Record profit for Port Otago

Media Release – 13 October 2021

Port Otago Limited has achieved a record profit of $94.5 million for the 2020/21 financial year and delivered dividends of $10.1 million to its shareholder, the Otago Regional Council (ORC).

Port Otago Chair Paul Rea presented the financial results to the ORC today. He says that, while the profit figure is significantly higher than last year's $50.5 million profit, it does require context.

"The $94.5 million result was driven by unrealised property revaluation increases totalling $82 million, spread across our diverse portfolio and reflecting increased demand for quality industrial properties. Particularly pleasing was the uplift achieved in our property holdings across the "Golden Triangle", with strong valuation gains achieved in Auckland and Hamilton.

"However, as a business, we focus on the underlying profit – that is, Port Otago's profit from our four business units. This removes the property revaluation movements but includes movements related to initial valuations of development projects completed during the year, which are noncash. Our underlying profit is $21 million for the 2020/21 year – down 13 per cent on last year's comparative figure of $25 million."

Mr Rea says the performance of the Group's individual port-related businesses – containers, bulk cargo and cruise – was mixed and, unsurprisingly, impacted by the ongoing Covid-19 pandemic.

The bulk business experienced a record year, with cargo volumes up 26 per cent on the previous year, at 1.9 million tonnes. This included log exports of 1.2 million tonnes, which have continued at pre Covid-19 volumes and are a positive indicator. "We expect bulk cargo volumes to continue growing, given market demand assisted by infrastructure improvements at our Dunedin Bulk Port which are allowing customers to move product more efficiently."

Container throughput was down 9 per cent on last year, as global shipping volatility led to lastminute schedule changes and vessel omissions. "It was a difficult year for our customers but our team pulled out all the stops to keep their product flowing," Mr Rea says.

"Our frontline staff had an unrelenting year with shipping disruptions, container yard congestion and the ever-present Covid-19 protocols, testing and vaccinations. To reflect that, the Board approved a one-off thank you payment of $750 to our 1(a) frontline staff. These men and women endured a year of Covid-19 nasal swabs and many layers of extra protocols. They did so professionally and without complaint, keeping our region's exports and imports moving."

Meanwhile, cruise was absent for the year. Not a single cruise ship entered the Otago Harbour during the 12-month period – down from 112 vessels in 2019/20.

Revenue for the year of $90 million was $20 million lower than the previous year largely due to the ban on cruise ships entering New Zealand waters and fewer land sales from our Te Rapa Gateway property development.

Mr Rea says the loss of cruise income and the uncertain economic outlook mid 2020 prompted Port Otago to reduce its cost base, which included actively managing annual leave accumulation and a restructuring programme. "Improvements in systems along with some redundancies and early retirements delivered significant savings. This cost-out programme is now complete and did work to partially bridge the revenue gap created by Covid-19."

Shareholder equity increased to $635 million, with an equity ratio of 85 per cent at 30 June 2021. Total borrowings increased by $7 million to $79 million, as we continued to invest in our property portfolio.

Workplace safety improved across the business, with our TRIFR (Total Recordable Incident Frequency Rate) reducing from 20 incidents per million hours worked last year, to 10 incidents per million hours worked this year. "While this is great progress, Zero Harm remains the company's goal and we will continue to invest and challenge the way we work to reach this."

The company's property business changed tack over the 12-month period. "Our strategic objective is to partner with long-term A-grade tenants. Having successfully leased out 100 per cent of our available properties and recognising the continued high demand for industrial premises in Hamilton, we have ceased selling land in Te Rapa Gateway to ensure we have land available for future design/build/lease opportunities," Mr Rea says.

Port Otago is leading the development of the ex-Warehouse building in Dunedin, as it is repurposed into the ORC's office over the next 18 months.

The highlight of the year for both the community and Port Otago was the naming of the Warren Lewis Fishing Jetty in June. "Other noteworthy activities in our community included the Te Rauone Beach renourishment project finally getting the green light to proceed, and the announcement of our long-term partnership with the Port Chalmers Maritime Museum."

Last financial year, Port Otago began working with Toitū to understand and measure the port's carbon footprint. "We now have our Carbonreduce certification and the baseline data we need to take meaningful steps to reduce our footprint. First up is identifying where we can have the most impact – which is our diesel-fuelled port and marine plant – and work towards strategic equipment replacements over time. We are also making many smaller changes across the business, such as the introduction of LED lighting and moving our light vehicle fleet to electric."

Mr Rea says the annual report, released alongside the financial result, is Port Otago's second integrated report. "It's been less than two years since we committed to operating sustainably across both financial and non-financial measures and, over that time, our thinking has changed dramatically. I'm very proud of how quickly this more thoughtful and robust way of operating has been embraced across the company.

"Looking ahead, container flows and shipping are likely to remain disrupted in the short to medium term. Bulk cargo volumes are expected to continue growing, while cruise ships are not expected to return to New Zealand this summer. We have a good pipeline of committed and potential projects ahead for our property business in Dunedin and Hamilton.

"Overall, our balanced portfolio puts us in a strong position to invest and support our customers to improve long-term supply chain efficiency, while also beginning to remove carbon from the end-to-end supply chain."


Mr Paul Rea Mr Kevin Winders
Chair, Port Otago Limited Chief Executive, Port Otago Limited
Tel 021 993 700 Tel 027 432 1530



Annual Report 2021