Port of Tauranga is today reporting record cargo volumes and increased profits for the year to 30 June 2019.

The port continues to consolidate its position as New Zealand's international hub port, with transhipment increasing 11.2 per cent.

It handled more than 26.9 million tonnes of cargo, an increase of 10.2 per cent in volume, with containerised cargo growing 4.3 per cent to more than 1.2 million TEUs1.

Group Net Profit After Tax passed the $100 million milestone for the first time, increasing 6.7 per cent on last year's profit of $94.3 million to reach $100.6 million.

Port of Tauranga chair David Pilkington says the results are evidence of Port of Tauranga's success in becoming New Zealand's major international hub port.

He says transhipment, where containers are transferred from one service to another, has been growing significantly since 2016, when the Port completed its $350 million capacity expansion programme to accommodate bigger container ships. Transhipment now makes up 32.1 per cent of the containers handled at Tauranga.

David says New Zealand shippers can access fast, big ship services that only call in Tauranga by utilising the sea links between Tauranga and Timaru, Napier, Nelson or Wellington.

He says Port of Tauranga's long-term agreements with key customers give it the assurance to plan ahead for increases in cargo growth.

The Port recently renewed its ten year operating agreement with major customer Oji Fibre Solutions.

'Having the necessary infrastructure is one thing, but it is also vital to have the relationships to ensure we have the freight volume to attract the big ship services,” says David.

'We have long-term agreements in place with key cargo owners such as Oji Fibre Solutions, Fonterra's shipping supplier Kotahi Logistics and Zespri International.”

Port of Tauranga Chief Executive Mark Cairns says the number of containers transferred by rail to and from Port of Tauranga's inland freight hub, MetroPort Auckland, increased 4.3% in the year to 30 June 2019.

MetroPort Auckland now stands alone as the country's fourth largest container terminal by volume.

Port of Tauranga recently announced a partnership with Tainui Group Holdings to support the development of the Ruakura Inland Port in Hamilton, about midway between Tauranga and MetroPort Auckland.

'This will help Waikato-based importers and exporters unlock the significant efficiencies to be gained by being directly linked by rail to the big ship services calling at Tauranga,” says Mark.

Port of Tauranga also expanded its MetroPort Christchurch inland freight hub by constructing a large warehouse that is being leased by associate company Coda Group to handle Westland Milk's dairy exports.

Mark says development of the Group's network of ports, inland freight hubs and logistics services, ensures importers and exporters in key cargo-producing areas throughout the country can access the efficiencies offered by bigger ships.

'The availability of rail and coastal shipping to consolidate cargo at Port of Tauranga, and the efficiency of the big ship services, means we can also offer a lower carbon supply chain to our customers.”

Financial performance Parent EBITDA (earnings before interest, tax, depreciation and amortisation) increased 12.4 per cent to $168.6 million.

Earnings from Associate Companies decreased 27.5 per cent after a very disappointing result from Coda Group, Port of Tauranga's 50/50 joint venture with Kotahi.

'We are confident Coda will return to profitability in the next financial year.

'Coda's new Chief Executive, Gerard Morrison, has embarked on an extensive change programme.”

Port of Tauranga's 100 per cent Subsidiary Quality Marshalling had an outstanding year, with profits increasing 15.1 per cent, and our joint venture in the South Island, PrimePort Timaru, increased its contribution by 36.6 per cent.

Dividend policy Port of Tauranga's Board of Directors has declared a final dividend of 7.3 cents per share, bringing the full year's dividend to 13.3 cents per share, a 4.7% increase on the previous year.

The last of four special dividends of 5.0 cents per share will be paid on 4 October 2019.

The Board has decided to extend the capital repayment programme from October 2020 through special dividends of 2.5 cents per share for another four years, subject to meeting certain conditions.

Cargo trends Exports increased 11.2 per cent to 17.1 million tonnes and imports increased 8.4 per cent to 9.8 million tonnes for the year ended 30 June 2019.

Log exports increased 12.5 per cent to 7.1 million tonnes. This trend is not expected to continue in the short term, with log prices declining in June following a drop in demand from China, New Zealand's biggest log export market. We expect some impact on volumes in the coming months.

Sawn timber exports increased 5.4 per cent in volume and, overall, forestry-related exports increased 10%.

