Why is Ports of Auckland performing so badly?
The recent announcement by Ports of Auckland managing director Jens Madsen that his company was interested in buying Port of Tauranga’s container business must rank as the best diversionary tactic of 2008. Madsen made the announcement during Ports of Auckland’s June 2008 year profit presentation and it completely diverted attention away from yet another poor result from the Auckland port company. In the early 1990s Ports of Auckland’s net profit after tax was approximately four times higher than Port of Tauranga and the Auckland company paid a dividend of $19.9 million for the June 1994 year, compared with only $4.0 million by Port of Tauranga. The latter has steadily caught up with Ports of Auckland, particularly since the Auckland Regional Council, through Auckland Regional Holdings, made a successful takeover offer for the Auckland company in 2005. Since the takeover there has been a marked difference between the performance of the two companies with Ports of Auckland earnings before interest, tax, depreciation and amortisation (EBITDA) falling from $79.5 million to $71.9 million while Port of Tauranga’s EBITDA has risen from $73.9 million to $79.3 million. In the early 1990s it was inconceivable that the Tauranga company would ever be able to achieve higher earnings than Ports of Auckland. Ports of Auckland – lagging well behind Port of Tauranga Net Profit after Tax Dividends Paid ($000) Ports of Auckland Ports of Tauranga Ports of Auckland Ports of Tauranga 2008 21,115 42,117 22,764 44,231 2007 32,818 39,335 19,866 28,136 2006 38,523 31,032 151,802 26,794 2005 43,672 33,654 42,932 26,794 2004 45,310 33,652 33,652 26,794 1999 32,824 18,095 23,851 29,016 1994 31,596 7,778 19,876 4,020 Port of Tauranga continues to believe that a merger is in the best interest of the two companies but it is now in a far better position to negotiate favourable terms than it was two years ago. This is bad news for Auckland ratepayers who should be demanding a far better performance from its ports company.
In 2006 the Auckland Regional Council scuttled a proposed merger between the two port companies but the boot is now on the other foot. Ports of Auckland performance has deteriorated dramatically under 100% political ownership and Auckland Regional Holdings’ latest long-term funding plan indicates that the port company’s dividend payment will be $100 million less than expected over the next decade.
Brian Gaynor, 29 August 2008