Also on the agenda for South Port chairman Rex Chapman are cautions surrounding the intense competition between shipping companies, the effect of large-capacity container ships and all-time-low container rates.
At South Port’s annual meeting in Bluff yesterday, Mr Chapman told shareholders that during the year record log volumes were handled and a substantial increase in exported wood chips, cargoes "very much influenced by overseas prices".
"Conversely, as we predicted this time last year, inbound stock-food volumes decreased by approximately 25% directly as a result of the low dairy payout.
"This demonstrates how external factors can affect cargo flows," Mr Chapman said.
However, Mr Chapman noted that during the past 10 years, cargo had increased 50% from 2million tonnes to 3million tonnes, which was partly explained by positive regional economic growth.
"South Port has responded well to that growth by matching the volume lift with the appropriate resources to service it," he said.
On the back of record cargo volumes, South Port had for the second consecutive year posted another record after-tax profit.
Net profit of $8.71million in 2016 was up 13% on the previous year’s $7.74million.
Mr Chapman said Southland’s economy as a whole was doing well and apart from dairying, which was recovering, the regional economy was also reasonably buoyant.
South Port’s outlook expected its main export cargoes "to remain stable", he said.
"Fertiliser and stock food may be constrained by the dairy sector, which is recovering," Mr Chapman said.
While an increase in maintenance costs would impact full-year 2017 earnings, which were expected to be down by around 15%, South Port’s board would "seek to maintain current dividend levels", Mr Chapman said.
Its dividends were 20c per share in 2013-14, 24c in 2015 and 26c for 2016.
Environment Southland is South Port’s 66% majority shareholder.
"Working smarter and more efficiently is important for a business such as ours.
"We cannot always rely on revenue and cargo growth because, to some extent, these two factors are not within our direct control and are heavily influenced by commodity cycles and regional growth," Mr Chapman said.
In September, South Port opened its $4.5million Intermodal Freight Centre in Invercargill, which is primarily targeting containerised import cargo.
He said there was still intense competition between shipping lines for cargo and unsustainable low shipping rates had led to some major shipping company casualties.
All shipping lines were affected by the problem of surplus capacity.
The rapidly increasing very large container vessels, with carrying capacities ranging from 12,000 TEUs (twenty-foot-equivalent units) to 19,000 TEUs, were displacing smaller vessels on the main trade lanes.
However, Mr Chapman said the abundance of ships in the 4500 TEU class that currently serviced New Zealand probably meant that, in the medium term, the bigger container vessels would not call at New Zealand ports, or would call less frequently.
"This is likely to mean that for the foreseeable future, there will be a continuation of international container shipping calls at a range of New Zealand ports, including South Port," Mr Chapman said.
He also cautioned that the all-time-low box freight rates could not be sustained.
"It appears inevitable that this scenario will lead to further shipping line failures, the scrapping of ships before the end of their productive life and further consolidation of shipping lines and/or services," Mr Chapman said.
Mr Chapman said given the relatively small size of most New Zealand ports, collaboration between port companies that were not in direct competition would increase.
"That is a very welcome trend, especially for a smaller port like ours," Mr Chapman said.
