lift all the fractured rock; therefore, some of this material was left in the channel.

The dredging operation to be carried out in the next few months will focus on completing the work started in 1980. Once completed, this operation will also provide excellent information to assist in the planning of the next drilling and blasting campaign, which will is the subject of the current resource consent application.

OUTLOOK

A prolonged period of global disruption due to COVID-19 has affected all regions of the world, including Bluff. During this period, it has been particularly pleasing to see the high levels of resilience the port community has shown in the face of many operational challenges.

Bulk cargoes supporting the NZAS and the agricultural sector have remained constant over this period and have shown growth.

However, the log export market continues to fluctuate based on the current demand profile from China, with the recent downturn expected to continue at least through Q4 2022. The container supply chain also remains congested, and there is no foreseeable correction. to this sector over the next 12 months.

Despite all the uncertainty in these two sectors, the Company remains enthusiastic about the future.

A consent to drill and blast the entrance channel to Bluff Harbor is awaited and, when issued, will allow the harbor to deepen from 9.7m to 10.7m. This slight modification to the channel will allow the port to process more cargo on fewer vessels, improve the efficiency of the operation, reduce the environmental footprint and provide safer transit for vessels calling at the southern port. . The timing of this activity will depend on the consent issued and the availability of the contractors to carry out the work.

Inquiries are being received for moving wind farm equipment into the port over the next 12 months. Two recent announcements will give confidence to the electricity sector to increase generation capacity in the south. The first is that NZAS and Meridian Energy have entered into discussions on a potential future energy contract after the current closing date of December 2024. The second factor is the review and adoption of a new transmission pricing methodology, which must come into force on April 1, 2023. These two developments could lead to a change in the production landscape in the south.

The Company continues to invest in our port, improving and modernizing our infrastructure and mobile plant, and is constantly looking for ways to improve the efficiency and safety of goods passing through the port. There are also exciting opportunities growing in the Southland region. We are particularly interested in new emerging industries such as deep sea aquaculture and green hydrogen, two areas where the port could have an important role to play in the future.

At the time of writing this report, South Port estimates that next year’s earnings are likely to be down 12.9% from the full year 2022 result. However, after removing the one-time gain of 0.98 million dollars on the interest rate derivative and the $0.68 million adjustment to our deferred tax calculation, the company’s underlying earnings will be in line with fiscal 2022 at approximately $11.2 million of dollars.

Based on this consistent earnings profile and absent any unforeseen circumstances, the Directors will endeavor to maintain the current level of dividend payments.

FINANCIAL PERFORMANCE

Dividend per share – 27.00 cents – No change

Total freight – 3,554,000 tonnes – Up 2.9%

Operating revenue – $48.58 million – up 2.7%

NPAT – $12.83 million – up 19.8%

Earnings per share – 48.9 cents – up 19.7%

Annual NPAT until June 30, 2022

$12.83 million

FY22 Constant dividend at

27.00 cents per share

FINAL DIVIDEND

Accordingly, the Board elected to pay a constant final dividend of 19.50 cents. This translates to an annual dividend of 27.00 cents (2021 – 27.00 cents). Full imputation credits will be attached to all distributions. The dividend payment represents a gross yield of 4.4% (net 3.2%), based on a share price of $8.48 as of June 30, 2022.

Cordially

Nigel Gear

General director

South Port New Zealand Limited

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