Interim Report
Financial Performance
Reduced volumes across the majority of South Port’s key commodities and inflationary pressure on costs have negatively impacted South Port’s financial performance in the first half of the financial year. Both the agricultural and forestry sectors have been under significant pressure for a number of months due to poor market conditions, which is negatively reflected in the majority of our import and export bulk cargoes.
The deterioration in trade is common across the port sector and unfortunately South Port is not immune.
These market conditions have been reflected in South Port’s net profit after tax (NPAT) for the first six months of FY2024 at $3.0 million (FY2023 $5.2 million). The factors influencing this interim result, as briefly discussed above, include:
• Forestry exports, logs and woodchips, faced reduced demand in both China and Japan.
• Imports of agricultural inputs, fertiliser and stock food, were back and are expected to remain down for the remainder of the financial year due to depressed sheep and beef prices.
• Marine calls were similarly impacted by reduced volumes being shipped through the Port.
• Inflationary pressures on labour and materials costs have increased substantially.
• Insurance costs have significantly increased.
• Increased financing costs due to an upwards movement in interest rates and additional debt on the balance sheet.
Cargo
Total cargo activity was 1,488,000 tonnes compared with 1,732,000 tonnes in the prior year’s interim period. This represents a decrease in cargo flows of 244,000 tonnes or 14%. Increases were registered in cement (+14,000 t) and timber (+17,000 t), however other cargoes were negatively impacted with woodchips (-72,000 t), logs (-68,000 t), alumina (-43,000 t), stock food (-39,000 t) and fertiliser (-37,000 t) down in comparison to the prior half year.
108 large vessel calls were registered (FY2023, 139 calls), a direct reflection of the reduced cargo flows through the Port.
Container volumes are showing some signs of recovery with 21,000 Twenty-foot equivalent unit (TEU) handled through the terminal (FY2023, 18,000 TEU).
Operational Events
Cold Storage Operation
The cold store operation has performed well. Increased volumes of meat products being handled, longer dwell times and reduced overheads compared with the same period last year has seen an improved result for this business unit.
Syncrolift – Dry Dock
After a major maintenance programme in FY23, the syncrolift has shown a marked improvement in FY24. Increased vessel dockings and reduced maintenance costs have also seen a better result for this operation.
Climate-Related Disclosures
From the 2024 reporting period it will be mandatory for South Port to produce climate-related statements according to disclosure requirements in the External Reporting Board (XRB) standards.
South Port is progressing towards meeting these requirements, to be published in this year’s annual report.
Initiatives
Kia Whakaū Project
The Kia Whakaū project to dredge and remove seabed materials to 9.7m chart datum (CD) in the harbour entrance channel was successfully completed and celebrated with a formal opening on 30 October 2023.
The Company is taking a staged approach to the new draft by declaring an interim operating draft of 10.3m at high tide to assess the handling of deeper draft vessels before moving to the full 10.7m.
Green Ammonia
Meridian Energy, with the support of Ngāi Tahu, is continuing to work with Woodside Energy and Mitsui towards making a final investment decision in 2025 for the development of a world-class hydrogen and ammonia facility in Southland.
South Port is assisting these parties with port and shippingrelated enquiries in relation to the export of green ammonia.
Cruise Vessels
It has been a busy cruise period in the south. There have been a number of cruise vessels transiting through the Sounds in Fiordland with a record number of vessel calls then making a call into Bluff.
Wind Farm Opportunities
There are a number of wind farm opportunities in Southland at differing stages of development. It is anticipated they will accelerate once the NZAS smelter’s future is resolved. The most advanced are Mercury Energy’s Kaiwera Downs and Contact Energy’s Wyndham proposed wind farms. Stage one of Mercury Energy’s 240MW Kaiwera Downs wind farm, 15km east of Gore, was completed and officially opened on 20 November 2023. Shipments for the second stage of the development, although not confirmed, are expected to begin arriving in early 2025.
A fast-track resource consent application for Contact Energy’s Southland Wind Farm project, was lodged with the Environmental Protection Authority on 22 December 2023.
If the consent is approved, it is hoped that construction would begin in 2025 with the wind farm to be fully operational by 2027.
Community
Port Open Day
The Port open day was held on Sunday 1 October 2023. This was a good opportunity to open the gates and show off our operations to the community. The event was quickly oversubscribed, and the weather played its part to make this another successful event.
