SPN 0.00% $6.80 south port new zealand limited (ns)

Ann: HALFYR: SPN: South Port Interim Result

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    13/02/2015 16:34
    REL: 1634 HRS South Port New Zealand Limited (NS)
    HALFYR: SPN: South Port Interim Result
    NZX & Media Statement
    Interim Result Announcement
    Bulk Cargoes drive strong first half for South Port
    South Port New Zealand has recorded markedly improved earnings over the six
    months to 31 December 2014 and Directors have approved an increase in interim
    The Directors are pleased to confirm that in the past six months South Port
    achieved record first half cargo flows, notably in bulk trades, in contrast
    to the slow start encountered in the first half of the 2014 financial year.
    The Chairman, Mr Rex Chapman, said the cargo throughput of 1.479 million
    tonnes compared with 1.379 tonnes in the prior corresponding period ('pcp')
    and the prior first half record of 1.390 million tonnes set in the December
    2011 half.
    This level of activity drove a record interim net profit after tax of $3.29
    million, compared with $2.68 million in the pcp, said Mr Chapman.  The
    earnings result confirms that South Port has sustained the momentum of the
    full 2014 year, in which the Company has had a record result of $6.68
    The Chief Executive, Mr Mark O'Connor said cargo volumes were ahead by
    110,000 tonnes, an improvement of 8%, with a lift in fertiliser and stock
    food imports despite farmers in the Southern region facing a low dairy pay
    out price.
    "Consistent log export and petroleum import volumes along with marginally
    higher NZ Aluminium Smelters import activity, supported the record
    throughput.  However, there were notable declines in fish and sawn timber
    The half year was particularly active for South Port's dry warehousing
    division which handles inbound fertiliser, stock food and dairy ingredients
    as well as export dairy product.  In addition, a range of third party tenants
    received and distributed fertiliser and stock food product.
    Increased volume necessitated deployment of additional resources into the
    Port's warehousing area.  The impact of a second milk powder dryer being
    commissioned at OCD's Awarua site was significant with export orders and the
    packing of containers hitting new monthly highs.
    Gauging the level of cargo activity in the second half of FY15 is a more
    difficult task than normal as the market is currently offering up mixed
    economic signals.  Where South Port had anticipated lower farm inputs driven
    by the subdued dairy pay out forecasts, this has not been the case in the
    December half-year.  Similarly an expected reduction in log exports has not
    eventuated in the interim period despite falling demand indicators
    originating from the Chinese market.
    Mr O'Connor said the sector in which NZAS operates is encountering some more
    positive trends.
    "Firstly, the international aluminium price strengthened in the second half
    of 2014, albeit from a low base, and the weakening of the New Zealand dollar
    has also delivered some much needed relief."
    "However, NZAS continues to face challenges in the form of their current
    transmission charging mechanism.  This relates not to the base electricity
    supply rate but to the charge method applied by Transpower for the use of
    transmission infrastructure."
    "If this could be modified to more accurately reflect the actual
    infrastructure use by NZAS, then not only would the commercial success of the
    Smelter be more secure, but there would also be an opportunity to reinstate
    the fourth production line at the Tiwai Smelter."
    South Port received its second mobile container crane in September 2014 and
    after assembly and testing, the crane became operational in late October.
    Mr O'Connor said "the $6.3 million outlaid to secure the new crane and a
    further container capable forklift represents a significant investment for a
    regional port operator."  The new equipment has delivered the immediate
    benefit of improved productivity at the Port of Bluff for MSC Capricorn
    vessels and enabled a reduced operating window to be scheduled for the weekly
    "Container shipping rates have fallen more recently in the New Zealand
    market," said Mr O'Connor. "One of the drivers has clearly been the new cargo
    relationship between Kotahi, Port of Tauranga and Maersk."
    "Over capacity in some key trade lanes has also influenced rates as container
    shipping lines have looked to offer additional incentives to hold market
    share in an intensely competitive environment," he added. "This is likely to
    have a flow on impact on the breakbulk shipping lines as well."
    "It will be interesting to observe further changes in the market over the
    coming 12 to 24 months which will be necessary to drive operational cost
    efficiency and a potential reset of market freight rates."
    South Port continued to roll out the PACE Process Improvement Programme
    reviewing existing systems and eliminating waste.
    The company committed $20,000 to Coastguard Bluff last year to a project
    funding replacement of the existing Coastguard vessel moored at Bluff.
    Mr O'Connor said there were several business development opportunities.
    South Port continues to evaluate the development of land at Mersey Street,
    Invercargill, strategically positioned alongside the rail head.
    Pioneer Generation is about to undertake construction of its wind farm at
    Flat Hill near Bluff and will import and store all related project cargo at
    South Port over coming months. When completed, the wind farm will comprise
    of 8 Gamesa Windturbines and be capable of delivering 6.8 megawatts of
    Trustpower continues to list among its potential projects the proposed
    Kaiwera Downs wind farm, located across 2,568 ha of farmland, approximately
    15 kms south east of Gore.
    Shell NZ and consortium partners OMV NZ and Mitsui E&P Australia announced in
    January 2014 that exploration would start in the Great South Basin around the
    first quarter of calendar 2016.
    "This exploration activity is likely to involve a 50-60 day operating period
    with the planned one well drilling exercise involving a significant operating
    outlay by the exploration consortium.  In the event that a commercial volume
    of gas is identified in GSB it will take a minimum of 5 years to convert the
    prospect to an operational stage.
    "South Port and regional stakeholders continue to interact with oil and gas
    exploration companies and remain optimistic about the energy potential
    available in the Great South Basin."
    Looking to the remainder of the current financial year, South Port believes
    it is prudent to project a softening in fertiliser, stock food and
    potentially fuel consumption by the farming sector.
    "This will likely affect the remainder of FY15," said Mr Chapman.
    "Notwithstanding that assumption, the second half of the financial year is
    traditionally a busier and more profitable 6 month period so a solid
    contribution to the bottom line is still predicted."  Further, additional
    resources and therefore costs have been introduced into the business to
    manage the consistent growth of cargo and warehousing activity over several
    Based on all presently known factors, South Port estimates that its full year
    earnings should be in the range of $6.5 million to $7.0 million (FY14 $6.68
    After assessing the anticipated year end result, the Directors have declared
    a fully imputed interim dividend of 7.00 cents per share (2013 - 6.00 cents)
    payable on 10 March 2015.
    Mr Mark O'Connor
    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
    End CA:00260638 For:SPN    Type:HALFYR     Time:2015-02-13 16:34:44
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