port of tauranga annual report Leading through Innovation & Commitment 06 OUR VISION To be New Zealand’s preferred cargo gateway.
OUR MISSION STATEMENT Leading through innovation and commitment.
OUR VALUES Integrity, Innovation, Communication, Teamwork.
FOR US SOCIAL RESPONSIBILITY IS Ensuring our strategic and operational decisions take into account our environmental responsibilities and the aspirations of all stakeholders, including the shareholders, the community and our staff.
CONTENTS 2 HIGHLIGHTS 3 RESULTS IN BRIEF & CORPORATE STRUCTURE 4 CHAIRMAN’S REVIEW 6 DIRECTORS 8 CHIEF EXECUTIVE’S REVIEW 12 Co-operating with Ballance – for nearly 50 years 14 Lodestar logistics – the Port provides choice 16 From Genesis to capacity – via flexibility 18 Fitting in to The ZESPRI System™ - an integrated partnership 20 SUSTAINABILTY 24 CORPORATE GOVERNANCE STATEMENT 26 REPORT OF THE DIRECTORS TO THE SHAREHOLDERS 28 AUDIT REPORT 29 FINANCIAL STATEMENTS 53 STATUTORY INFORMATION 55 FINANCIAL AND OPERATIONAL FIVE YEAR SUMMARY 56 DIRECTORY ANNUAL REPORT 2 0 0 6
“Productivity & efficiency are the hallmarks of the successful partnerships the Port of Tauranga maintains with many of New Zealand’s leading businesses. In this year’s report, we focus on our bulk customers and get their views on how working with the Port of Tauranga adds value to their businesses.” ANNUAL REPORT 2 0 0 6
HIGHLIGHTS
The first New Zealand call in the newly-formed Maersk Line’s 4100 TEU “Pendulum” service commenced in February. This service provides New Zealand’s exporters with a weekly direct service to North America and Europe, which includes trans-Tasman imports via Tauranga.
The additional fortnightly call of Maersk’s NZ A-string. This Maersk Asian service contributes to the signs of reinvigoration in coastal shipping, involving also the transhipment of export cargo from Nelson and New Plymouth, destined for Europe and North America.
In March, the new NZX shipping service made its first call in Tauranga. NZX combines several lines [Nippon Yusen Kaisha (NYK), Mitsui Osk Line (MOL), Pacific International Line (PIL), Malaysia International Shipping Corporation (MISC) and Orient Overseas Container Line (OOCL)] to provide an express service calling at Singapore, Tauranga and Lyttelton to provide exporters with a fast connection into Asian markets.
Tauranga was confirmed as the North Island port of call for Hamburg Sud’s new fortnightly Trident service commencing in March. The service takes exports to the East Coast of North America and Europe.
Significant increase (100%) in cruise vessel calls with 28 liners visiting in the 2005/2006 season and further increases already confirmed for the 2007/2008 season.
Significant increase in transhipments as cargo transferred from other ports for relay over Tauranga on to different services.
A new train schedule commenced operating longer 97 TEU trains between MetroPort Auckland and Tauranga.
US Lines choosing Tauranga as the only New Zealand port of call for its new fortnightly service which began in August. Imports from United States and Australia, exports to Australia, Hong Kong and south China and Los Angeles, giving both importers and exporters greater choice.
The new Goodman Fielder grain store was completed and the first delivery received into the store in February. The 4,000 square metre store, built on Port land, has a 20,000 tonne capacity.
Signing heads of agreement for Specialised Container Services (SCS), New Zealand’s leading container management organisation, to manage MetroBox. ANNUAL REPORT 2 0 0 6
RESULTS IN BRIEF
Year Year 2006 2005 $000 $000
Revenue 122,423 145,601 Surplus after taxation 31,032 33,654 Total assets 647,896 650,346 Total equity 431,434 427,187 Shareholders’ equity (%) 66.5 65.7 Dividends paid 26,794 26,794 Net asset backing per share ($) 3.22 3.19 Return on equity (%) 7.2 8.0 Cargo throughput (000 tonnes) 12,278 12,622 Containers (TEUs) 423,138 438,214
The Board approved a final dividend of 13.0 cents per share ($17.4 million) after year end payable on 6 October 2006.
corporate structure
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J o h n P ar k er C H AIRMAN
“A combination of improving efficiencies and a strong focus on costs plus a modest improvement in log volumes gives a positive outlook for 2006/2007.” ANNUAL REPORT 2 0 0 6
Chairman’s review
FINANCIAL PERFORMANCE The Company faced higher interest costs, with the average base rate being 6.86% on $202 million of debt at year end. We have taken Net profit after tax at $31.032 million was $2.622 million less than out $35 million forward start swaps, for periods out to 2011, at rates last year, a reduction of 7.8%. Both years included some one-off less than the year end average. adjustments; this year $2.181 million from the sale of land, and 2005 entailing $4.000 million of Genesis non-assessable income The Company has a strong balance sheet with shareholders’ equity and $456,000 of land sales. Adjusted for one-offs, this year at being 66.5% and interest covered 4.1 times. Strong control was $28.851 million was marginally ($347,000) down on last year’s kept over operating costs that for the parent company were slightly less than last year. Staff numbers were reduced from 159 to 156. $29.198 million. DIVIDENDS Normalised EBITDa improved by $987,000, which is pleasing, given the difficult trading environment where cargo volumes, TEUs Directors have declared a final dividend of 13.0 cents per share, and ship departures were all down and fuel increased in cost by payable on 6 October 2006, bringing the total payment to $1.4 million over last year. shareholders for the year to 20.0 cents, which is the same as the 2005 financial year. The reduction in revenue was caused partially by reduced volumes, but more particularly by the accounting treatment of our associate THE FUTURE company Toll Owens Limited. Toll Owens was formed by merging The 2007 financial year will provide some challenges with labour, our 100%-owned Owens Cargo Company with Toll Logistics and is fuel costs and interest rate pressures likely to impact on the now equity accounted rather than consolidated line by line into financial performance, coupled with a very competitive trading group accounts. environment. Directors are particularly conscious that a return on The performance of our associate companies has been mixed. equity of 7.2% is not a satisfactory return for shareholders. Our share of Toll Owens Limited, generated a tax paid profit of As indicated in our interim report, however, the outlook for the Port $1.618 million compared with last year’s $0.558 million, whereas continues to be positive, and the beginning of 2006/2007 has seen Northport Limited and Northport Services Limited were unchanged clear signs of an improved performance associated with the forestry at $970,000. sector. The weakening in the New Zealand currency, despite its effect on fuel imports, has benefit in the export sector and impacts directly Capital expenditure was $1.595 million less than depreciation. on forestry volumes. Additionally, the supply of softwood logs from Because of difficult trading conditions, this was confined to countries competing with New Zealand faces some constraint. $7.8 million with the bulk relating to capitalised dredging and the completion of deepening berths used by Genesis for the Increased log exports will affect the Port over the medium term importation of coal. but impact on Toll Owens immediately, where modest volume ANNUAL REPORT 2 0 0 6
improvements are expected to have a positive effect on consolidation of shipping companies and their negotiating profitability. Toll Owens is a marshalling and stevedoring power into fewer and fewer hands. company operating in 11 ports throughout New Zealand. At Northport, the costs of a new berth and uncertainties in regard Concurrently with the consolidation of shipping companies, to ownership of Northland forests and export intentions point to terminal operators have been treading the same path – for or indicate modest improvement at best. example, Dubai Ports’ takeover of terminal operator P&O Ports (29 container terminals in 19 countries). The activity is moving Last year’s Chairman’s review noted that the collective economic closer, with Hutchison Whampoa seeking to add Lyttelton to their wisdom was that we were at the start of a slow-down but that stable of terminals and Toll Holdings pursuing vertical integration a focus on productivity and service would dampen the effect. with their takeover of terminal operator Patrick Corporation. That has proved to be correct and while the slow-down is projected to continue, a combination of improving efficiencies Within New Zealand, there is increasing discussion around and a strong focus on costs plus a modest improvement in log rationalisation of ports. It is clear that the country is over- volumes gives a positive outlook for 2006/2007. supplied with facilities and services. Of the 13 commercial ports in New Zealand, 10 are competing in the international container INDUSTRY ISSUES arena. The result is significant over-capacity for the country’s There has been significant international activity relating to the needs, and a possibly counter-productive level of capitalisation port industry, with transactions including Maersk Sealand, that may not serve the national interest in the long term. As the world’s largest shipping company, acquiring the second- merged shipping lines realise greater buying power, so their largest shipping line P&O Nedloyd. Then Hapag-Lloyd acquired suppliers, including ports, need to run lean enough to compete CP Ships, and Hamburg Sud, FESCO. The outcome is the effectively while still offering reasonable returns.