Dairy product exports remained steady at just over 2.3 million tonnes, while imports of dairy herd food supplements and fertiliser decreased by 11.8 per cent and 9.2 per cent respectively.

Kiwifruit exports increased 15.2 per cent during the period. Other primary produce sectors also performed strongly, with frozen meat exports increasing 18.8 per cent in volume and apple exports increasing 54.3 per cent.

Cement imports decreased 17.1 per cent in volume and steel exports decreased 7.7 per cent. Salt imports increased 26.8 per cent in volume.

Oil product imports increased by almost 2 per cent and dry chemical imports increased by almost 9 per cent.

Ship visits decreased 3.9 per cent to 1678 for the year. The average size of vessels continues to increase.

Operational developments Port of Tauranga is now planning for the next stage of growth and in response to customer demand, intends to add another container vessel berth by extending up to 385 metres to the south of the existing Sulphur Point wharves.

A ninth container crane will be delivered in January 2020.

'We continue to make progress with people and safety, a key focus, with a 55 per cent reduction in Total Recordable Injury Frequency Rate and a 17 per cent reduction in Injury Severity. We had one lost-time injury during the year, involving blistered feet.”

Sustainability

'We take climate change seriously in our business and we are proud to have one of the lowest carbon emissions per tonne of cargo handled of any port in New Zealand.

'We are committed to the Paris Agreement target to keep global warming well below two degrees.”

Port of Tauranga has gained CEMARS (Certified Measurement and Reduction Scheme) accreditation of its carbon emissions measurement and management.

The Port has set an initial short-term goal of a 5 per cent reduction in Scope 1 emissions per cargo tonne and is targeting net-zero emissions by 2050.

Mark says the Company will 'inset” the potential cost of carbon offsets by investing in sustainability initiatives within the business.

'This year we have set aside $1 million which we are investing in more expensive battery-hybrid straddle carriers. The largest source of our emissions is from diesel-powered straddle carriers at the container terminal,” he says.

'We are also replacing light vehicles with electric or hybrid models where available, and using biodiesel where we can.

'Our modern fleet of ship-to-shore gantry cranes now all have sophisticated electric motors that re-generate up to 700kw of electricity when lowering a container onto the vessel or terminal, which can then be made available to any adjacent cranes lifting containers or fed into the reefer blocks, greatly reducing our electricity consumption,” he says.

'We favour rail transport over road because of the lower emissions and are working with our rail partners KiwiRail to reduce train-related emissions through efficiency and technology. We are also working with our partners Pacifica Shipping to promote greater use of coastal shipping where feasible,” he says.

The availability of rail and coastal shipping to consolidate cargo at the Port, and the efficiency of the big ship services, means Port of Tauranga is the obvious choice for customers seeking the lowest carbon supply chain. Big ships of 7,500 to 9,500 TEUs have a carbon footprint more than 31 per cent lower than the previous average size vessels calling in New Zealand.

'In addition to our response to climate change we are also placing increasing focus on the impact of our growing business on our various communities and stakeholder groups.

'We are very pleased to have secured resource consent for our stormwater network at Mount Maunganui and we have also made significant progress in dust suppression and spill prevention.

'We encourage the moves to require ships to utilise low sulphur fuel and note the improvement that continues to be made in minimising the release of the log fumigant Methyl Bromide to the atmosphere,” says Mark.

Upper North Island Supply Chain Review A Government-appointed working group is reviewing the current supply chain with a view to moving significant cargo volumes from Ports of Auckland to Northport in Whangarei (50 per cent owned by Port of Tauranga). We see a growing role for Northport in helping to alleviate the pressure on Ports of Auckland.

'We have outlined to the working group the significant capacity still available at Tauranga for cargo growth and we look forward to future reports, which we hope will address well-known issues such as the need for increased investment in road and rail networks and the historic under-performance of some port companies.

Outlook Port of Tauranga is subject to external influences such as economic conditions, trade trends, technological change and the political environment. The Company continues to focus on maintaining diversity in its cargo and customer mix, giving it a range of revenue sources and ensuring it can capitalise on any new business opportunities.

Looking to the 2020 financial year, Mark says log volumes are expected to fluctuate in the coming months following the recent drop in international prices.

Port of Tauranga will provide an update on the first quarter's trade, and earnings guidance for the full year, at the Annual Shareholders' Meeting on 25 October 2019.