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| Chinese demand for logs boosts Tauranga's profits |
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http://www.sbdailynews.com
2009-02-26 |
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Strong Chinese demand for logs has helped Port of Tauranga post a solid half-year result and predict full-year earnings similar to last year.
The Bay of Plenty port reported an unaudited after-tax profit of $22.54 million for the six months ended December 31 up 10 per cent on the previous corresponding half.
Total trade for the period was up 6 per cent to 6.94 million tonnes largely driven by forestry which accounts for more than a third of the port's total trade. Log exports were up 26 per cent, sawn timber exports up 9 per cent and wood pulp exports were up 18 per cent.
"From a trade perspective, forestry is really propping things up," said Port of Tauranga chief executive Mark Cairns.
Plummeting shipping rates, lower fuel costs and a falling dollar had all contributed to the boost in log exports, he said. "Demand has tanked in Korea and Japan but at the moment there's very strong demand into China and India."
That demand had continued into the third quarter but it was difficult to forecast if it would hold up after that, he said.
The port will pay an interim dividend of nine cents a share the same as the year before.
Port of Tauranga's share price closed up 15c on $5.30. First NZ Capital analyst Rob Bode called it a good solid result pretty much in line with expectations. Tauranga was probably more resilient than most ports because it had limited exposure to manufacturing, he said.
"The big question mark is how the forestry trade will hold up and there's limited visibility on that."
Coal imports jumped 48 per cent over the period because of the dry winter in which Genesis burnt a large amount of coal at its Huntly plant. Frozen meat exports were up 13 per cent, palm kernel imports up 87 per cent and bulk liquid imports were up 25 per cent. The increase in bulk liquid volumes had come from winning business from rival Ports of Auckland, Mr Cairns said.
Palm kernel is used as a feedstock for dairy cows. The lower dairy payouts might lead to a drop in volumes but balancing that was the fact that it was considerably cheaper, he said.
"This [2009] will be a challenging year for our business," said Port of Tauranga chairman John Parker. "We don't really know the extent of the challenges but we'll ensure we are well prepared for them."
The port has identified $4 million of cost cuts across the board including a self-imposed management pay freeze. It was hoped that staff cuts could be avoided, Mr Cairns said. With a debt to debt-plus-equity ratio of 29 per cent and interest cover of 4.8 times Port of Tauranga said it was comfortable with its debt levels.
The port said it expected to post full-year earnings similar to last year's largely because of the strong forestry trade.
"It's been the most difficult year getting visibility of demand from our customers," Mr Cairns said.
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