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Financial results reported from Napier Port

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Dry Bulk,

Napier Port has reported lower revenue and underlying earnings for the nine months to 30 June 2020 due to reductions in container and bulk cargo volumes as the result of COVID-19 disruptions.

Third quarter revenue was down by 16.2% to NZ$24.3 million from NZ$29.0 million in the same period last year. Revenue for the nine months decreased 1.4% to NZ$76.6 million from NZ$77.6 million last year.

Bulk cargo

Bulk cargo revenue for the quarter of NZ$6.3 million decreased 20.3% from NZ$7.9 million in the same period last year. For the nine months, bulk cargo revenue was down by 9.0% to NZ$22.3 million from NZ$24.5 million as volumes reduced by 12.8% to 2.2 million t from 2.6 million t in the same period a year ago.

Log export volume reduced by 14.3% to 1.6 million t from 1.9 million t for the nine-month period due to the cessation of log harvesting during Alert Level 4 and Chinese export market conditions. Average revenue per tonne increased 4.4% to NZ$10.02 from NZ$9.60 in the same period last year.

Operating results

The result from operating activities for the third quarter was down by 31.6% to NZ$9.3 million from NZ$13.7 million. For the nine months the result from operating activities declined by 13.0% to NZ$31.1 million from NZ$35.7 mil-lion due to lower revenue and operating expenses increasing in line with expectations to support growth and build operational resilience. Operating expenses increased with higher employee numbers, higher insurance costs, and listed company costs in the nine months compared to the same period last year.

Pro forma EBITDA for the quarter reduced by 30.1% to NZ$9.3 million from NZ$13.3 million in the same period last year. For the nine months, pro for-ma EBITDA reduced by 10.8% to NZ$30.8 million from NZ$34.5 million. Pro forma operating expenses in the quarter reduced 4.5% and increased 6.2% for the nine months compared to the same periods last year.

Pro forma net profit after tax for the third quarter reduced by 43.7% to NZ$4.2 million from NZ$7.5 million in the same period last year. For the nine months this reduced by 14.3% to NZ$15.5 million from NZ$18.1 million.

The reported statutory net profit after tax for the nine months of NZ$18.7 million, up from NZ$16.3 million in the same period last year, includes the receipt of the government’s COVID-19 wage subsidy of NZ$2.0 million (gross of tax effect) and a one-off non-cash deferred tax gain of NZ$1.5 million related to the deductibility of tax depreciation on buildings, both of which are excluded from the pro forma result. The statutory net profit after tax also benefited from reduced finance costs of NZ$3.0 million when com-pared to the same period a year ago.

Chair Alasdair MacLeod says: “These results cover the period that included the Level 4 COVID-19 lockdown, when all but the cargo the Government deemed ‘essential’ reduced sharply. With the gradual lifting of restrictions, we have seen a recovery in cargo volumes flowing across our wharves since the lockdown, albeit not to the levels we anticipated prior to the lockdown.

“These disruptions have weighed on our earnings for both the three-month and nine-month periods. Meanwhile continued uncertainty about the medium-term impact of the pandemic and month-to-month volatility in trade flows continue to pose challenges to accurately assessing the outlook for the future.

“Despite this uncertainty, Napier Port and the broader region is weathering the pandemic relatively well. We expect the primary sector cargo that underpins our business and the prosperity of the region to continue to flow across our wharves and, over the long-term, grow. We continue to invest to support that long-term growth and our customers.”

Chief Executive Todd Dawson says: “As we signalled in May, the 2020 financial year is emerging as a year of two halves, with the first largely in line with forecasts we set at the time of our 2019 initial public offer and the second seeing the COVID-19 disruption to trading and the resulting softening in our financial performance.

“Volumes of key trades since the end of the lock down in April have been volatile, particularly log exports. Major apple packers have reported strong harvests, but, due to the volatility in international markets, our customers are taking longer to clear inventory than prior years. These dynamics have seen Napier Port moving slightly lower volumes of apple and pear containers compared to the same period in the prior year.

“Meat volumes have been steady, while import trades have been in line with last year despite the economic uncertainty. Timber volumes have, mean-while, been solid.

“Napier Port continues to build capability and capacity for the future. The 6 Wharf construction project continues to progress in line with expectations. We are also pleased with progress we have made on other strategic initiatives, including the commissioning of our third tug Kaweka and our second off port container depot in Thames Street, Napier.

“In June we welcomed the Government’s in-principle support to help fund the development of an inland port at Whakatu, which forms part of Napier Port’s future infrastructure masterplan. The Government support potentially offers Napier Port the opportunity to bring forward this development in return for favourable funding terms. The financing package is subject to the agree-ment of terms and Board approval of a business case.

“All of these developments position the company well for the long-term. They help us to drive efficiencies and provide capacity for the long-term growth in cargo we expect to flow from the region.”

Balance sheet and capital expenditure

Napier Port retains a strong balance sheet following its capital raising in the prior year. At 30 June 2020, cash and cash equivalents stood at NZ$18.0 million, down from the NZ$31.2 million at the end of the last financial year. In addition, we have undrawn bank facilities of NZ$180 million to fund the 6 Wharf development, the majority of which mature in 2024.

Our strategic investments are cementing our capability to continue growing our position as the preferred gateway in the central and lower north island for cargo owners.

Over the nine-month period Napier Port has invested NZ$30.9 million in capital assets with NZ$14 million spent on 6 Wharf construction. Other projects included the commissioning of Kaweka, the new off-port container depot, and replacement wharf maintenance, maintenance dredging, paving works and mobile plant.

Earnings guidance and outlook

Napier Port now expects pro forma NPAT for the 12 months to 30 September 2020 to be approximately NZ$20 million, assuming no material change to trading conditions. This expectation benefits from our COVID-19 response measures, including employee benefit and short-term operating expense deferrals, and excludes pro forma adjustment items such as the COVID-19 wage subsidy.

“Beyond the end of the financial year the outlook is still subject to consider-able uncertainty. Cruise ship visits are unlikely to resume for the coming cruise season, which traditionally commence in October and extends through summer. Meanwhile, it is still difficult to assess how the pandemic will affect demand for key trades from export markets and imports to the region,” Mr Dawson said.

“As we noted at the half year Napier Port continues to engage with cargo owners to understand how COVID-19 trading conditions are affecting them and the expected outlook for cargo volumes through Napier Port. We expect to provide a further update when we release our results for the 2020 financial year in November.”

As advised with the company’s half year results announcement, a decision on the final dividend will be made by the Napier Port board in conjunction with the full financial year result and outlook in November 2020. The board’s intent is to pay a final dividend in respect of the 2020 financial year result, in accordance with its stated dividend policy, subject to developments and the economic outlook at that time.

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