Port Nelson Annual Report 2012 (pdf)

directors’ report
As Chairman of Port Nelson Limited (Port Nelson), it gives me great
pleasure to report on a good year for the company, particularly when
taking into account the ongoing challenging conditions in the wider
economy.
Port Nelson has produced another strong financial result, with earnings
before interest and tax of $14.4 million, some $1.4 million above budget.
One of the main influences on the result was the strong performance of
the Unimar business over the last 12 months, as mentioned below.
Operating revenue for the last 12 months was marginally under budget,
but was compensated for by lower-than-budgeted operating expenses
and by maintenance costs coming in around $600,000 lower than
anticipated.
The main points to note regarding the revenue and expenses figures
are as follows:
•Cargo volumes were 131,000 tonnes lower than budgeted, due
mainly to the drop off in log exports to China
• Container volumes at 86,178 TEU* were just above the previous
record figure of two years ago
• Maintenance costs were well contained for the year, with dredging
expenses in particular not as high as had been expected
• Tax expense was significantly reduced due to the recognition of
buildings and building fit outs previously not depreciable now
being depreciable for tax purposes. This adjustment resulted in
a reduction in tax expense of $0.65 million. Additionally a further
$0.35 million tax expense reduction was recognised due to a
previous period adjustment.
Total cargo for 2011/12 was 2.65 million tonnes, down very slightly on
the previous year and also below what had been budgeted. The main
reason for this, as mentioned above, was the reduction in log exports to
China from the region, from the middle of 2011 onwards.
MDF, fish and wine volumes were all above budget during this period,
with sawn timber and fruit being at slightly lower levels than had been
expected.
We have continued our ongoing programme of maintaining, and where
necessary upgrading, equipment and facilities to ensure the business is
sustainable and reliable for the long term. Major items this year included
purchase of a new Empty Container Handler (ECH), and pavement
upgrading in sections of the container yard and log storage area. We
also completed the camera installation project around the port area,
resulting in vastly improved coverage with operational and security
benefits.
From a property-holding perspective, the major development we
undertook in the last year was the upgrading of the Steel and Tube
leased property. This meant lesees could consolidate two sites they
had around the wider Nelson area into one within the port precinct. As
the commercial property market in Nelson picks up, it is hoped we can
attract more such tenants to the port area, with the advantages that it
can offer.
While still on the subject of property, during the year, Nelson City
Council purchased the former Reliance Engineering and Four Seasons
buildings and sites from Port Nelson. Long term, these were not seen as
being of operational use to us and this sale fits in with the council plan
to further connect the city to the sea.
The performance of the partly Port Nelson-owned Unimar Limited
has been a highlight of the last 12 months, with the company heavily
involved in the salvage of cargo from the stricken vessel Rena off the
coast of Tauranga. As the New Zealand representative for UK-based
Braemar Howells, Unimar has been intricately involved in a large amount
of recovery work. This has seen the fortunes of the business change
significantly from only 12 months earlier, and it has been pleasing to see
a Nelson-based company at the forefront of the salvage project.
This year’s net surplus after tax, significantly inflated by the one-off
effect of the Unimar work on the Rena and the aforementioned tax
adjustments, resulted in an average return of shareholders’ funds of 7.7
per cent, and dividends declared for the full year of $12.2 million.
These dividends were made up of the normal annual dividend plus
an additional special dividend of a further $8 million that the Board
also declared. This put the total dividends paid out to shareholders
since Port Nelson Limited was formed in 1988 in the region of $122
million. The special dividend was paid after the Board undertook a
comprehensive review of the company’s position.
As the financial year came to an end, the main focus was on the continued
uncertainty over container shipping services and the challenges this
brings to regional ports in particular. After much speculation and
considerable lobbying by a number of key Nelson exporters and others
including Port Nelson, Maersk made the decision to retain a Nelson
call, with the introduction of calls from their NZ1 service from early
August. While this announcement was pleasing for all concerned, the
uncertainty that the service changes created only served to emphasise
the vulnerability of regional ports in retaining ongoing services, a
continued concern for us all.
As we head into another financial year, it is clear that 2012/13 will be a
difficult one, with cargo volumes predicted to remain static and costs
such as insurance and electricity continuing to rise. Port Nelson is
committed to continuing to work hard to provide our customers with
the most efficient service we can offer, recognising this is an ongoing
process as customer expectations continue to increase.
In closing, I would like to thank our management team and all our
staff for their efforts over the last year. I would also like to extend our
continued appreciation to our customers, whether they be importers,
exporters or shipping lines, for their continued custom. We also value
and appreciate the ongoing contribution from our two shareholders
Tasman District Council and Nelson City Council. Finally, my thanks go
out to my fellow directors for their contribution over the previous 12
months.
Nick Patterson
Chairman, Port Nelson Limited.
*TEU = Twenty-foot Equivalent Container Unit.
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