Tauranga 'game-changer' to boost Timaru port's 2015 profit

PrimePort Timaru, the South Island hub which has aligned itself with Port of Tauranga [NZX: POT], expects a turnaround in its fortunes as it benefits from its tie up with the country's busiest export port.

The Timaru port posted a 12 percent increase in profit to $1.9 million in the year ended June 30. It expects profit to rise further in 2015 as it benefits from increased shipping traffic coming from its link with Tauranga, chairman Roger Gower said.

In the past year, PrimePort sold half its shares and leased its container terminal to Port of Tauranga in an attempt to drive more business through its operation. Port of Tauranga then inked a 10-year deal which will see more business coming through PrimePort from the Fonterra Co-operative Group [NZX: FCG] and Silver Fern Farms-led Kotahi freight management partnership, which involves the venture taking a half share of the Timaru terminal.

Kotahi agreed to ship containers with Maersk Line, the world's largest container shipping company, which last month introduced its weekly 'Northern Star' service out of Timaru and is set to boost activity in the current financial year.

PrimePort says the deals position it as the prime central hub of the South Island as it acts as a feeder for Port of Tauranga, which is dredging its shipping channels to make them big enough for a new generation of larger container vessels.

"Tauranga is a hub and we can feed that hub from Timaru by sea so it brings in a whole new logistics chain," Gower said. "Those larger ships and other lines that are serving Tauranga, we will be able to feed those from Timaru, so that will give them direct connections to the world. It is quite profound. We think it is a game changing investment."

The Timaru port expects container volumes to return to record levels of 80,000 this financial year, last seen in 2008, Gower said. Container throughput dropped to 22,000 in 2013, its lowest level since 2001, after the port suffered a series of setbacks following the decision of Maersk and Hamburg Sud to stop calling at Timaru and Fonterra's 2009 decision to transport its products via Kiwirail to rival Port of Lyttelton for five years even though its Clandeboye plant, the world's second-largest dairy processing site, is closer to Timaru.

Non-containerised cargo handled through the port increased 35 percent to 1.27 million tonnes last financial year, led by increased volumes of fertiliser, stock feed and fuel to support the region's dairy industry. Export log volumes also increased on the back of strong demand from China and increased supply.

"Container volumes are growing quickly and on the back of that, breakbulk volumes are also growing," Gower said. "We are finding a lot of businesses are now wanting to expand in Timaru and the wider district because of the range of services that are now on offer. We think it's a real renaissance for us."

PrimePort, which ended the last financial year with no debt, expects to debt fund the $23 million construction of a new wharf for Holcim (NZ), slated for completion in August 2015.

Holcim is investing about $50 million to build a 30,000 tonne silo and distribution facility on land adjacent to the port terminal to create a distribution hub for the South Island and lower North Island, replacing its manufacturing facility at Westport. The facility is supported by a 25-year agreement and is expected to be in operation by the end of 2015.

The new facility, which is about to start construction, will initially handle about 350,000 tonnes of cement a year and is slated to underpin growth in PrimePort's bulk business for many years, Gower said.

PrimePort chief executive Jeremy Boys retired this week and is set to take up a new position as the port's representative in the Holcim construction project. Phil Melhopt will take over as chief executive in December. Melhopt is currently chief executive of the Central Otago District Council and has previously been chief executive of Timberlands West Coast and held senior roles with DB Group.

PrimePort expects further benefits from Port of Tauranga's $20 million investment in an 'inland port' at Rolleston, south of Christchurch, which will steer exports and imports to Timaru, and is slated for completion later this year.

(BusinessDesk)