South Port NZ Ltd - 2024 Annual Report

2024 Annual Report South Port New Zealand Limited’s Annual Report for the year ended 30 June 2024 is now available on our website. You can view the Report at: https://bit.ly/SPNZ-Annual-Report-2024 South Port New Zealand Ltd recorded an after-tax profit of $7.38M (2023 - $11.71M), a 37.0% decrease on last year’s result. This result reflected a 7.7% decrease in cargoes handled through the Port of 3,213,000 tonnes (2023 – 3,479,000 tonnes). Consistent with other infrastructure companies, South Port’s result was also negatively impacted by the Government’s decision in March to remove tax deductibility for depreciation on commercial buildings. This tax change resulted in a one-off deferred tax expense of $2.3M for the 2024 financial year. Normalised Net Profit After Tax, excluding one-offs, was $9.96M (2023 - $11.50M), a 13.4% decrease. Core bulk cargo volumes were down by 12.2% at 2,673,000 tonnes (2023 – 3,043,000 tonnes), reflecting decreases in logs, fertiliser, and woodchip volumes. Container services port-wide achieved an impressive 24.5% increase in volumes handled in 2024 at 51,900 TEU (2023 – 41,700 TEU), despite a similar number of calls (39 vs 38). The Company continues to support the New Zealand cruise industry by providing pilotage services at Fiordland and Stewart Island and allocating berth space for cruise vessels calling at the Port. New Zealand Aluminium Smelter (NZAS) On 31 May 2024, NZAS announced it had secured electricity supply contracts from Meridian Energy, Contact Energy and Mercury NZ for 20 years, out until 2044. This was a welcome announcement for both South Port and the Southland region that has heavily relied on this business activity since 1971. NZAS represents approximately 20% of Net Profit After Tax (NPAT), 30% of the total cargo volume handled through the Port, 20% of bulk vessel calls, and 27% of containers - the majority of which are packed on the Island Harbour. These are significant numbers and play an important role in the Port’s ability to operate an efficient marine and container packing operation, offer backload opportunities on bulk vessels, and to help cement the Mediterranean Shipping Company (MSC) service calls. Importantly, it is expected this decision will provide the catalyst for generators to commit to investing in additional renewable electricity generation in the Southland province. Outlook The agricultural and forestry-based sectors continue to face particularly challenging conditions. These are expected to be reflected in the volumes of bulk cargo being handled through the Port. Demand in offshore markets remain subdued. Supply chains continue to be disrupted, particularly around regions where conflict is present. These variables are out of our control and are not expected to improve in the near future. However, the Company remains optimistic about future opportunities. The NZAS extension is a major boost in providing consistency in vessel calls and base cargo that can now be factored into future planning. A large majority of the project cargo associated with wind farm development activity is expected to be handled through the Port in coming years. We are aware that there are applications to the Fast Track Advisory Group for aquaculture projects in Murihiku including the Hananui ocean salmon farm, the Impact Marine land-based salmon farm and the Kelp Blue ocean kelp farm. The Company’s diversity of cargoes provides us with resilience and helps to smooth out fluctuations in the market. Therefore, based on all known factors at the date of compiling this report, South Port estimates that earnings in the next financial will be in the range of $9.30M – $10.30M (2024 – $7.38M). On the assumption of a consistent earnings profile and in the absence of any unforeseen circumstances, the Directors will seek to, at least, maintain the current level of dividend payment. FINANCIAL PERFORMANCE Dividends per share - 27.00 cents - No change Total Cargo - 3,213,000 tonnes - Down 7.7% Operating Revenue - $56.13 million - Up 4.7% NPAT - $7.38 million - Down 37.0% Normalised NPAT - $9.96 million - Down 13.4% Earnings per share - 28.1 cents - Down 37.0% Annual NPAT to 30 June 2024 $7.38 million FY24 Dividend consistent at 27.00 cents per share FINAL DIVIDEND Despite the reduction in profit in 2024, the Board is pleased to declare a final dividend of 19.5 cents. This translates to a full year dividend of 27.0 cents per share (2023 – 27.0 cents). Full imputation credits will be attached to all distributions. The 27.0 cent dividend represents a pay-out ratio for 2024 of 96% using reported NPAT and 83% of FCF. The dividend payment represents a gross return of 6.7% (net 4.8%), based on a share price of $5.61 as at 30 June 2024. Nigel Gear Chief Executive South Port New Zealand Limited