​Port of Tauranga says earnings growth may stall in 2016 on weaker log volumes, dairy impact

Port of Tauranga [NZX: POT], New Zealand's biggest port company, says earnings growth may stall in 2016 in the face of uncertainty over log and dairy volumes, which may offset growth in containers.

The Tauranga-based company, which is aiming to be the nation's dominant hub port, may report earnings similar to last year's $79.1 million, which itself was a gain of just 1 percent on the year and reflected a drop in log volumes. Chief executive Mark Cairns told shareholders at their annual meeting that overall trade was down 2 percent in the first quarter of the 2016 year, largely reflecting a 17 percent decline in log exports, which he partly attributed to demand at a new mill in Rotorua.

The drop in log volume was offset by a 21 percent gain in dairy volumes and an 8 percent increase for containers, he said. Earnings before interest, tax, depreciation and amortisation was flat in the quarter, and profit was down 2 percent, reflecting interest and depreciation expenses on its five-year, $350 million of investments to 'future-proof' the port.

"Despite the positive increase in container volumes, due to the uncertainty around log and dairy volumes, along with the flow on effects to imports of farms inputs such as fertiliser and stock feed supplements, at this early stage we expect to achieve full year earnings similar to last year," Cairns said. "Having said that, we do note the recent Agrifax report released earlier this week, reporting of a pick-up in demand, which has significantly reduced inventories on Chinese ports from 4.7 million tonnes to approximately 3 million tonnes, supporting an increase in average wharf gate prices."

Port of Tauranga has extended its reach across the nation, aiming to become a major hub serving what is expected to be fewer visits by larger ships in the future. Its interests stretch from Whangarei to the Timaru Container Terminal, where container volumes have more than tripled and are expected to reach a record this month. It began dredging this month to deepen the Tauranga harbour channel to allow the next generation of 6,500 TEU (20-foot equivalent unit) ships, having awarded the work to Danish company Rohde Nielsen.

It has also extended its relationship with Kotahi, the logistics group owned by Fonterra Cooperative Group and Silver Fern Farms, in a new joint venture called Coda that will move containers and bulk cargo to and from ports and freight hubs.

Port of Tauranga shares rose 0.1 percent to $17.52, having climbed 142 percent in the past five years, outpacing the NZX 50 Index's 80 percent gain. The stock is rated a 'sell' based on the consensus of five analysts polled by Reuters.

(BusinessDesk)