Ports of Auckland investment stifles 1st-half revenue growth
Ports of Auckland reported a 16 decline in first-half profit and expects more of the same for another 18 months as its automation investment programme saps capacity and stifles revenue growth.
The port operator said net profit was $24.4 million in the six months to December versus $29.2 million in the same period a year earlier. Operating expenses rose 9.8 percent to $76 million while revenue was up 2.5 percent at $123.6 million.
“Our company is in the middle of a major investment programme which will increase capacity, efficiency and returns. This work will give us a solid foundation for a sustainable future, but while construction is underway there is a tangible effect on our business,” chief executive Tony Gibson said.
Gibson said the terminal is operating with less capacity as a result of work to introduce automation, limiting the port’s ability to respond to unexpected increases in demand or events such as the terminal closure following the death of a worker in an accident in August.
As a result, it experienced severe congestion in September and October, and had to divert a few services to other ports, something Ports of Tauranga acknowledged as boosting its own earnings when reporting its first-half result last month.
Gibson said that congestion also exposed a weakness in the Auckland supply chain: “It is working at capacity and small problems can rapidly escalate.”
“Auckland’s growth means the supply chain needs to evolve if it is to handle the increased volumes which are now a permanent part of the landscape,” he said. “Factors behind the vulnerability include delays to shipping – over half of all container ships arrive late – labour shortages affecting the port and trucking industry, and a lack of capacity at nights and weekends in distribution centres, importers’ warehouses and empty container depots.”
He noted that while the congestion “is now behind us, we will continue to operate with reduced terminal capacity until automation infrastructure works are completed later in 2019.”
While that will improve the situation “we will still be operating a terminal at capacity until automation comes on stream early in 2020. This will impact on our operations and on our ability to take greater volume, and that will be reflected in our results this year and the next,” he said.
The port operator said it expects its annual result to be lower than the prior year and for the following year to also be affected. Reported net profit for the year to June 30, 2018 was $76.8 million.
Container volumes at the port were down 4.6 percent to the equivalent of 485,093 twenty-foot units in the half, and the operator expects container volumes to be down for the full year.
It also noted that car volumes fell 16.6 percent to 124,190 units due to a decline in car sales and measures to protect the country from the brown marmorated stink bug. It expects car import volumes to be lower on the year.
Ports of Auckland will pay a first-half dividend of $18.6 million, or 76 percent of profit, to the Auckland Council, versus $23.8 million, or 82 percent, in the same period a year earlier.