directors
J S P ar k er A W B aylis A W C apama g ian J M C ronin B Ag Sc, Chairman Master of Commerce (1st Class CA JP, CA INDEPENDENT DIRECTOR Honours), FCA, FNZIM, AFInstD INDEPENDENT DIRECTOR INDEPENDENT DIRECTOR
John Parker is Chairman of Bill Baylis is Chairman of Bill Capamagian is a Tauranga John Cronin, an experienced MIT Development Limited, Cottonsoft Limited, Naylor business consultant who company Director, is Northport Limited and Toll Love Enterprises Limited, has a long involvement in Chairman of the Bay of Owens Limited. Mr Parker PGG Wrightson Limited, Real the shipping and transport Plenty Regional Council also chairs the Nomination Journeys Limited and Director industry as a former (Environment Bay of Plenty). and Remuneration of Blackhead Quarries. He has Director of the Owens family John joined the Board in Committees and joined the broad agribusiness governance companies. He joined the August 2002. Board of Port of Tauranga experience and joined the Board in August 1994. Limited in June 1996. Board in February 2006. ANNUAL REPORT 2 0 0 6
We are a small country, a long way from export markets shipping well, seamlessly coming into the management team and large commodity volumes, often of low unit value. This means the commanding respect from all who interact with him. cost of transport is of greater importance to New Zealand than to most countries. It is increasingly being recognised that New Zealand Staff have had a demanding year – it’s not easy to reduce would be better served by providing more concentrated services costs and improve efficiencies and the Board appreciated the situated in logical hubs. We intend to be one of those hubs. extra effort.
DIRECTORS
Bill Capamagian and Sir Dryden Spring retire at the Annual Meeting in accordance with the Company’s constitution and offer themselves for re-election. JOHN Parker During the year, Bill Baylis was appointed to the Board and will CHAIRMAN therefore come up for election at the Annual Meeting. Bill has a vast experience and skill in governance and is a very pleasing appointment to the Board.
MANAGEMENT/STAFF
Mark Cairns completes his first year (actually some eight months) as Chief Executive and while I’m sure he wishes he had faced a more buoyant economy, he has performed extremely
D A P il k in g ton M J S mit h S ir D ryden S prin g H M T itter BSc, BE, GradDip Dairy Science & LLB INDEPENDENT DIRECTOR CMG, B Com, FACA Technology INDEPENDENT DIRECTOR INDEPENDENT DIRECTOR
David Pilkington was a A Tauranga lawyer, Michael Sir Dryden Spring is A former Managing Director of member of Fonterra’s senior Smith is a Director of Quayside Chairman of the ANZ National Feltex New Zealand Limited, executive team and now holds Holdings Limited and Bank Limited, Asia 2000 Chairman of Northern Regional Directorships in Ballance Agri- Quayside Securities Limited. Foundation of New Zealand Health Authority and Secretary Nutrients Limited, Douglas He is an experienced company and the APEC Business of Defence, Harold Titter Pharmaceuticals Limited, Prevar Director with an extensive Advisory Council of New is Chairman of TrustPower Limited, Restaurant Brands corporate and commercial Zealand. He is also a Director Limited. He is a business New Zealand Limited, Ruapehu legal background. Mr Smith of Fletcher Building Limited, consultant to various private Alpine Lifts Limited and ZESPRI chairs the Constitution Marsden Port Services and government enterprises. Group Limited. He has a strong Committee and joined the Limited, Northport Limited Mr Titter also chairs the Audit background in marketing, Board in August 2001. and Sky City Entertainment Committee and joined the international business and Group Limited. He joined the Board in May 1995. supply chain logistics. Mr Board in April 2004. Pilkington joined the Board in July 2005. ANNUAL REPORT 2 0 0 6
mar k cairns C H IEF EXECUTIVE
“We have a first-class asset and an extremely committed team focussed on delivering world class productivity.” ANNUAL REPORT 2 0 0 6
CHIEF EXECUTIVE’s review
As Chief Executive for eight months of the period under review, The positives from last year’s trading were in particular, dairy I am able to report that the challenges of the past two years exports at 840,300 tonnes representing an increase of 59,600 have, as anticipated by my predecessor, continued alongside tonnes (7.6%), frozen meat increasing 86,600 tonnes (38.1%) and two exacerbating factors – the expected downturn in the national apples 127.7% at 81,400 tonnes. On the import side, cement was economy and the substantial rise in fuel prices. up 23,000 tonnes, grain 31,000 tonnes and most importantly coal imported on behalf of Genesis, for the power station at Huntly, The Port’s infrastructure, both strategic and physical, has stood us in totalling 1.130 million tonnes, which represents an increase over last good stead over this difficult period and we are in a strong position to year of 250,600 tonnes or 28.5%. benefit from the expected upturn over the next five years, of which we have seen some evidence in the final quarter’s trading. On the container side of the business, total for the year was 423,138 TEU, a reduction of 15,076 TEU (-3.4%) on the 2005 container throughput. The Port of Tauranga remains committed to treating every customer as a valued partner with whom it works to find shipping solutions EFFICIENCY that are efficient, innovative, and profitable for the importer/ New Zealand is a country geographically challenged by its exporter and the Port Company. significant distance from the large export markets of Asia, Europe, OPERATIONS and the United States. To improve our performance as an exporting nation we have maintained a strong focus on our cost structures and Trade for the year, at 12.278 million tonnes, was 344,800 tonnes improving efficiency. We are proud to have increased the Company’s down on last year, with the main contributor to this reduction being already high level of productivity whilst at the same time achieving the forestry sector, with logs of 2.224 million tonnes (64,000 tonnes a $1 million reduction in operating costs. less than last year). Other forestry-related exports such as sawn timber, wood pulp, wood panels and wood chips were also all less Cost reduction has not been at the expense of customer service, as our increased productivity shows. Terminal Operations Manager than last year’s throughput. The only exception in the forestry-related Martyn McColgan and his team are producing an acknowledged products mix was paper products that increased by 61,000 tonnes. world-class performance under a restructured operation. In total, forestry exports at 4,166,300 tonnes, were 246,700 tonnes That team’s achievement has seen a 9% improvement this year (5.6%) less than last year, as a result of the sector being significantly in net crane rates to 34.4 moves per hour on average across all affected by a combination of a high currency value and high shipping vessels. By comparison, a recently updated Australian Productivity rates. This has impacted directly on volumes and indirectly through Commission Report revealed that the average net crane rate its effect on our associate company, Toll Owens. across all five Australian ports is 27.7 moves per hour. The vessel Volumes on the import side, especially fertiliser bases, were down on throughput rates of more than 100 moves per hour with three cranes last year by 161,600 tonnes (26.3%) and the other material reduction are also unmatched in Australasia. This improvement in productivity was in general goods, reflecting the reduced container numbers and along with further cost-saving measures, has seen the variable cost slowing New Zealand economy. per container reduced. 10 ANNUAL REPORT 2 0 0 6
