What’s sailing South Port New Zealand’s stock price go North in 2021?

Summary

  • Impact of COVID-19 on South Port’s net profit not as much as expected earlier.
  • The Company recovered its forestry cargoes in the second part of the year once the lockdown was lifted.
  • In the duration of last decade, South Port has consistently managed to pay dividends even with the reduced or no earnings growth.

South Port New Zealand Limited (NZX:SPN), a commercial deep-water port, has not been hit hard by COVID-19, as was expected earlier.

As per the Company’s annual meeting held in October 2020, it noted just a decrease of 3.6% in its net profit. While Rex Chapman, Chairman of the Company, at the 2019 Annual Meeting, had conveyed the shareholders to expect a fall of approximately 10% in 2020 net profit.

Forestry cargoes decline during Lockdown phase

Even though, total cargo for June 2020 stood at 3.269 million tonnes, a 7.2% decline over the previous year was observed.

It was mainly forestry (logs and woodchip) cargoes that were not considered essential commodity had suffered in the first part of 2020, when coronavirus prompted lockdowns were in place all over the world. Forestry had exemplified a major portion of the cargoes in 2019, almost 31%, and a 7.2% drop in total volume was because of no forestry cargo.

Other businesses of the Company did well last year

However, the Company’s other businesses- cold storage and container services functioned very well, as they more than made up for the loss occurred in bulk forestry cargoes.

During October 29, 2020, annual meeting, the chairman, South Port also said that though the Company had qualified for the wage subsidy, it chose not to go for it. It turned out to be the right decision as forestry cargo picked up as soon as Lockdown phase 4 was lifted.

He further added that as an essential business, the Port constantly functioned during the complete lockdown phase. Despite the dire situation, the Port’s workforce continued to work and received a bonus of NZ$500 during the time frame.

South Port celebrated silver jubilee of being listed on NZX

Last year, the Company completed 25 years of its listing on New Zealand’s Exchange.

Since 1994, the Company’s trade volumes have doubled from 1.7M to almost 3.3M tonnes. Revenue to net profit has risen from 6% to 21%. Profit and share price have moved up more than 5 times.

Also, South Port’s market capitalisation was up from NZ$29M to NZ$182M, as in June 2020.

In addition, South Port paid dividends in last decade even if there was little to no earnings growth. Annual dividend per share has also grown from 6 cents to 26 cents since it was listed on NZX.

Overall, there are some positives to the business. But going forward in 2021, New Zealand’s Aluminium Smelter (NZAS) closure in August, this year might dent its revenue significantly.

It is learnt that the smelter represents around 33% of the Port’s cargo volume, and the smelter also gives a certain license fee to the Port. It is estimated that smelter’s share to the net profit after tax is around NZ$2M of the total of NZ$10M, which amounts to almost 20% of its tax after profit.

However, the Company is hopeful that an extension of three to five years may be given as the government and other local groups are lobbying for the extension with Rio Tinto.

On 31 December 2020, South port ended 0.78% higher at NZ$7.76.

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