Port of Tauranga has headroom to chase opportunities

Port of Tauranga has some $200 million of "headroom" it could use at short notice to pursue growth opportunities even if it proceeds with the full $140 million capital return it has flagged for the next four years, says chief executive Mark Cairns.

New Zealand's biggest port company yesterday declared a fully imputed special dividend of $34 million, or 25c a share, as the first step in a capital return proposal that chairman David Pilkington says will still allow for a conservatively geared balance sheet and an investment grade credit rating. The company could put the return plan on hold if it needed more funding, Mr Cairns told BusinessDesk.

"If there is a significant opportunity, the directors could suspend the programme," he says. "Even if it goes ahead we have $200 million of headroom – we could do that overnight."

The headroom includes undrawn revolving cash facilities of about $310 million as at June 30 with lenders including ANZ Bank New Zealand, Bank of New Zealand and Commonwealth Bank of Australia, while its $190 million of commercial paper is interchangeable with direct borrowings under its cash facilities.

Port of Tauranga paid an average weighted interest rate of 3.616% as at June 30, down from 4.326% a year earlier, its accounts show.

The port company has been reviewing its capital needs because its five-year, $350 million capital expenditure programme, which has included dredging its shipping lanes to accommodate larger ships as soon as October this year, adding cranes, straddle carriers and tugs, expanding its wharf and marshalling areas, and buying property, comes to an end in 2017.

Port of Tauranga's full-year results show container volumes rose 12% to 954,006 TEUs (twenty-foot equivalent units) and its inland MetroPort facility in south Auckland alone recorded a 39% increase in volumes to 248,309 TEUs.

Total cargo throughput slipped to 20.1 million tonnes from 20.2 million, reflecting a decline in bulk cargo to 9.4 million tonnes from 10.6 million. The port recorded a decline in log export volumes, meat, fertiliser bases and grain and dairy food supplements, while volumes of sawn timber, paper products, dairy products, kiwifruit and oil products rose.

Mr Cairns says much of MetroPort's growth came from imports taken in at Tauranga and railed north to Auckland. "We're now able to balance our trains. Before they were running full in only one direction."

He cited Ministry of Transport data to show while Port of Tauranga's container volumes rose 12%, Ports of Auckland's fell 8% and nationally volumes only moved 2-3%. The uplift reflected a reconfiguration of the company's services and larger vessels making fewer stops in New Zealand, in particular, Maersk ships.

Its 10-year freight agreement with Kotahi, the transport and logistics provider owned by Fonterra Cooperative Group and Silver Fern Farms, "has allowed us to make a few more longer-term decisions" and to "pull a few more levers to make sure the trains are full both ways," he says.

The company plans to provide guidance for the 2017 year at its annual meeting on October 20, although yesterday it did signal that it expects earnings growth in the current year.

The shares fell 1.1% to $19.13 and have gained 3.7% this year.

(BusinessDesk)