In the case of our relationship with Genesis Energy, we have continually OUR PEOPLE improved our vessel discharge rates for coal, achieving a record 26,700 It has been a privilege to inherit such a strong management team tonnes per day through the provision of a seamless logistics system who have so ably risen to the challenge of supporting a new Chief in the Port - Toll Owens - Toll Rail partnership. This project, to move Executive in a demanding year. coal from shipside to Huntly, is an example of our ongoing “customer needs” approach and our commitment to develop innovative and I would like to thank the Directors who have provided the direction tailored solutions. Other examples of this approach are featured and support for the business. My sincere gratitude is also extended elsewhere in this document. to the Port of Tauranga team including our business partners for the A key plank to our high efficiency is our strategy of encouraging hard work and dedication they have contributed over the year. They intra-port competition. We are the only New Zealand port offering will, I am sure, respond with similar strength of purpose and ability, customers the choice of five different stevedoring and marshalling to the demanding and exciting potential of the year ahead. companies. We thank those companies for their role in Port of Our people remain our strongest source of competitive advantage. Tauranga being acknowledged as the most productive port in New Zealand. Recent benchmarking shows us to be consistently among THE FUTURE the top 10 ports in the world. We are proud to be able to add value The ports industry faces continued challenges in the face of to the Company while simultaneously providing an excellent quality a national economic slow-down and rising oil prices. We are service to the export industry that is so vital to the national interest. nevertheless looking at some very positive signs, particularly in SUSTAINABILITY the forestry sector which will benefit Northport and Toll Owens in the short term. Our expectation of a medium term recovery in this We continue to recognise our role in the community as a responsible area has been borne out by an encouraging improvement in the last corporate citizen. You will find familiar information, appropriately updated, in the sustainability section of this report. Of particular quarter with consecutive record months through the terminal during note in the economic contribution area is the company’s recent April and May 2006. The Container Terminal throughput for the Tourism Champion Award from Bay of Plenty Tourism, recognising last three months of the financial year was 119,600 TEU, which was our contribution to tourism in the region. While cruise vessels do not 12,000 TEU more than any other quarterly period and 11.4% more contribute individually as well as cargo, the increase from 14 visits than the comparable quarter last year. two years ago to 34 this year is certainly useful and enhances our role Our multi-port strategy and flexibility of service have provided in contributing to the local economy. We are expecting this activity to effective shock-absorbers and will continue to do so as we actively further increase with more than 40 visits planned for next year. pursue new growth opportunities. This year we were also pleased to have encouraged customers and We have a first-class asset and an extremely committed team focussed our own staff to enter sixteen three-person teams into the annual Port on delivering world-class productivity, which will continue to provide of Tauranga Half Ironman. This type of involvement in our flagship significant competitive advantages into the future. sports sponsorship in the Bay of Plenty region is a clear example of the added value that corporate-community engagement provides. The event itself is estimated to contribute in excess of $4 million annually to the regional economy.
SAFETY Mark C airns Financial achievements are hollow if our employees are injured CHIEF EXECUTIVE in the course of our business operations. We operate in a very hazardous environment and it has been gratifying to achieve a reduction in our lost time injury frequency rate of 41% over the last six months of the year. Management have set a target of a further 25% reduction over the next year and want to ensure that we operate within a culture of considering “all accidents as being preventable”.
Excellent progress has also been made in establishing port-wide common user health and safety protocols with the formation of the Port Users’ Health and Safety Forum – an industry first. ANNUAL REPORT 2 0 0 6 11
From left to right:
TERRY JAMES CORPORATE SERVICES MANA G ER
Graeme Marshall COMMERCIAL MANA G E R
TONY REYNISH PROPERTY MANA G ER
COLIN BOOCOCK C H IEF FINANCIAL OFFICER
MARK CAIRNS C H IEF EXECUTIVE 12 ANNUAL REPORT 2006
Co-operating with Ballance – for nearly 50 years
“Although New Zealand ports have always offered us pretty good service, the relationship with Tauranga is the best port-business partnership I’ve experienced – it stands out for its efficiency and effort to co-operate.”
Ballance has three phosphate manufacturing plants – at Mount Maunganui, Invercargill and Whangarei – where raw materials are processed into products tailored for the New Zealand farming environment. More than 400,000 tonnes of product was One of New Zealand’s top imported through the Port of Tauranga last year. 100 companies, Ballance Agri-Nutrients was formed 50 years ago last November – and has been doing “Our association works to the extent that I view the Port company business with the Port of Tauranga for nearly as long. and the people who operate it as business partners. That’s not merely a term, it’s the reality of the relationship. A key theme of The Ballance name goes back to the 1890s, in recognition of the the way in which we operate - particularly over the last 10 years - Prime Minister who drafted legislation enabling the development has been to form business relationships and work closely with our of New Zealand’s agriculture-based economy. Now a farmer-owned partners. We have found that, in almost every situation, a win-win co-operative with 17,500 shareholders, the company has been outcome is achievable. headed by Chief Executive Larry Bilodeau for the past seven years. “Port people understand their role in helping us to manage our “A key part of the original decision to set up as a co-operative in business better”, he says. “Efficiency in bulk business is critically the Bay of Plenty was the access to the Port of Tauranga and the important in keeping costs down, and to provide our customers Sulphur Point facilities,” he says. “Until then, farmers in the region with the service levels they expect, we rely on the Port to help us had experienced poor service and inefficient delivery and we manage our inventory levels. believed this would solve the problems. The long and successful association we have had with the Port since then has repeatedly “Staff are in contact with each other at all levels on an everyday reinforced our view. basis, right through the organisation, and our customers see 13
Co-operating with Ballance – for nearly 50 years
“The relationship with Tauranga is the best port-business partnership I’ve experienced – it stands out for its efficiency and effort to co-operate.”
L arry B ilodeau Chief Executive, Ballance Agri-Nutrients LIMITED
the result in our products being delivered to them efficiently, at a competitive price.
“The Port also works with us outside of day-to-day business, creating opportunities to learn from each other and support each other in areas which affect our business – for example, the traffic issues on local roads. They’ve offered very useful advice and guidance in several areas, unrelated to the business we do together – an indication of the strength of the relationship.” 14 ANNUAL REPORT 2006
Lodestar logistics - the Port provides choice
“The relationship has become the key catalyst of efficiencies, rather than the other way around.”
C h I N T h A k a A beywic k rama Chief Executive, Carter Holt Harvey Lodestar
Lodestar is a Carter Holt Harvey business, formed in 2001 to provide flexible, quality and cost-effective shipping and logistics solutions to both internal and external customers.
In the last year, more than 10% of the trade through the Port of Tauranga was chalked up to the four Lodestar operated vessels moving through the Port twice monthly, with a total volume of 1.3 million tonnes.
“We offer our shipping customers reliable scheduled sailings, wider geographical coverage, flexible load and discharge windows and competitive rates for bulk, break-bulk, parcel and project cargoes,” says Chief Executive Chinthaka Abeywickrama.
“The Port of Tauranga is our key export gateway to markets we serve – it’s an integral part of our logistics chain, given that many of our processing plants are centred around the central North Island and Bay of Plenty regions.
“If you look at the way the Port has developed as a bulk and container handler over the last decade particularly, it’s given us a choice in terms of services we can access. 15
Lodestar logistics - the Port provides choice
The Port has also given us the choice within each bulk, break-bulk and container shipping segment including the supply of infrastructure services.
“The competitive business model and the innovative approach the Port has followed has given us the low cost access to infrastructure (storage, warehousing and shipping services) for our cargo and ships with no or minimal operational constraints.
