A strong financial performance

We forecast a tough year and it was; volume and revenue were lower. However profit and dividend increased which is a great result and shows that the company is in good health. A disciplined focus on innovation, efficient operations and cost management has given us the agility to respond to market changes and continue to deliver. We are pleased with this result.

We will pay our shareholder, Auckland Council Investments Limited, a dividend of $54.3 million for the 2015/16 financial year. This compares with last year’s dividend of $41.7 million.

A dividend of $54.3 million equates to $103 per Auckland household, or 4.4% of the average residential rates bill of $2320.

While reported profit before tax was $99.9m, adjusted underlying profit before tax was $70.6m up $1m on last year. Revenue was $211.1 million, down $7.2m and underlying expenses were $105.7m, down $12.7m.

The table above shows the adjustments to the reported profit. Expenses have been adjusted to take in to account the one-off impacts as a result of the court ruling on the extension of Bledisloe Wharf. Last year’s expenses have also been adjusted for the write down and demolition costs associated with the partial demolition of Marsden Wharf and severance payments made in that year.

One-off impairment, gains or losses arising on investments have also been adjusted.  Investment property valuation increase of $12.2m primarily reflects value created by improvements to Ports of Auckland’s Wiri Freight Hub.

Our financial performance should be seen in the context of a container shipping industry that is undergoing significant change. Put simply, the industry has built too many container ships and there isn’t enough freight to fill them. Profits are down, and a series of mergers and acquisitions are underway as lines seek to reduce overcapacity and improve their financial position.

The impact has been felt in New Zealand in the shape of changing shipping patterns as some lines have withdrawn from our market and as alliances between lines have changed. This has resulted in a 7.9% fall in the volume handled through our container terminal.

The container sector is expected to remain volatile and our future volume growth will be subdued as a result. This highlights the need for us to continue our focus on maximising our productivity and flexibility on-port and investing in the supply chain off-port, so that we can offer cargo owners good value and service.

In contrast to the container terminal, our multi-cargo container business has grown 3.2%. The majority of this business is to/from the Pacific Islands, a trading region where volumes have been reasonably consistent year on year and are expected to remain so.

Total container volume (terminal plus multi-cargo) is down 6.7% on last year to 907,099 TEU.

Chair_report_table_V2

2016

2015

Reported profit

Adjustments

Underlying earnings

Reported profit

Adjustments

Underlying earnings

$’000

$’000

$’000

$’000

$’000

$’000

Revenue

211,108

211,108

218,314

218,314

Expenses

(103,549)

(2,184)

(105,733)

(132,485)

14,057

(118,428)

EBITDAFI

107,559

(2,184)

105,375

85,829

14,057

99,886

Share of profit from equity accounted investments

1,168

1,168

2,001

2,001

Depreciation and amortisation

(24,458)

(24,458)

(21,113)

(21,113)

Finance costs

(11,517)

(11,517)

(11,268)

(11,268)

Reversal of previous impairment of assets

17,584

(17,584)

15,075

(15,075)

Investment property fair value increase

12,213

(12,213)

(457)

457

Impairment, (loss)/ gain on investments

(2,614)

2,614

891

(891)

Profit before income tax

99,935

(29,367)

70,568

70,958

(1,452)

69,506

Income tax expense

(15,939)

(7,770)

Profit after income tax

83,996

63,188

$54.3M

SHAREHOLDER DIVIDEND FOR THE 2015/16 FY

Bulk and break-bulk volumes (including cars and other vehicles) have been varied. Bulk volumes are down 5.5% as a fall in iron/steel commodity prices has led to a significant reduction in the export of iron sand. This has been partly offset by the increase in other commodities such as cement and coal.

The number of ‘high and heavy’ vehicles we’ve handled, such as farm and construction machinery, has grown and car volumes were up 1.7%. Growth in car volumes slowed this year, but there has still been a strengthening in both the new and used car markets and the industry is predicting a similar level of growth for the next few years. Growth in all vehicles helped minimise the overall volume reduction in bulk and break-bulk, which was down 2.2% compared with last year.

We continue to evolve our operations to best meet the dynamics of the market and the changing needs of our customers. Through the implementation of our strategy we have achieved greater flexibility and the ability to manage operating costs to ensure that overall financial performance is protected.