Auckland port pledges to lift its financial and productivity game soon

Ports of Auckland is aiming for a significant lift in its dividend payment to the city’s long-suffering ratepayers in two years and a net profit improvement not heavily bolstered by property revaluations.

The embattled Auckland Council-owned port, now being steered by experiencedcompany director Jan Dawson as new chair, says in its statement of commercial intent for the next three financial years it aims for a FY24 dividend of $19.8 million compared to $3.7m for FY21.

However, only $2.1m is given for a dividend payment in the current financial year, with$5.3m the goal in FY23.

The target for net profit after tax in FY24 is $55m, however this won’t include gains from investment property revaluation, which in FY21 boosted NPAT by $20.6m to $45.6m.

Undertaking to “recover our commercial position and profitability”, the port said it aimed for a 16.4 per cent revenue increase for FY24, compared with a -2.4 per cent performance in FY21.

Overall revenue for FY21 was $226.3m, down $5.1m on the previous year.

The port company pledged to deliver full automation of its container terminal “no later than 30 June 2022”.

Continuing delays in fully implementing this six-year-old automation project, meant the country’s main imports gateway wasn’t operating productively when the Covid-driven consumer goods shipping boom hit last year. Intended to provide more container handling capacity without the need for more harbour reclamation, the Auckland port’s poor productivity while working a hybrid system at the terminal has inflamed New Zealand’s supply chain crisis and incurred the wrath of importers, exporters, retailers and manufacturers.

The port was also this year the subject of a damning independent health and safety report after a string of fatalities and injuries, and its chief executive of 11 years Tony Gibson quit in June. The port and Gibson are being prosecuted by Maritime NZ over the August 2020 workplace death of Pala’amo (Amo) Kalati, who was crushed by acontainer.

Financial results and dividends have been weak.

Branded “a lazy shareholder” by senior councillor Chris Darby, the council has responded that it can’t interfere in port management under the Port Companies Act. However, in recent months Mayor Phil Goff’s office has driven a change of board directors, with a new chief executive announcement promised by the year’s end.

Goff has written to new chair Dawson with the council’s expectations.

These include that the port retain the target of zero lost time injuries. (The port has said in FY22 it intends to have implemented “100 per cent” of the recommendations of the independent health and safety report commissioned by the council.)

In response, Dawson said while the port is focused on improving health and safety, it considered reinstalling a target of zero lost time injuries was “unrealistic and unachievable based on our current position”.

Setting challenging yet achievable targets was important to the port, she said.

Therefore it had made two changes: its zero fatality target would include zero work related illnesses and injuries, as suggested by the council’s health and safety staff.
It had also increased the lost time injury targets from its draft statement. These had been 15 per cent, 25 per cent and 15 per cent. The targets were now all 50 per cent.

“We think it is timely to reiterate that the primary objective of automation was to increase [terminal] capacity … and have an efficient flow of containers through the port into the supply chain.

“To increase capacity with no more reclamation, we required the ability to have higher container stacks which therefore required taller straddle carriers. We assessed the impact on safety of an increased risk of tip-over was unacceptable and that automation….was a safer option.”

The port had targeted maintaining productivity levels achieved at the time the automation project was decided. But much had changed in the interim as changes were made to improve worker safety.

“These safety processes have a direct reduction in the various measures of productivity,” Dawson wrote.

The council asked the port to include a specific performance indicator and target in its statement of intent to show productivity improvements made after automation.

The council said it expected to see more ambitious productivity targets for the years after automation.

In response, Dawson said the port acknowledged the council’s point and the need to continuously improve financial performance.

“Recovering container terminal productivity is one of our key strategic objectives for the year.

“We remain aware of the potential conflict between productivity and safety and will not set ambitious productivity targets that cannot be achieved safely.

“We have decided not to amend the targets these are targets that will be carefully considered for next year’s SCI [statement of intent].”

The company did agree however to the council’s request to reinstate the port’s customer service indicator for 2023 and 2024 financial years, although the FY23 target was lower than historic targets due to global shipping disruption.

The council asked for the statement’s “primary line of communication” clause to be amended to include the council chief executive as well as the mayor.

Dawson said this had been amended. The direct lines of communication would to the mayor via the port chair, and to the CEO via the port CEO.

Dawson confirmed an improved relationship with the council was a priority.

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