“The approach the Port has taken and the relationships we have developed have had a wider impact in our logistics chain “That’s the nature of the relationship now and into the and will have a major role to play in the future. future: our vision is their vision. The relationship has become the key catalyst of efficiencies, rather than the “We have worked very closely together with the Port to other way around. design, co-ordinate and manage these services over the last decade. As a result, we have improved efficiency and service “CHH business units also work closely together standards, and developed a very close understanding of each internally, as well as with the Port improving others objectives and visions. The open and honest working the direct and indirect benefit to all parties. The relationship has created opportunities for both parties - we achievement of the Port in bringing additional work together to improve the efficiency and effectiveness of services is an extra benefit, increasing the mobile assets across the logistics chain to achieve the best competitiveness of our shipping options as well as the outcome for all. geographical spread of destinations we can access.” 16 ANNUAL REPORT 2 0 0 6
From Genesis to capacity – via flexibility
As the electricity industry’s largest energy retailer, Genesis Energy The company’s working relationship with the Port centres on the carries a level of responsibility and influence in the importation of coal from Indonesia, for railing to the 1000MW Huntly national economy perhaps unsurpassed by any power station. A 15-year contract for the importation of up to a other single organisation. Reliable, quality million tonnes of coal per year was signed in 2004, and a joint $32.6 energy supply is a key infrastructural million infrastructure project became operational the same year. driver in the industrial sector, and Genesis Energy’s stated goal is The whole project includes conveyor systems, a load-out system to optimise generation and for rail, a covered storage facility at Mount Maunganui, and retail supply to meet enclosed reclaim facility and modifications to hoppers, as well as the demands of the an extensive berth-deepening programme. The targets have not rapidly-growing only been reached but exceeded, with 1.13 million tonnes being energy market. delivered this year, over 38 vessel calls.
“In our very first discussions with the Port, we said we needed half a million tonnes annually to make coal importation work,” says Genesis Energy Chief Executive Murray Jackson. “Reserves of suitable-quality coal in the North Island are rapidly depleting, while the demand for coal has increased. We sourced a reliable supply from Indonesia and needed it delivered cost-efficiently and seamlessly to the site.
“The demand for energy has reached record levels this year, and the Port company has been a vital part in transporting coal at a rate of delivery we simply must achieve.
“The big thing is the Port’s ability to schedule and co-ordinate the actions of multiple parties through the port, and to co-ordinate shipping to avoid the demurrage of ships offshore. 17
From Genesis to capacity – via flexibility
“It all comes down to our relationship: both companies have a ‘can do’ approach, and a willingness to roll up our sleeves together.”
M U R R A Y J A C K SON Chief Executive, GENESIS ENERGY
“They are very sophisticated in their management of ship scheduling, and work constantly to maintain their very rapid turnaround rates. We have been running at capacity, reliably, for 12 months, and the project worked efficiently from an early stage.
“Flexibility is the key word in all of this - it’s been a vital part of our strategy. We’re running 18 wagons, with 100 tonnes each on two trains a day at the moment. If necessary, we are confident we can crank up the tonnage from Indonesia to a third train per day.
“It all comes down to our relationship: both companies have a ‘can do’ approach, and a willingness to roll up our sleeves together to face challenges. We simply don’t contemplate failure – our attitude is to make things work.” 18 ANNUAL REPORT 2006
Fitting in to The ZESPRI System™ - an integrated partnership
“They share our view that customer service is everything, and we experience the way they practice that.”
TI m g oodacre Chief Executive, ZESPRI GROUP LIMITED
Owned by more than 2,500 New Zealand kiwifruit growers, ZESPRI is the world’s single biggest marketer of kiwifruit, providing a family of products to segmented global markets in more than 60 countries. In building and maintaining its market share, the company focuses on “The ZESPRI™ System”, which ensures end- to-end integration of the supply chain from orchard to international customer. The System provides a reliable and seamless supply from origin to world market, with consistent guaranteed product quality and access to industry expertise at each point in the supply chain. 19
Fitting in to The ZESPRI System™ - an integrated partnership
“The company is New Zealand’s top-earning horticultural exporter,” says Chief Executive Tim Goodacre, “and the key to that success is the management of supply. Through efficient management, we can optimise returns to growers and ensure our market share. ZESPRI has 20% plus of the global market – and as much as 80-90% during our selling season. If the market is confident that supply and quality Our extensive shipping programming and scheduling is are both reliable, we retain that position. allowed for by the Port’s flexibility.
“This is a billion-dollar industry, so with the majority of “We’ve found the Port particularly accommodating – our product moving through the Port of Tauranga, it can I certainly have over the four years that I’ve been here, be something of a challenge to guarantee the reliability of both under the previous Chief Executive and Mark Cairns, timing and care. It’s essential to get the fruit out on time. To and the operations staff we deal with. They’re always do that, efficient loading and shipping is essential – as soon accessible and the customer service is excellent – they as we have it packed, we have to get it out.” share our view that customer service is everything, and we experience the way they practice that. In the last year, the company shipped more than 660,000 cubic metres of cargo, in 58 vessel calls, through the Port of “As with all business, issues do arise – but we have Tauranga. never had an instance where we couldn’t sit down and fix a problem. Even more importantly, things get “Once we’ve got the picking and packing right, the emphasis resolved quickly. The Port understands our business, moves to getting it onto the vessel and out of the port the export business as a whole, and how their role as soon as possible. Doing this well has resulted in real affects this vital part of the Bay of Plenty’s prosperity. opportunities for us in the early season gap in the market between the Asian “Their contribution has been not only to this company, and European supply patterns. We but to the region,” he says. can’t afford any hold-ups. 20 ANNUAL REPORT 2 0 0 6
SUSTAINABILITY REPORT 2006
“As a responsible corporate citizen, we appreciate that our long-term sustainability and continued ability to create economic wealth is dependent on the overall environment in which we operate.”
This seal was photographed sunning itself alongside one of the vessel berthing positions.
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%":.07&4 /*()5.07&4 ANNUAL REPORT 2 0 0 6 21
STAFF NUMBERS COMPARISON STAFF TURNOVER 160 As the commercial heart of the Bay of Plenty region, and 10% a major economic player in the New Zealand economy, the Port of Tauranga impacts significantly on the broader 155 social environment. As a responsible corporate citizen, we 5% appreciate that our long-term sustainability and continued 150 ability to create economic wealth is dependent on the overall environment in which we operate. 145 0% 2004 2005 2006 2004 2005 2006 In seeking to limit our environmental footprint, while maximising our positive social and economic effects on the MALE:FEMALE EMPLOYEES AVERAGE LENGTH OF SERVICE AVERAGE LENGTH OF SERVICE community, we have monitored a range of key performance 100% 12.15 12.15 12.10 12.10 indicators over the past five years. This section of the 80% 12.05 12.05 Annual Report covers those indicators. 12.00 12.00 60% 11.95 11.95 11.90 11.90 YEARS YEARS LOST TIME INJURY FREQUENCY RATE 40% 11.85 11.85 11.80 11.80 In order to compare our Lost Time Injuries against industry 20% 11.75 11.75 11.70 11.70 standards more accurately, we have adopted a universal 0% 11.65 11.65 formula for calculating time lost as a result of work-related 2004 2005 2006 2004 2005 2006 2004 2005 2006 MALE FEMALE injuries this year, represented as follows:
No of injuries x 1 million AVERAGE AGE OF EMPLOYEES LOST TIME INJURY FREQUENCY RATE No of work hours exposed 60 25
50 20
ADDING VALUE TO SPORTS SPONSORSHIP 40 15 30 10 20
5 10
This year, the Port enlisted the help of Ironman competitor 0 0 and Cystic Fibrosis (CF) fundraiser Tracey Richardson to 2004 2005 2006 2006 encourage staff and customers to accept the challenge of competing in the Port of Tauranga Half Ironman. The PORT TOURS 70% event, recognised as a highlight on New Zealand’s sporting 60% calendar, had been sponsored by the Port for many years. 50%
As a result of Tracey’s inspiration, 10 companies 40% 30% assembled 15 teams for the event, which attracted more 20% than 800 competitors. 10% Tracey Richardson has lived with CF issues for 13 years, 0% EDUCATION COMMUNITY BUSINESS since two of her children were found to have inherited this 2004 2005 2006 genetic condition. For the past two years, she has worked to raise funds to provide sports equipment for children with CF PERMANENT v CASUAL EMPLOYEES 2006 through major New Zealand sporting events.
