The group profit of the Dunedin City Council's six trading or associated companies declined 30% from $2.6 million from the corresponding time last year to $1.8 million, but umbrella company Dunedin City Holdings Ltd remains adamant it will hit its full-year forecast, a figure which has not been made public.
Dunedin City Holdings Ltd (DCHL's) profit before shareholder interests were deducted was down 14.5%, from $12.1 million to $10.35 million, much of it due to a $1.7 million forest revaluation.
DCHL released the half-year to December 31 financial results yesterday, which highlighted tough trading conditions in a volatile market but which also revealed some resilience against the global credit crunch where rising interest rates have made access to funds and borrowing a nightmare for companies and other credit-using organisations.
Of the six companies, Aurora Energy Ltd showed the largest before-tax profit of $11.9 million, but it was down on last year's $12.8 million. Delta Utility Services had the only before-tax profit increase, up from $1.6 million to $1.71 million, while City Forests Ltd's before-tax profit was well down from last year's $2.69 million (largely the result of forest estate revaluation) to $153,000 this year.
Taieri Gorge Rail Ltd and the Dunedin International Airport both booked increased losses, respectively up from $299,000 to $458,000 and $3167 to $27,400, while Citibus lost less than last year's loss of $771,000, losing $373,000 this year.
DCHL chairman Paul Hudson said during the six-month period DCHL was able to increase its term debt by $95 million, to match expected council expenditure.
"This has been completed at rates which are highly competitive," Mr Hudson said.
After the media briefing, Mr Hudson said the global credit crunch had not affected DCHL borrowings to the extent reported by companies in the private sector.
He highlighted DCHL had secured interest rates 1% above the benchmark banks' swap rates in December (for five years) while more recently Auckland city and Fonterra had paid respectively 2% (five years) and 3.55% (six years), above the swap rate.
"We're not affected so far and are getting everything we need. [However] we are likely to have pay a little more [in the future] to fulfill debt requests," Mr Hudson said.
He said the council's reputation and strong Standard and Poors short- and long-term credit ratings were behind the relatively good lending rates on offer.
Aurora Energy's before-tax profit of $11.9 million dropped slightly as Central Otago building development eased, as did the pace of new connections, compounded by "heavy" capital investment in Queenstown.
However, Aurora had produced a result in line with budget and a "satisfactory performance" was expected for the full-year, Mr Hudson said.
Delta Utility Services' increase to $1.71 million was attained in a "shrinking market", with its result "fully in line with budget". However, the director's report noted "a long-running dispute with a large customer was settled resulting in a significant sum in final settlement", which was not disclosed but was understood to have been beneficial to Delta.
Delta directors cautioned the full impact of the economic downturn was likely to affect its full-year result.
City Forests Ltd's profit decline to $153,000 this year followed another period of volatility in the sector, with Mr Hudson noting North Island companies were "dumping" logs in South Korea, which was a prime City Forests customer.
Last year's $3.5 million forest revaluation was down to $800,000 this year, prompting the $1.73 million difference in profit.
Mr Hudson said the global lack of ships and stockpiling at Port Chalmers had not affected City Forests, saying yesterday there had been a recent reduction in freight costs.
Its director said the six months ahead would be "difficult" and expected pressure on pricing and margins as competitors dumped stock, but new customers increasing competition might offset those negative factors.
Taieri Gorge Rail Ltd's increased loss to $458,000 was in a declining tourism market, with international numbers down more than 5%, with an overall reduction in customers during the six-months.
An earlier cruise ship season had boosted income 37% for the six months. There were an additional 17 trips, resulting in a 8% reduction of passengers per train.
"[However] this increased schedule will pay off, now that it is established, but not until there is a recovery in the tourist market," directors said.
When asked about the cost of refurbishing 11 new carriages, Mr Hudson said while the first was awaiting certification, the remainder would be spread over at least the next five years, so spreading the financial outlay.
Dunedin International Airport's (DIA) loss of $27,000 after losing $3,167,000 last year, also reflected the volatility of the tourism sector, although overall numbers were up 15.8% , as was revenue, up 9.1% at $3.9 million. The recent loss of Air New Zealand services was expected to impact negatively by year-end.
Mr Hudson highlighted DIA had its relatively new terminal to pay off for some time, and while tourism was dampening, the airport was expecting strong cashflows; but it was "marginal" as to whether it would be in profit for the full-year.
The recent loss of Air New Zealand service would "undoubtedly be negative" for DIA income and cash flows and the "first impact" would be seen at its year-end result, Mr Hudson said.
Citibus' reduced loss to $373,000 follows a more than $2 million investment in new buses from an increased urban service revenue, which was up from $1.24 million to $2.42 million for the six-month period.
Cruise ship feeder services were offsetting the declining number of international tourists on in-bound coach tours, and while no clear indication of the six months ahead was given, its directors noted it was investing in new markets and fleet growth in a "highly competitive market".
Mr Hudson was asked about the funding of capital expenditure for seven new super low-floor buses, costing more than $2 million, or more than $300,000 each, and said they were paid for from cash reserves, as opposed to being paid for by the raising of loans.