Outlook
Global events continue to create uncertainty and provide challenges to our business operations.
The wars in both Ukraine and the Middle East are continuing to impact marketplaces which has a flow-on impact to commodity prices and volumes handled through the Port. The container supply chain is facing additional challenges with the war in the Middle East escalating into the Gulf of Aden and the Red Sea preventing shipping lines gaining access to the Suez Canal, resulting in longer transit times to market.
There are also several elections taking place in key markets that New Zealand trades with that will create additional uncertainty as we progress through the 2024 calendar year.
The Company has invested significant capital in recent years to upgrade the Island Harbour and develop our infrastructure for future growth opportunities.
The deepening of our entrance channel is especially important as it will allow us to take greater payloads, improve the supply chain and provide safer transit for vessels calling at the Port.
There are a number of opportunities on the horizon, and we are now in the position to take advantage of these as they arise.
In February 2024, Fonterra upgraded its dairy payout forecast. In addition, good progress appears to have been made in negotiations with Rio Tinto over long term supply arrangements for the NZAS aluminium smelter. The Government has also announced a new fast track consenting process which may assist projects such as Ngāi Tahu’s proposed Hananui open ocean aquaculture farm at Rakiura (Stewart Island).
These are unlikely to have material effects on South Port this financial year but do provide some reasons for optimism that the current downturn will be short lived.
Based on all known factors at the date of releasing its 2024 interim result, South Port estimates that its full year earnings should fall in the range of $7.3 million to $8.0 million (FY2023$11.7 million).
Dividend
Despite the expectation of reduced full year earnings, the Directors have declared a fully imputed interim dividend of 7.50 cents per share (2023 – 7.50 cents) payable on 12 March 2024.
The Board will consider the Company’s financial year end result, market conditions and trading outlook before determining the final distribution to shareholders.
P CORY-WRIGHT Chair
N G GEAR Chief Executive
Financial Statements
Statement of Comprehensive Income
Statement of Cash Flows
Notes to the Financial Statements
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2023
01 Activities of South Port Group
The Group is primarily involved in providing and managing port and warehousing services.
02 Accounting Policies
The Group is a Financial Markets Conduct (FMC) reporting entity for the purposes of the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013. These financial statements comply with these Acts and have been prepared in accordance with the New Zealand equivalents to international Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for profit orientated entities. These financial statements comply with International Financial Reporting Standards (IFRS) as appropriate for condensed interim financial statements. They comply with New Zealand equivalents to International Accounting Standards 34 (NZ IAS 34) Interim Financial Reporting, and International Accounting Standards 34. There has been no change in accounting policies. All policies have been applied on a consistent basis with the most recent annual report.
03 Employee Share Rights
The Group adopted a performance share rights plan during this period. The plan grants participants a right to receive ordinary shares in South Port NZ for no consideration if the vesting conditions are met. Vesting is subject to certain performance conditions measured over a three-year period and the participants remaining employed by the Group during that period.
The plan is an equity-settled share-based payment arrangement for accounting purposes. The fair value of the rights is expensed on a straight-line basis over the vesting period with a corresponding increase in equity.
30,928 rights were granted during the period, having an estimated fair value of $142,000, with $9,000 of this being expensed during the period ended 31 December 2023.
04 Taxation
Income tax expense comprises current and deferred tax at the company tax rate of 28%. Income tax expense is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
05 Segmental Reporting
The South Port Group operates in the Port Industry in Southland, New Zealand, and therefore only has one reportable segment and one geographical area based on the information as reported to the chief operating decision maker on a regular basis. South Port engaged with one major customer who contributed individually greater than 10% of its total revenue for the period ended 31 December 2023. This customer contributed $4.38 million for the six months ended 31 December 2023 (2022: $4.14 million).
06 Statement of Changes In Equity
SIX MONTH PERIOD ENDED
31 DECEMBER 2023
07 Net Cash Flow from
South
Subsidiary
Directors
Philip Cory-Wright Chair
Cassandra Crowley
Nicola Greer
Michelle Henderson
Clare Kearney
John Schol
Corporate Executives
Nigel Gear Chief Executive
Geoff Finnerty
Port General Manager
Jamie May
Commercial Manager
Hayden Mikkelsen
Container Manager
Frank O’Boyle Infrastructure and Environmental Manager
Lara Stevens Chief Financial Officer
Murray Wood
Warehousing Manager
Helen Young
People and Safety Manager