In 2004, she completed the Ironman New Zealand competition and her Breath4CF campaign became the first- ever charitable association in the event’s 20-year history, raising $120,000. The Vodafone NZ Foundation selected Tracey as a 2005 winner of its World of Difference Award and this year she was awarded the New Zealand Order of Merit. CASUAL 15% PERMANENT 85% 22 ANNUAL REPORT 2 0 0 6
From left to right: Cystic Fibrosis fundraiser Tracey Richardson, fishing vessel Lady Luck, Port of Tauranga Limited’s Customer Service Centre
The Port of Tauranga Half Ironman contributes $4.5 million to of conveyors, the opportunity for dust-creation is limited by fine, the local economy annually by way of accommodation, food, chemically-treated water sprays. refreshment and general spending in the Bay region. Any dust raised by loaders working within the negative-pressure PORT STAFF TO THE RESCUE store area is controlled by moisture levels on the floor, with air being filtered before being discharged outside by a large cascade The Port of Tauranga’s pilot launch team rescued the four crew water filter. members of the fishing vessel Lady Luck when it was wrecked off Motiti Island in July. Within the rail silos, dust is filtered by fabric Luhr filters. Each of the 30 rail wagons per train is loaded within a 50-metre Port of Tauranga Operations Manager Nigel Drake (acting for long concrete tunnel, to control dust and noise. Water, used for Environment BOP in the absence of a harbourmaster) was in charge washing down and dust-filtering, is collected in settling ponds or of removing any threat to the environment from oil on the vessel. chambers and is either recycled or discharged into the sewerage The diesel tanks were pumped out before the remains of the vessel system as trade waste. were towed back to the port. Very little was able to be salvaged, apart from a winch and the recently reconditioned motor. CUSTOMER SERVICE CENTRE MAKEOVER
KEEPING OUR ENVIRONMENT CLEAN A major refurbishment of the Customer Service Centre (CSC) was undertaken during the year, to ensure a healthy workplace at the The Port of Tauranga coal transit and storage facility is the only 24-hour operating area. fully-enclosed coal store in Australasia. The $30-million complex was purpose-built in 2004, as an environmentally-sound means of Following investigation into best-practice office environments, receiving and storing up to two shipments (70,000 tonnes) of coal, including visits to other call and operation centres, the area was before trans-shipping to Huntly by rail. redesigned to include layout and resources most suited to a 24-hour operation. The only similar facility in Australasia has been decommissioned, while two other coal storage facilities in New Zealand – Lyttelton Among the most up-to-date changes introduced were and a new one currently under construction in New Plymouth – ergonomically-designed chairs and desks and “intelligent daylight” are both exposed to the environment. equivalent lighting, which adjusts automatically to the prevailing natural light. Extraneous noise is minimised by the introduction Dust nuisance from the Tauranga facility is controlled mainly by the of a hush zone (noise insulated area), while the immediate area fact of containment in a closed structure, with the store itself and around the CSC desks are cellphone free. All computer monitors all conveyors being fully-enclosed and dust-proofed. At the end now have flat screens.
3"*-4*-04 $0/7&:03$ $0/7&:03$ $0/7&:03$ 50//&4 $0/7&:03$ "*3$-&"/&3 &953"$503
536$,-0"%*/
8"5&3 53"/4'&3 $0"-4)&% '&--0"%065 53"/4'&3508&3 53"*/-0"%06556//&- 56//&- 4&55-&.&/5 508&3 50//& )011&34 10/% 450$,1*-& ANNUAL REPORT 2 0 0 6 23
RMA CONSENT A ct i v i t y - 2005/2006
DESCRIPTION APPLICATIONS CONSENT UNDER PUBLIC LODGED gRANTED APPLICATION CONSULTATION
Mount Maunganui Wharf area storm water discharge 3 Stormwater outfall structure - Sulphur Point 3 Re-application, capital dredging, south end Sulphur Point 3 Dredging Sulphur Point - effluent treatment and discharge, amend 3 3 TOTALS 1 2 2 0
RESOURCE MANAGEMENT ACT - SCHEDULE OF TERM CONSENTS - 2005/2006
DESCRIPTION YEAR OBTAINED EXPIRES (or lapses) Incinerator water bore extraction – for laying dust 1972 1 October 2026 Emergency sewerage discharge, Mount outfall 1978 1 October 2026 Occupation of the coastal marine area, Section 384a of RMA 1994 30 September 2026 Discharge sludge ex Hewletts Road log storage, stormwater treatment 1995 31 August 2015 No 1 Shed cooling water discharge 1996 30 November 2030 Maintenance dredging of shipping channels 2000 28 February 2020 Maintenance dredging disposal, area D, main ocean dump 2000 28 February 2020 Dredging Stella Passage, southern end of Sulphur Point 2006 31 January 2026 Maintenance dredging disposal, area A, renourishment main Mount beach 2000 28 February 2020 Maintenance dredging disposal, area B & C, replenishment areas 2000 28 February 2020 Dredging disposal site for silt, area G 2000 28 February 2020 Pilot Bay beach renourishment 2000 28 February 2020 Sulphur Point sand extraction – 100,000m3 pa 2000 28 February 2020 Northern wharf extension 170m 2002 4 February 2015 Dredging Sulphur Point – effluent treatment and discharge 2002 4 February 2015 Hewletts Road log storage, stormwater treatment and discharge 2002 31 March 2022 Place and use three culverts 2002 20 November 2035 Discharge stormwater from paved storage area for debarked logs 2002 31 July 2017 Minor reclamation for Harbour Bridge extension road widening 2004 30 June 2038
R esource U se - 2005/2006
RESOURCE UNIT RESOURCES USED COMMENT 2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 (REASON FOR CHANGE) Water m3 130,589 154,775 161,925 189,504 206,136 228,803 Increased container and vehicle washing Electricity kW-hrs 10,542,219 11,473,127 11,759,416 13,170,601 15,704,169 17,094,578 Due to a doubling of reefers and an increase in the dwell time of reefer containers Gas m3 57,849 80,385 7,843 5,226 - - Gas use ceased in the Port Petrol litres 60,766 53,590 47,290 52,524 54,000 54,424 No change Diesel litres 1,090,391 1,229,822 1,259,095 1,631,628 1,858,015 1,932,605 Increased straddle carrier use in proportion to containers
10350'5"63"/("-*.*5&%4)*17*4*54 5"63"/("5&3.*/"-$0/5"*/&353"/41035
3"*- 30"%
$"3(07&44&-%&1"3563&4
:&"3 10350'5"63"/("-*.*5&%"//6"-5&6(3085) -0(30"%3"*-70-6.&
5&6µT
:&"3 30"% 3"*- 24 ANNUAL REPORT 2 0 0 6
CORPORATE GOVERNANCE STATEMENT
This statement gives readers an overview of the main corporate authority limits, financial and dividend policy and the ongoing governance policies, practices and processes adopted or review of performance against strategic objectives. followed by the Board. The corporate governance processes do The Board supports the concept of the separation of the role not materially differ from the NZX Corporate Governance Best of Chairman from that of Chief Executive. The Chairman’s role Practice Code. is to manage the Board effectively, to provide leadership to the ROLE OF THE BOARD Board, and to interface with the Chief Executive.
