Announcement

FLLYR: SPN: South Port Full Year End Results 04:22p.m. 
SPN  
29/08/2019 16:21  
FLLYR  
PRICE SENSITIVE  
REL: 1621 HRS South Port New Zealand Limited  
 
FLLYR: SPN: South Port Full Year End Results  
 
NZX Announcement and Media Release  
 
SOUTH PORT FULL YEAR 2019 RESULTS  
For Release following the 29 August 2019 Board Meeting  
 
29 August 2019  
 
Rising trades carry South Port to record year  
 
A steady level of bulk cargo and increased container activity were key  
contributors to another record year for South Port New Zealand Limited in the  
period ending 30 June 2019.  
 
A 2% increase in cargo flows confirmed the sustained strength of the southern  
New Zealand economy - total cargo volume was 3,521,000 tonnes (2018  
3,445,000 tonnes) another record performance.  
 
Reported after-tax profit of $9.79 million (2018 - $9.66 million) is a 1%  
increase on last year which South Port Chairman Rex Chapman said "is a  
pleasing result consistent with the June guidance that strong late season  
cargo flows would see South Port's result similar to last year's record."  
 
"This result is certainly much better than we expected at the time of  
releasing the interim report in February, when earnings looked likely to fall  
within the range of $8.6 million to $8.9 million, as increased infrastructure  
expenditure continued to impact profit."  
 
"The strong business activity had given us confidence to continue port  
developments such as the $1.7 million upgrade to the Island Harbour Cold  
Stores infrastructure, including the installation of a new blast freezing  
facility."  
 
"The Board has confirmed a final dividend of 18.50 cents this year, thus  
maintaining a steady full year dividend of 26 cents."  
 
CARGO GROWTH  
 
Bulk cargo remained at 87% of all volumes imported or exported across South  
Port wharves.  
 
South Port Chief Executive Nigel Gear said "for the second year running log  
cargoes reached 700,000 MT and combined with woodchips at 320,000 MT,  
forestry is now 34% of total bulk cargo volume handled at the Port.  
 
Log prices in China recently dropped significantly due to an oversupply into  
this market.  
 
Container traffic was the standout performer this year in the Company's trade  
statistics, increasing by 25% to 48,700 TEU (2018 - 39,100 TEU).  
 
The Mediterranean Shipping Company's (MSC) Capricorn Container Service made  
54 calls this year (2018 52 calls) averaging 900 TEU exchanges per call.  
 
The change in port rotations and reduced transit times to market has resulted  
in a combination of increased full container exports being shipped and empty  
containers being recycled through the Port.  
 
COLD STORAGE CAPEX  
 
South Port's warehousing operations performed above expectations this past  
season. The closure of the Foreshore Road cold storage complex and the  
consolidation of this activity on the Island Harbour enabled the business to  
focus all of its resources at the one location.  
 
To enable this transfer, South Port undertook a $1.71 million capital  
expenditure project to modify the cargo receipt, container loadout areas and  
construct a new blast freezer.  
 
"This resulted in a similar volume of containers being packed and loaded out  
from the one consolidated site versus the same being handled over the two  
facilities utilised last season, with a reduction in operating costs per  
tonne handled.  
 
An impressive 50% increase in volumes were handled through the new blast  
freezer and provided options to a number of clients in the region," said Mr  
Gear.  
 
Increased dairy produce was also handled by the Open Country Dairy (OCD)  
warehousing operation. OCD intends to construct a third drier that will be  
operational for the 2020 / 2021 dairy season. Mr Gear said, "South Port will  
be working closely with OCD to ensure the necessary resources at the Port  
will be available to meet their requirements for this expansion.  
 
New Zealand Aluminium Smelter (NZAS) continues as an important customer for  
South Port representing one third of the Port's annual total cargo.  
 
NZAS is currently facing some headwinds paying for higher electricity, raw  
materials and transmission costs ($334 million for transmission costs alone  
over the last five years), at a time when aluminium prices are at their  
lowest since early 2017.  
 
Recently the Electricity Authority released its latest proposal for reforming  
the way transmission costs are allocated. This reform, if adopted, would see  
transmission costs reduced by $11 million per year for the smelter but would  
not take effect until 2024.  
 
South Port continues to work closely with NZAS on opportunities to pack a  
variety of aluminium products into containers for export on MSC vessels and  
potentially opening up new markets for this customer.  
 
The Intermodal Freight Centre (IFC) adjacent to the KiwiRail container  
transfer site at Invercargill processed increased volumes in its third year  
of operation.  
 
"We've started to see a balancing of trade flows with exports of Medium  
Density Fibreboard for Daiken Southland Ltd being packed and transported to  
South Port for shipment complementing imported cargo being unpacked at this  
facility," said Mr Gear.  
 
The Marine department piloted 352 ship movements through the Port in addition  
to the 30 pilotage movements carried out in the Fiordland sounds. The recent  
growth in tonnage handled at South Port has translated to increased ship  
movements and busier wharves.  
 
All sectors of the business were impacted with the exception of forestry  
where reduced ship calls reflect larger volumes of logs being loaded per  
visit.  
 
Mr Gear said, "Cruise activity in Fiordland has increased in recent years  
with more than 100 vessels now calling each year. South Port has been  
working closely with Southland's new regional development agency, Great  
South, and Cruise New Zealand to attract ship calls into Bluff.  
 
Trade forecasts for the Port, with the exception of logs, remain steady, said  
Mr Chapman. "The forecasted farm-gate milk price for the coming season looks  
reasonably healthy which again bodes well for agricultural inputs that are  
shipped into the region annually."  
 
OUTLOOK  
 
Based on all known factors, South Port estimates that earnings in the next  
financial year are likely to reduce by approximately 5%.  
 
"Increased infrastructure expenditure will be a feature for coming years with  
the focus in the next twelve months being placed on the access bridge,  
wharves and electrical infrastructure."  
 
A review of the Port's Asset Maintenance Plan will see R&M spend increase to  
~$3.5 million in 2020 and near ~$4.0 million in 2021 compared with $2.1  
million in 2018 and $2.8 million in 2019.  
 
"This lower earnings profile and in the absence of any unforeseen  
circumstances, the Directors will endeavour to maintain the current level of  
dividend payment," said Mr Chapman.  
 
FOR FURTHER INFORMATION PLEASE CONTACT:  
 
Mr Nigel Gear  
Chief Executive  
South Port New Zealand Ltd  
Tel (03) 212 8159  
 
Mr Warren Head  
Managing Director  
Head Consultants Ltd  
Tel (03) 3650 344  
Mobile 021 340 650  
headconsultants@xtra.co.nz  
End CA:00340072 For:SPN Type:FLLYR Time:2019-08-29 16:22:00  

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