Port reports profits drop

Napier Port’s full-year profit declined by 11.8 per cent year on year to $20.4 million because of higher costs and weaker trade volumes. One-off property gains aside, its underlying net profit was $18.6m compared to $22m in 2020/21.

The port lifted its prices, which saw revenue rise 4.6 per cent to $114.5m despite total tonnage declining by 8.1 per cent to 5.38 million tonnes and container volumes falling eight per cent to 254,000 twenty-foot equivalent units.

Chief executive Todd Dawson, pictured, says: “The first half of the year was impacted by some environmental conditions including the weather, Covid flowing through and impacting the workforce, and supply-chain disruptions making shipping challenging.”

The port’s operating expenses for 2021/22 rose by 13.3 per cent to $74.4m. “Labour costs are going up... We’re also seeing cost increases in key inputs like fuel, insurance, other utility costs, electricity.”

Support for other ports

Napier Port is preparing to pick up the slack and support other North Island ports as they grapple with capacity constraints.

Earlier this month, Tauranga warned economic activity in New Zealand could be at risk in a few years’ time if the port is unable to secure resource consent to extend its berth.

Napier’s chief executive says there is an opportunity for the company to step in and assist. “If you look at the profile of Napier, we’re predominantly an export port, so there is an opportunity to bring more capacity through Napier Port of an import nature,” Dawson told NBR. “We could help to relieve some pressure at Tauranga and Auckland.”

He adds that would depend on having the land capacity, and the capacity of the road and rail network to take cargo back to the upper North Island, while Napier also has the ability to bring in more vessels through following the opening of a new wharf earlier this year.

Shipping disruptions

Dawson says signs are emerging widespread disruptions experienced in the global shipping network are easing after two challenging years. 

“We’re seeing signs that demand is dropping off, which means supply in the shipping industry is becoming more available.” However, the increasing supply has yet to flow through to New Zealand, he adds.

Shipping prices have come off their peaks, and Kiwi importers and exporters are starting to see benefits in a small way. “We would expect to see the availability of equipment, containers etc to improve from where it’s been in the past couple of years.”

Actual shipping capacity remains constrained and will depend on the ability of New Zealand ports to clear boats in a timely fashion, notes Dawson.

The way ahead

Napier Port is forecasting full-year underlying earnings of $42m-$48m for 2022/23, which represents about a 12.5 per cent increase on the past fiscal year.

Dawson is optimistic about its prospects because of the strong underlying export demand for what’s produced in the region.

“We think we’re in a good position to be able to leverage that growth and volume when it comes because we’ve built the capability to do so, and we’ve been able to offset some of the impacts of inflation in our prices.”

He adds causes of concern outside of the company’s control include further supply-chain disruption, global economic uncertainty, geopolitical tensions and high inflation.