The Board of Directors of Port of Tauranga Limited (“POTL”) is There are no executive Directors. elected by the shareholders to supervise the management of BOARD OPERATIONS AND MEMBERSHIP the Company and its subsidiary companies and currently has
eight Members. POTL’s constitution sets out policies and procedures on the operation of the Board, including the appointment and removal The Board establishes POTL’s strategic objectives, annual of Directors. The full Board formally met eight times during the budgets and overall policy framework within which financial year ended 30 June 2006 and an additional corporate the business is conducted. The Board oversees the strategy workshop was held prior to the formulation of the management of the Company and endeavours to ensure strategic plan and annual budgets. that the activities undertaken are carried out in the best interest of shareholders, while respecting the rights of other BOARD MEETINGS & COMMITTEES stakeholders. This includes maintaining clear policies in relation to employees, customers and the environment. The Board of Directors has established four Committees of the The Board monitors management performance relative Board for audit, constitution, remuneration and nomination of to present goals and plans, but delegates day-to-day Directors. management to the Chief Executive. The Board operates The Audit Committee comprises Messrs A W Baylis, J M Cronin, under a code of conduct designed to ensure matters can be J S Parker, M J Smith and H M Titter CMG, with Mr H M Titter discussed openly, frankly and confidentially. being the Chairman. The Constitution Committee comprises The Board is entitled to seek independent professional advice Messrs A W Capamagian, J S Parker and M J Smith, with to assist it in meeting its responsibilities. The Company pays Mr M J Smith being the Chairman. The Nomination Committee for this advice upon approval by the Chairman. comprises J S Parker, M J Smith, H M Titter CMG, with Mr J S Parker being the Chairman. The Remuneration Committee The Board has the obligation to protect and enhance the value comprises Messrs A W Capamagian, J S Parker, M J Smith and of the assets of the Company. It achieves this through the Sir Dryden Spring, with Mr J S Parker being the Chairman. approval of appropriate corporate strategies, with particular regard to return expectations, including the approval of The following table outlines the number of Board Meetings transactions relating to capital expenditures above delegated attended by Directors during the course of the 2006 financial year:
BOARD COMMITTEES FULL BOARD AUDIT REMUNERATION NOMINATION CONSTITUTION
A W Baylis (appointed 23 February 2006) 4 1 - - - A W Capamagian 8 2 4 - - J M Cronin 7 3 - - -
H R L Morrison (resigned 31 October 2005) 2 - - - - J S Parker 8 3 4 2 2
D A Pilkington (appointed 29 July 2005) 6 - - - - M J Smith 7 2 4 2 2 Sir Dryden Spring 7 - 4 - - H M Titter CMG 8 3 - 2 2
TOTAL Meetings held 8 3 4 2 2 25
Audit Committee Constitution Committee
The function of the Audit Committee is to assist the Board in The Committee is charged with ensuring that the Company’s carrying out its responsibilities under the Companies Act 1993 constitution is kept current and recommends appropriate and the Financial Reporting Act 1993, regarding management’s amendments to the Board. accounting practices, policies and controls relative to the RISK IDENTIFICATION AND MANAGEMENT Group’s financial position and to review and make appropriate inquiry into the audit of the Group’s financial statements The Group has in place policies and procedures to identify by external auditors. The Audit Committee operates under areas of significant business risk and implement procedures to a charter approved by the Board and reviewed by external effectively manage those risks. auditors each year. Where significant business risks are identified, the Board is Remuneration Committee advised and prompt corrective action is taken to mitigate and monitor the risk. The Remuneration Committee operates under a charter approved by the Board. TREASURY POLICY
The primary objectives of the Remuneration Committee are to Exposure to foreign exchange and interest rate risks are assist the Board of Directors in: managed in accordance with the Group’s Treasury Manual that sets limits of management authority. Derivative instruments 1 the establishment of remuneration policies and practices are used by the Group to manage its business risks; they are for executives of the Company not used for speculative purposes. 2 the setting and reviewing of the remuneration package and terms of employment of the Chief Executive
3 advising the Board of senior executive remuneration packages and terms of employment
4 the establishment and implementation of any incentive plan for senior management
5 the setting of Directors’ remuneration
6 monitoring the Board’s statutory and contractual compliance obligations as employers
Nomination Committee
A Nomination Committee reviews the composition of the Board annually to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the Committee selects a panel of candidates with the appropriate expertise and experience. The most suitable candidate is then recommended for appointment. The Director must stand for re-election at the next general meeting of shareholders. 26 ANNUAL REPORT 2 0 0 6
REPORT OF THE DIRECTORS TO THE SHAREHOLDERS
Your Directors take pleasure in presenting their Annual Report Equity of the Group at year end totalled $431.434 million, including the Financial Statements of the Company and its compared with the 2005 year end total of $427.187 million. subsidiaries for the year ended 30 June 2006. Fixed assets are recorded at $549.286 million compared with The report includes all information required to be disclosed $571.718 million last year. under the Companies Act 1993 and by the New Zealand Exchange Limited. DIVIDENDS
ACTIVITIES An interim dividend on ordinary shares of 7.0 cents per share was paid during the year. During the year the Group continued to provide: Directors have approved a final dividend of 13.0 cents per • wharf facilities ordinary share. The dividend will be paid on Friday 6 October • back up land for the storage and transit of import and 2006 to all shareholders on the Company’s register at the export cargo close of business on Friday 22 September 2006. A solvency certificate has been completed in support of the dividend • berthage resolution. • cranes • tug and pilotage services for exporters, importers and All ordinary dividends are fully imputed. Non-resident shipping companies shareholders will receive an additional amount under the foreign investor tax credit regime in lieu of imputation credits. • leasing of land and buildings • a container terminal DIRECTORS
The Company has a 50% shareholding in Toll Owens Limited, As provided by clauses 9.5.1 and 9.5.2 of the Company’s a national log marshalling, stevedoring, log measurement constitution, Mr Alistair William Capamagian and Sir Dryden and inventory management business which also undertakes Spring retire at the Annual Meeting and being eligible they materials handling and container maintenance. This company offer themselves for re-election to the Board. Mr Arthur William has a presence in eleven New Zealand ports and three log yards. Baylis was appointed by Directors to the Board during the year and must retire at the next Annual Meeting of the Company but In conjunction with Northland Port Corporation (NZ) Limited, a shall be eligible for election at that Meeting. company listed on the New Zealand Exchange Limited, a deep water port at Marsden Point was developed and opened in REMUNERATION OF DIRECTORS October 2002. This joint venture is further explained under note 16 to the Financial Statements and trades as Northport Limited. Directors’ fees received, or due and receivable during the year, are as follows: Northport Limited has formed a 50:50 joint venture company (North Tugz Limited) with Ports of Auckland Limited to undertake towage operations within the Whangarei Harbour, in GROUP PARENT COMPANY particular, providing marine services at Marsden Point. 2006 2005 2006 2005 $ $ $ $ MetroBox Auckland Limited is a 50:50 joint venture company
with Toll Rail Limited for storing, cleaning, washing and J S Parker 80,000 ,667 80,000 ,867 inspecting shipping containers at the Southdown rail terminal A W Baylis 19,500 0 19,500 0 at Auckland – MetroPort. Effective from 7 August 2006, A W Capamagian 40,000 ,700 40,000 ,700 Specialised Container Services Limited (SCS) will run the Southdown rail terminal. This new structure will combine the J M Cronin 40,000 ,100 40,000 ,100 best container yard location in Auckland with SCS’s knowledge F G McKenzie 0 ,333 0 ,533 and experience as New Zealand’s leading container depot and H R L Morrison 6,166 ,500 6,166 ,500
repair operator. D A Pilkington 28,750 0 28,750 0
M J Smith 39,000 ,700 39,000 ,700 RESULTS Sir Dryden Spring 38,000 ,700 38,000 ,700
Net tax paid surplus for the year was $31.032 million (2005: H M Titter 42,000 ,300 42,000 ,300 $33.654 million). 27
REMUNERATION OF EMPLOYEES Company Limited and is a Director and shareholder of TG Mount Maunganui Limited. The number of employees whose total annual remuneration including salary, performance bonuses, an Economic Value H M Titter gave general notice that he is no longer a Director of Added based Executive Incentive Scheme, employer’s Northport Limited. contributions to superannuation and health schemes and other sundry benefits received in their capacity as employees, was D A Pilkington gave general notice that he is a Non-Executive within the specified bands as follows: Director of Ballance Agri-Nutrients Limited, ZESPRI Group Limited and Aragorn Limited (ZESPRI subsidiary).
