Lyttelton Port warns cruise berth will dent dividend

Monday, 1 October 2018

Lyttelton Port Company has revealed the dividend it will pay to its cash-strapped Christchurch City Council owner at $8 million, while warning that a new cruise ship berth will affect future payments.

Until last year the company had resisted calls for a cruise berth but a special meeting of city councillors requested the company proceed 'with urgency' in the interests of regional tourism operators.

'After doing our due diligence on the berth, it was clear that it would be challenging for it to make a full commercial return. Lyttelton has agreed with the city council that it should proceed with the construction of the berth but any return which is less than commercial will be reflected in lower dividends,' directors said in the annual report. 

'Current forecasts show that the cruise berth may not make an economic return…it is likely that in the 2019 financial year, the [$56m] cruise berth will be impaired [written down in value].'

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The dividends the council receives from its trading companies are used to offset rates rises, forecast to rise steeply in coming years for post-earthquake projects including sports stadiums.

The port company has also warned that other spending will affect future profits.

The port invested more than $72m in during the year on a new headquarters, new marina, 10 hectare reclamation, new container wharf at Cashin Quay, repairs to wharves, MidlandPort construction at Rolleston, new tug and straddle carriers, and repair of the oil wharf.

'As with any business it will take time for these assets to make a return because they are all very new…we are forecasting net profit to remain relatively low as depreciation costs are high and we move from having cash in the bank to borrowing money to fund our investments.'

Chief executive Peter Davie earned $981,000 compared with $955,000 in 2017.

Short term incentives made up 40 per cent of Davies' pay, of which 20 per cent was made up of health and safety performance, and 20 per cent financial performance. The remaining 60 per cent was based on achieving strategic objectives.

Although some operational measure fell short of directors' targets, the financial results were slightly ahead of target, despite being down on the previous year.

After extracting, expenses and tax, the final profit for 2018 was $12m, lower than last year's $14.4m. Revenue was higher at $122 million compared with $114m in 2017. The dividend of $8m compared with the 2017 dividend of $5.2m.

During the 2018 year the port had a 5.7 per cent increase in containers to 424,560 twenty foot equivalents, partly due to the Kaikoura earthquakes forcing logistics companies to use more coastal shipping rather than rail. Industrial action in March and April reduced TEUs by about 10,000.

Imports of vehicles were higher at 60,789 compared with 55,488 the previous year, and log exports were 431,291 tonnes compared with 490,000 previously.