Port of Tauranga (NZX:POT): What is its outlook for 2022?

Highlights

• POT delivered a remarkable result for FY21 despite COVID-19 challenges.
• The Company is planning to automate container storage, improve cargo capacity while also committing to decarbonisation.
• POT expects its FY22 earnings to be between $103 million and $110 million.

Port of Tauranga Limited (NZX:POT) is the largest port in NZ that offers port and cargo handling services majorly for the farming and forestry industry.

The Group conducted its annual meeting on 29 October, presenting a summary of POT’s performance for the year to June 2021. The Group played a significant role in keeping cargo moving amid disruptions in consumer demand, production, and shipping availability due to the COVID-19 pandemic.

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The Company achieved an outstanding result despite these challenges. POT’s subsidiary and associate companies delivered a 46% rise in earnings amid increasing costs and an uncertain outlook.

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Some of the highlights of the Group’s financials for the year to June 2021 included the following:

• Parent revenue increased 8.9% to $323.5 million while marine revenue declined due to a 13.7% decrease in ship visits.
• Group’s NPAT rose 15.4% on pcp to $102.4 million.
• Operating expenses increased 15.3% to $161.1 million for the year.
• A final interim dividend of 7.5cps was declared, taking the total dividend to 13.5cps.

Improving cargo capacity and automating terminals

POT has been pursuing plans to automate container storage at the terminal to increase the Port’s capacity within the current land footprint. The future freight handling capacity of inland freight hubs is likely to increase the Company’s capacity.

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POT’s JV inland port with Tainui Group Holdings at Ruakura is under development, with opening reserved for the middle of 2022. This will enhance both cargo capacity and connectivity between Auckland, Waikato, and the Bay of Plenty.

POT is also making additions to its supply chain infrastructure. The Company’s shareholder, Quayside Holdings, is developing the 148-hectare Rangiuru Business Park at the junction of the Eastern, Western and Southern Bay of Plenty.

Efforts to improve air and water quality near the port

POT expects that the usage of methyl bromide at the port will persist to decrease with a second log de-barker being assigned by forestry exporters in 2022.

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The Company is also exploring ways to improve water quality further. The global craze for bigger ships offers substantial decarbonisation advantages. Terminal development can further lower carbon emissions. Electric auto stacking cranes can be adopted for lower emissions and reduce operating costs.

On 9 November, at the time of writing, POT was trading at $6.84, up 0.74%.

Outlook

POT expects many challenges ahead due to lack of schedule reliability, limited shipping capacity, and the deterioration of labour shortages. However, the Group is well placed to meet these obstacles. The Company stays resilient due to the diversity of cargoes and income streams and has assurance due to its long-term freight agreements with major customers.

The Group has also managed to process more vessels and larger volumes of cargo in Q1 compared to the same quarter last year despite disruptions in its international supply chain.

POT expects its FY22 earnings to be between $103 million and $110 million.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)