PARENT SUBSIDIARY PARENT SUBSIDIARY A W Baylis gave general notice that he is Chairman of PGG $000 2006 2006 2005 2005 Wrightson Limited and no longer a Non-Executive Director of AFFCO Holdings Limited. 100 – 109 6 0 8 0
110 – 119 11 0 6 0 Sir Dryden Spring gave general notice that he is Chairman of 120 – 129 2 0 5 0 ANZ National Bank Limited and Director of Northport Limited. 130 – 139 6 0 3 0 140 – 149 2 0 3 0 Share Purchases 150 – 159 0 0 1 0 210 – 219 0 0 1 0 During the period there were no acquisitions of a relevant 230 – 239 0 0 0 interest in equity securities issued by the Company. 240 – 249 1 0 0 0 Directors’ Loans 250 – 259 0 0 1 0 270 – 279 1 0 0 0 There were no loans by the Company to Directors. 280 – 289 0 0 2 0 290 – 299* 1 0 1 0 Directors’ Insurance 340 – 349* 2 0 0 0 The Group has arranged policies of Directors’ Liability 350 – 359* 1 0 0 0 Insurance, which together with a Deed of Indemnity, ensures 420 – 429* 1 0 0 0 that generally Directors will incur no monetary loss as a 940 – 949* 0 0 1 0 result of actions undertaken by them as Directors. Certain actions are specifically excluded, for example the incurring *Includes accumulated accrued incentives relative to the cessation of the five-year Management Incentive Scheme. of penalties and fines, which may be imposed in respect of breaches of the law. AUDITORS For and on behalf of the Board of Directors Under section 19 of the Port Companies Act 1988, the Audit Office is the Auditor of the Company. The Audit Office has appointed, pursuant to section 32 of the Public Audit Act 2001, the firm of PricewaterhouseCoopers to undertake the Audit on its behalf.
The amount paid as audit fees and for other services provided Chairman by the Auditors is set out in the accounts.
ENTRIES RECORDED IN THE INTERESTS REGISTER
The Directors have made the following disclosures with the Company. Director
J S Parker gave general notice that he is no longer a Director of 23 August 2006 Dairy Meats (NZ) Limited.
A W Capamagian gave general notice that he is no longer shareholders’ representative of Port of Tauranga Services 28 ANNUAL REPORT 2 0 0 6
AUDIT REPORT • verifying samples of transactions and account balances;
TO THE READERS OF PORT OF TAURANGA LIMITED AND GROUP’S • performing analyses to identify anomalies in the reported data; FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 • reviewing significant estimates and judgements made by the The Auditor-General is the auditor of Port of Tauranga Limited (the Board of Directors; Company). The Auditor-General has appointed me, E J Harvey, • confirming year-end balances; using the staff and resources of PricewaterhouseCoopers, to carry out the audit of the financial statements of the Company and • determining whether accounting policies are appropriate and Group, on his behalf, for the year ended 30 June 2006. consistently applied; and
• determining whether all financial statement disclosures Unqualified Opinion are adequate.
In our opinion: We did not examine every transaction, nor do we guarantee • The financial statements of the Company and Group on pages complete accuracy of the financial statements. 30 to 52: We evaluated the overall adequacy of the presentation of information - comply with generally accepted accounting practice in in the financial statements. We obtained all the information and New Zealand; and explanations we required to support our opinion above. - give a true and fair view of: Responsibilities of the Board of Directors - the Company and Group’s financial position as at and the Auditor 30 June 2006; and
- the results of operations and cash flows for the The Board of Directors is responsible for preparing financial year ended on that date. statements in accordance with generally accepted accounting practice in New Zealand. Those financial statements must give • Based on our examination, the Company and Group kept a true and fair view of the financial position of the Company and proper accounting records. Group as at 30 June 2006. They must also give a true and fair view The audit was completed on 23 August 2006, and is the date at of the results of operations and cash flows for the year ended on which our opinion is expressed. that date. The Board of Directors’ responsibilities arise from the Port Companies Act 1988 and the Financial Reporting Act 1993. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and the We are responsible for expressing an independent opinion on Auditor, and explain our independence. the financial statements and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 Basis of Opinion and section 19(1) of the Port Companies Act 1988.
We carried out the audit in accordance with the Auditor- Independence General’s Auditing Standards, which incorporate the New Zealand Auditing Standards. When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the We planned and performed the audit to obtain all the information independence requirements of the Institute of Chartered and explanations we considered necessary in order to obtain Accountants of New Zealand. reasonable assurance that the financial statements did not have material misstatements, whether caused by fraud or error. In addition to the audit we have carried out assignments in the areas of taxation, which are compatible with those independence Material misstatements are differences or omissions of amounts requirements. Other than the audit and these assignments, we and disclosures that would affect a reader’s overall understanding have no relationship with or interests in Port of Tauranga Limited of the financial statements. If we had found material or any of its subsidiaries. misstatements that were not corrected, we would have referred to them in our opinion.
The audit involved performing procedures to test the information presented in the financial statements. We assessed the results of those procedures in forming our opinion.
Audit procedures generally include: E J Harvey PricewaterhouseCoopers • determining whether significant financial and management On behalf of the Auditor-General Auckland, New Zealand controls are working and can be relied on to produce complete and accurate data; ANNUAL REPORT 2 0 0 6 29
Financial Statements 2006
CONTENTS
Statements of Financial Performance...... 30
Statements of Movements in Equity...... 30
Statements of Financial Position...... 31
Statements of Cash Flows...... 32
Notes to and forming part of the Financial Statements...... 34 30 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Statements of Financial Performance FOR THE YEAR ENDED 30 JUNE 2006
Notes Group Parent Company
2006 2005 2006 2005 $000 $000 $000 $000
OPERATING REVENUE 3 122,423 145,601 121,878 137,898 OPERATING EXPENSES 4 (77,649) (97,786) (77,911) (79,933) SURPLUS BEFORE TAXATION 44,774 47,815 43,967 57,965 Taxation expense 5 (13,742) (14,161) (13,599) (13,682) SURPLUS AFTER TAXATION 2 31,032 33,654 30,368 44,283
SURPLUS AFTER TAXATION COMPRISES: Surplus from continuing activities 31,032 32,217 30,368 44,283 Surplus from discontinued activities 0 1,437 0 0 $31,032 $33,654 $30,368 $44,283
Statements of Movements in Equity FOR THE YEAR ENDED 30 JUNE 2006
Notes Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
EQUITY AS AT 1 JULY 427,187 420,330 422,563 405,074
Net surplus 31,032 33,654 30,368 44,283 Total recognised revenues and expenses 31,032 33,654 30,368 44,283
Disposal of minority interest 15 0 (8) 0 0 Increase in paid up capital 6 9 5 0 0 Ordinary dividends 7 (26,794) (26,794) (26,794) (26,794) (26,785) (26,797) (26,794) (26,794) EQUITY AS AT 30 JUNE $431,434 $427,187 $426,137 $422,563
These statements are to be read in conjunction with the notes on pages 34 to 52 and the Auditors’ Report on page 28 ANNUAL REPORT 2 0 0 6 31
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Statements of Financial Performance Statements of Financial Position FOR THE YEAR ENDED 30 JUNE 2006 as at 30 JUNE 2006
Notes Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
EQUITY Paid in capital 6 67,497 67,488 67,816 67,816 Reserves 8 349,576 350,375 349,576 350,375 Retained earnings 8 14,361 9,324 8,745 4,372 Total Equity 431,434 427,187 426,137 422,563
NON CURRENT LIABILITIES Term liabilities 9 202,255 207,679 202,000 207,500 Deferred taxation 10 5,986 4,910 5,874 4,798 208,241 212,589 207,874 212,298
CURRENT LIABILITIES Accounts payable and accruals 11 8,221 10,570 8,221 10,570 8,221 10,570 8,221 10,570 $647,896 $650,346 $642,232 $645,431
NON CURRENT ASSETS Property, plant and equipment 12 549,286 571,718 549,286 571,718 Receivables 13 16,788 0 16,788 0 Advances and prepayments 14 4,043 4,703 4,043 4,762 Investments in subsidiaries 15 0 0 0 0 Investments in associates 16 55,787 53,220 49,930 48,170 625,904 629,641 620,047 624,650
CURRENT ASSETS Cash 4,313 1,898 4,309 1,896 Receivables 17 12,492 14,557 12,492 14,557 Advances and prepayments 18 3,882 3,800 3,936 3,878 Taxation 1,262 443 1,405 443 Inventories 19 43 7 43 7 21,992 20,705 22,185 20,781 $647,896 $650,346 $642,232 $645,431
For and on behalf of the Board of Directors who authorised these financial statements for issue on23 August 2006.
