Despite softening trade conditions and a developing dairying crisis, Port Otago is confident of delivering annual dividends of around $7.3million for each of the next two years.
The ORC's long term plan has Port Otago's dividends increasing each year of the next decade, from $7.3million for the current financial year to $8.9million for 2024-25.
For the half year to December, Port Otago's container volumes were down 4.3%, from 77,400 to 74,000, cargo volumes declined by 12.5%, from 727,000 tonnes to 636,000 tonnes, logs declined 16% to 353,000 tonnes and empty container handling also declined.
Port Otago deputy chairman Paul Rea told regional councillors yesterday ‘‘to expect variable revenues'', but the current financial year dividend would still be $7.3million.
‘‘I don't expect impacts on dividends to change for two years,'' he said.
After the meeting, chief executive Geoff Plunket, asked for his outlook on the dairying situation, and effects on Port Otago, said despite the dairy price plunges, volumes of exports across the wharf had not been hugely affected yet.
He noted that, in general, exporters were benefiting from excess shipping capacity, favourable shipping rates and lower fuel costs.
Port Otago's revenue was down 12.5% from $41.5million to $36.3million and its earnings before interest and tax declined from $13.1million to $7.82million.
After tax profit at $5.48million was down 29% on the $7.8million last year.
After-tax profit a year ago was booked at $37.45million, which included a major one-off boost of $27.9million from share sales in Lyttelton Port of Christchurch,
leaving $7.8million from normal operations. Cruise ships were down from 76 last year to 70, but Mr Rea was optimistic, in that 91 were ‘‘confirmed'' for the 2016-17 season.
For the six months, there were 17 fewer container and conventional ship calls, while overall calls declined from 235 to 213 vessels.
He noted Port Otago would host the 347.7m-long Ovation of the Seas on December 22. It is 30m longer than any other ship to visit.
Mr Rea was upbeat about warehouse expansion, with the 9300sqm Back Beach extension leased before completion, and the new 3800sqm Sawyers Bay shed ‘‘has had plenty of interest for leasing''.
Port Otago's Next Generation dredging project had completed stage 1, having dredged to a depth of 13.5m and expectations were stage two could be completed to a depth of 14m within 18 months.
The second-hand barge Hapuka, from Queensland, had been repainted in the upper harbour, while a 30-tonne Turkish-built work-boat, Arihi, was due to be delivered about mid-2016.
Subsidiary company Chalmers Property booked a 13% decline in operating profit before property disposals and tax, of $4.7million, with rental income down slightly due to property sales.
Mr Rea said ‘‘several properties'' in Dunedin had been freeholded during the past 18 months, and highlighted last week's announcement of a $9.45million, design, build and leaseback project for listed Steel & Tube.
The Hamilton land project had booked seven sales valued at $7.4million, with three more ‘‘under offer''.
Cr Doug Brown sought an explanation from Mr Rea over mention of ‘‘derivative financial instruments''; complex interest swap rates which hit the news last year after being sold to farmers, bankrupting some in the process.
Mr Rea defended having locked in some interest rates a year ago, which had subsequently declined, but noted that was done with a business model where the interest rates ‘‘could be sustained''.
Cr Scott said if return on equity was applied, against $461million total assets, the return was around 2%, and asked if this was acceptable.
Chief executive Geoff Plunket said the return on equity should be applied using the full-year profit figure, which would be closer to 6%, than the 2% Mr Scott had calculated.
