The Taranaki community is to benefit from a sizeable increase in returns from their investment in Port Taranaki.
The port company confirmed at its Annual General Meeting (AGM) in New Plymouth today, the dividend to its sole shareholder, the Taranaki Regional Council (TRC), is projected to increase to $8 million per annum for the next financial year, further helping to offset regional rates. This is an increase of more than 60% on the $4.9m dividend paid to the TRC in the 2016-17 year.
Port Taranaki retiring Chairman John Auld said the projected increase in annual dividend reflected the company’s view on the retention of capital versus returning capital to the shareholder.
“Port Taranaki has played, and will continue to play, a critical role in the Taranaki economy. This includes providing an appropriate return on our shareholder’s investment for the betterment of the Taranaki community,” Mr Auld said.
In the 2017-18 financial year, Port Taranaki expected to financially benefit from its investment in the former Chevron tank farm on Centennial Drive, New Plymouth, Port Taranaki chief executive Guy Roper said. The port company purchased the tank farm in 2015 and began an operational agreement with BP New Zealand to enable larger parcels of petrol and diesel to be shipped in, stored and distributed throughout the region, reducing costs. The first product is to be transported from the site next month.
A further lift in log volumes through Port Taranaki is also projected following another record year. For the 2016-17 year, 486,000 JAS passed across Port Taranaki's wharves – an increase of 36%. This resulted in a 29% increase in log revenue. Favourable market conditions, low inventory levels in China, and large numbers of harvest-ready trees in the port’s catchment area combined to produce this result. These conditions are expected to continue in the next financial year.
“As well as stacking logs higher to accommodate this growing business, we are also investigating developing more land at the former power station site to store logs,” Mr Roper said.
“We are also examining means to extend our forestry catchment area and service the growing demand by developing a combined road-rail transport mode for logs. With rail facilities direct to the Blyde wharf we are exploring ways to make this practical and economically viable.”
Mr Roper said the past financial year had proved challenging for Port Taranaki with both revenue and profitability down compared with the previous 12 months.
Reduced shipping activity, lower oil commodity prices and a fall in the stock feed market all contributed to the 2016-2017 result.
However, the outlook for the new financial year was stable, with revenue, profit and cargo volumes forecast to be in line with the 2016-2017 results across all sectors, Mr Roper said.
“We will remain flexible and adaptable with a focus on making a return on our shareholder’s funds and making a real difference to the Taranaki economy.
“To achieve this in the current climate, we need to carefully review our costs across the business and this is something we will be assessing in the coming months.”
Financial results 2016-2017 overview
- Revenue decreased 6.7% from $44.7 million (2015-2016) to $41.7 million (down $3 million)
- Net profit before tax reduced 6.5% to $11.5m
- Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) decreased 3.3% from $19.6 million to $19.0 million (down $0.6 million)
- Operating costs reduced by 6.5% to $29.0 million
Total trade fell 1.4% from 5.2 million tonnes in the previous financial year to 5.08 million tonnes. While exports continue to improve by 1% year-on-year largely because of strong log exports, the volume of imports fell by 15% compared with 2015-2016 as demand for feed in the agricultural sector weakened significantly.
Favourable on-farm feed conditions and cashflow constraints in the dairy sector have resulted in a 17% drop in volume and a 25% reduction in revenue for our dry bulk business. The forecast lift in the milk price to more than $6/kg milksolids is welcomed and is forecast to boost a recovery in dry bulk trade and will help boost the Taranaki economy.
As New Zealand's key oil and gas port, the oil and gas industry remains Port Taranaki’s largest sector, and the continuing challenging oil commodity price environment has had an impact on port business. While methanol volumes were strong during the year, this was offset by lower crude, condensate and LPG volumes. As a result, revenue from bulk liquids was down 2%. Port Taranaki’s offshore business saw virtually no exploration related work and was down 38% year-on-year.
“There are, however, early and positive signs of future activity in offshore exploration and we will be ready to support that when the work begins,” Mr Roper said.
Port Taranaki’s shipping numbers were down by 10% because of a number of factors, in particular the international trend of larger vessels exchanging bigger parcels of cargo, therefore requiring fewer visits. In the oil and gas sector, lower LPG production resulted in fewer visits, while as the market for stock feed has fallen, customers have consolidated and entered vessel sharing arrangements to reduce costs. As the port’s log business has increased at record levels, average liftings of logs increased.