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Port of Tauranga Full Year Profit

25 Jul 2004

Port of Tauranga announces increased profit and dividends in a year of strategic investment

The Port of Tauranga has announced an increased net profit after tax of $33.7 million and lifted its dividend for the year by 11.1% to $26.794 million - a distribution of 20 cents per share.

Making his final annual announcement for the Port after 16 years as Chairman, Mr Fraser McKenzie commented on one of the Company's most challenging trading periods.

He said it was pleasing being able to sign off on a year of progress in the face of difficult trading conditions and uncertainties in forestry.

"The past year has demonstrated the strength of the strategic planning, the visionary thinking and the hard work that has gone before," Mr McKenzie said.

The reported net profit increased 7.7%, earned on revenue 3.5% higher at $151.1 million. The profit increase included a $3.658 million benefit from the sale of land at Tauranga to the Tauranga City Council.

Earnings per share improved from 23.3 cents to 25.1 cents with the overall return on equity rising to 13.4% before revaluation of assets. The tax requirement was $15.4 million, up from $14.5 million last year. The Port's balance sheet strength continued unabated, with shareholders' equity moving from 52.9% to 66.7% at year end.

A revaluation of fixed assets as at 30 June 2004, resulted in an increase in the value of land, buildings and civil works of $189.2 million. Of this, 82%, or $155.8 million, related to increased land values.

The most significant economic factor faced by the Port during the 2003/2004 financial year was a severe downturn in the forestry sector, which reduced volumes going through the Port as well as impacting on the operations of The Owens Cargo Company and the performance of the Port's investment in Northport.

However, Mr McKenzie said, the opportunity to secure a 15-year contract to handle the new coal supply for Genesis Energy's Huntly Power Station had been a major boost to the Company. The result was coal tonnage through the Port lifting to 663,000 tonnes.

Total trade volumes through the Port were up slightly at 12.24 million tonnes and during the year there was a growth in container volumes of 12.8%, the result of securing new business opportunities as well as growth from existing customers.

Log exports were down by 1,000,000 tonnes, sawn timber by 175,000 tonnes, wood panels by 33,000 tonnes and wood chips by 254,000 tonnes.

Mr McKenzie said that these were offset by dairy volumes increasing by 63,000 tonnes, meat by 35,000 tonnes, kiwifruit by 90,000 tonnes and other export goods by 341,000 tonnes.

Total container movements rose by 44,607 to 394,403 TEUs (twenty foot equivalent units) providing staff with a demanding challenge and requiring additional investment in the MetroPort and Sulphur Point operations, he said.

Against this background, the need for careful, strategic, long-term investment comes into a clear focus, he said.

"It is a sobering discipline for the Board and management to realise that many of the decisions they make today can have the same bearing on the future as those made long ago, which is why they must be subject to careful analysis and evaluation," he said.

The Company continues to advance its multi-port strategy with a shareholding in Northport and working partnerships with Port Marlborough and The Owens Cargo Company operation, which operates across a number of ports including MetroPort.

MetroPort is now New Zealand's third largest container port in its own right and a vital part of the Port of Tauranga's strategy. Exceptional growth in the demand for MetroPort's rail-based facilities saw TEU numbers increase by 50%, necessitating an upgrade to facilities costing $3 million.

The upgrade more than doubled the number of container slots, installed lighting so the operation can work 24 hours a day and added two more rail tracks that allow the Port to be serviced by trains able to carry 70 TEU containers.

This operation is also delivering environmental benefits by removing large volumes of heavy trucks from the roading system and allowing more efficient use of rolling stock with freight able to be moved overnight and during the weekends.

Mr McKenzie said these developments are another step towards creating a freight village in South Auckland that can provide an integrated service to shippers, importers and exporters.

Substantial capital investments were also made at Tauranga. New straddle carriers are being progressively introduced and these are more powerful, quicker and more versatile, with 15% more lifting capacity. They are also quieter, which is a benefit, given the 24-hour nature of the terminal's operations.

A fourth container crane for Sulphur Point arrived in July and is expected to be operational in September. This and other changes to the existing operations will improve the Port's container handling speed and capacity.

Mr McKenzie also said that major investment in infrastructure was necessary to manage the new coal contract, which will account for the shipping of up to a million tonnes a year from the Port to Huntly Power Station.

Trains hauling 1,500 tonnes of coal each will be served by a new covered storage facility at Mount Maunganui, which has a capacity of 70,000 tonnes.

Difficult trading conditions and the need for infrastructure investment meant the Port has had to be mindful of the impact on its customers during the year, said Mr McKenzie.

An important feature has been the commitment from staff to making every effort to deliver the best customer service possible during a period of change and to work closely with customers to keep them informed of developments.

Changes were also implemented through an agreement with P&O Ports under which the Port contract manages receiving, delivery and marshalling services at Sulphur Point. These changes are aimed at improving customer service, safety and security as well as reducing costs

Mr McKenzie said that as a result of the substantial business development and investment undertaken by Port of Tauranga, Standard & Poor's rating service reviewed the Company's credit rating.

He said it was pleasing that the Port's BBB+ long term and A-2 short term corporate credit ratings were reaffirmed, with the outlook for the Company positive.

"If the Port continues with its stable and conservative management practices, an upgrading in the long-term rating could follow, "he said.


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