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A flat domestic economy and international trading uncertainty have failed to cool business through the Port of Auckland, which eclipsed its annual profit target with three months to spare.
The port company has told its owner, Auckland Council, it now expects to end the year around 20 percent up on its $65m budgeted net profit, nudging $80m due to “an overall excellent performance.”
That is despite weaker vehicle imports and lower trade in construction materials as demand for cement and aggregates weakened in the Auckland region.
A report for Tuesday’s meeting of the committee overseeing Auckland Council-owned businesses says growth in container volumes, solid imports of coal among other “breakbulk” products, and better than expected cruise liner and passenger numbers have contributed to the strong result.
The port firm paid the council an interim dividend of $25m in March and says it is on track to meet the $45m full dividend after year’s end in July.
Separately, a decision to sell the company’s shares in a Northland port joint venture should see the company’s board meet a council request for a special dividend of $46m to the council for reinvestment in the new Auckland Future Fund.
Port chief executive Roger Gray says the third quarter success was partly due to better laden container volumes in and out of the port.
Since the end of the third-quarter on March 31, container volumes have eased but coal imports remain high as power company Genesis rebuilds its Huntly station stockpile to supplement renewable electricity supply in winter.
The Auckland port company reported a strong third quarter for the financial year. Photo: Tim Murphy
Port of Auckland Ltd is on track to lift net profit above $100m a year in 2027, after targeting $85m next year, he says.
An agreement with the council in 2024 involves the port company contributing $1.1 billion in ‘impact’ over the next decade to the council – representing the total for its combined net profits accounted for by the parent body, rather than dividends paid.
Gray hopes the trade in construction materials and cement, which have been low, will lift with demand from projects like the port’s own Bledisloe North wharf, for which it has applied for fast-track approval, and the Precinct properties development on the site of the current downtown carpark.
The firm is less optimistic about the cruise business – the season just gone had fewer ships than last summer but with more passengers, as the tourism sector struggled to regain cruise ship numbers.
Overall, Gray sees the port company delivering higher net profits than previously outlined in its statement of corporate intent. It will not “sit on our laurels” if the numbers can exceed previous targets.
The good news at the port business stood out among the council-controlled organisations reporting their third-quarter updates to councillors for the Tuesday meeting.
The Eke Panuku development and property business, which will be folded into the council organisation after July 1, reported favourable operating results but failures in its targets for asset sales as well as for completed new dwellings (just 66 of a planned 157).
The stubbornly subdued property market means Eke Panuku will not contribute the $76m in sales of “council’s surplus property” required of it in the council’s budget, having achieved just $8.1m in the third quarter from a quarterly budget of $46m.
“The property market is challenging from a wider economic perspective with significant numbers of listings and developers holding unsold stock,” it tells councillors.
Eke Panuku says it has a further $57m of further conditional sales “under negotiation” but that is listed under risks to the financials rather than a positive.
The business has also been affected by two other council decisions.
The restructuring of the council economic and events agency Tatāki Auckland Unlimited means it may not need to keep leasing a Wynyard Pt building for which Eke Panuku had a tentative deal to sell, as the potential developer had been spooked by the likely exit of the other council-owned agency tenant.
And higher proposed development contributions set by the council for beyond July 1 had created uncertainty and made some developments “financially unfeasible” in the eyes of potential buyers of surplus council properties.
“Sites continue to be taken to the market to test market appetite but any improvement in market sentiment is still to appear,” Eke Panuku reports.
“Inflation and interest rates have reduced but economic conditions are affecting demand. This affects the delivery of current and future SOI asset sale targets and regeneration outcomes, including construction of new dwelling units.
“It is taking longer to attract partners with capacity to achieve viable projects in current conditions.”
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