Chairman Director
These statements are to be read in conjunction with the notes on pages 34 to 52 and the Auditors’ Report on page 28 32 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Statements of Cash Flows FOR THE YEAR ENDED 30 JUNE 2006
Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
CASH FLOWS FROM OPERATING ACTIVITIES Cash was provided from: Receipts from customers 119,528 148,679 117,395 123,477 Interest received 1,466 27 1,466 5 Dividends received 0 0 1,573 2,068 120,994 148,706 120,434 125,550
Cash was applied to: Payments to suppliers and employees (57,254) (81,905) (55,127) (58,927) Taxes paid (13,489) (13,902) (13,489) (13,295) Interest paid (14,487) (13,970) (14,487) (13,970) (85,230) (109,777) (83,103) (86,192) Net Cash Inflow From Operating Activities 35,764 38,929 37,331 39,358
CASH FLOWS FROM INVESTING ACTIVITIES Cash was provided from: Proceeds from sale of property, plant and equipment 3,130 95 3,130 11 Proceeds from subsidiary for repayment of advances 0 0 89 2,443 Finance lease payments received 3,950 0 3,950 0 Proceeds from sale of business 0 8,660 0 6,000 Receipts from associate companies 2,814 1,414 1,241 943 9,894 10,169 8,410 9,397
Cash was applied to: Cash outflow for property, plant and equipment (7,748) (40,950) (7,748) (40,860) Cash outflow for advances to associate companies (3,001) (1,770) (3,001) (1,770) Cash outflow for interest on property, plant and equipment (285) (509) (285) (509) (11,034) (43,229) (11,034) (43,139) Net Cash Used in Investing Activities (1,140) (33,060) (2,624) (33,742)
These statements are to be read in conjunction with the notes on pages 34 to 52 and the Auditors’ Report on page 28 ANNUAL REPORT 2 0 0 6 33
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Statements of Cash Flows Statements of Cash Flows FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
CASH FLOWS FROM FINANCING ACTIVITIES Cash was provided from: Proceeds from issue of new shares 9 0 0 0 Proceeds from long term debt 0 19,500 0 19,500 9 19,500 0 19,500 Cash was applied to: Dividends paid (26,794) (26,794) (26,794) (26,794) Repayment of long term debt (5,424) (2,358) (5,500) 0 (32,218) (29,152) (32,294) (26,794) Net Cash (Used) in Financing Activities (32,209) (9,652) (32,294) (7,294)
NET INCREASE/(DECREASE) IN CASH HELD 2,415 (3,783) 2,413 (1,678) Add opening cash brought forward 1,898 5,681 1,896 3,574 Ending Cash Carried Forward $4,313 $1,898 $4,309 $1,896
CASH BALANCES IN STATEMENTS OF FINANCIAL POSITION Cash 4,313 1,898 4,309 1,896 Ending Cash Carried Forward $4,313 $1,898 $4,309 $1,896
RECONCILIATION OF SURPLUS AFTER TAXATION TO CASH FLOW FROM OPERATING ACTIVITIES Reported Surplus After Taxation 31,032 33,654 30,368 44,283 31,032 33,654 30,368 44,283
Items classified as investing/financing activities: Finance lease interest (4,493) 0 (4,493) 0 Cash flow impact of reclassification of finance lease 2,007 0 2,007 0 Gain on sale of business 0 (163) 0 (11,340) Net gain on sale of property, plant and equipment (2,181) (540) (2,181) 0 (4,667) (703) (4,667) (11,340)
Add/(less) non cash items and non operating items: Depreciation and amortisation 10,763 12,594 10,763 10,749 Increase in deferred taxation 1,076 19 1,076 (93) Share of surpluses retained by associates (2,380) (1,651) 0 0 9,459 10,962 11,839 10,656
Add/(less) movements in working capital: Decrease/(increase) in receivables 3,224 (1,498) 3,224 (1,008) (Increase)/decrease in prepayments (80) (1,489) (86) (1,489) (Increase)/decrease in inventories (36) 318 (36) 5 (Increase)/decrease in taxation receivable (819) 351 (962) 480 (Decrease) in accounts payable and accruals (2,349) (2,666) (2,349) (2,229) (60) (4,984) (209) (4,241) Net Cash Flow From Operating Activities $35,764 $38,929 $37,331 $39,358
These statements are to be read in conjunction with the notes on pages 34 to 52 and the Auditors’ Report on page 28 34 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
1 STATEMENT OF ACCOUNTING POLICIES Reporting Entity
Port of Tauranga Limited is a public company registered under the Companies Act 1993 and listed with the New Zealand Exchange Limited.
The Financial Statements for the “Parent” are for the Port of Tauranga Limited as a separate legal entity.
The Group consists of Port of Tauranga Limited, its subsidiaries and associates (as disclosed in notes 15 and 16).
Port of Tauranga Limited is an issuer for the purposes of the Financial Reporting Act 1993. The Financial Statements of Port of Tauranga Limited have been prepared in accordance with the Financial Reporting Act 1993.
Measurement Base
The Financial Statements have been prepared on the historical cost basis, as modified by the revaluation of certain assets as identified in specific accounting policies below.
Specific Accounting Policies
The Financial Statements are prepared in accordance with New Zealand generally accepted accounting practice.
The following specific accounting policies which materially affect the measurement of financial performance and the financial position have been applied:
(a) Basis of Consolidation
The Consolidated Financial Statements include the holding company and its subsidiaries which are accounted for using the purchase method. All significant inter-company transactions are eliminated on consolidation. There are no in-substance subsidiaries.
(b) Associate Companies
These are companies in which the Port of Tauranga Limited Group holds a significant but not controlling shareholding, and in whose commercial and financial policy decisions it participates.
The Financial Statements of associate companies have been reflected in the Consolidated Financial Statements on an equity accounting basis which shows the Group’s share of tax paid surpluses/(losses) in the Consolidated Statements of Financial Performance and its share of post acquisition increases or decreases in net assets in the Consolidated Statements of Financial Position.
(c) Joint Ventures
When a member of the Group participates in a joint venture arrangement, that member recognises its proportionate interest in the revenues and expenses of the joint venture. Interests in joint ventures are otherwise accounted for in the same manner as interests in associates.
(d) Property, Plant and Equipment
The Group has five classes of property, plant and equipment:
Freehold land Freehold buildings Wharves and hardstanding Harbour improvements Plant and equipment ANNUAL REPORT 2 0 0 6 35
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
1 STATEMENT OF ACCOUNTING POLICIES (continued) The cost of purchased property, plant and equipment is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended service.
The cost of assets constructed by the Group includes the cost of all materials used in construction, associated borrowing costs, direct labour on the project and an appropriate proportion of variable and fixed overheads. Costs cease to be capitalised as soon as the asset is ready for productive use.
Revaluations
Land, buildings, harbour improvements, wharves and hardstanding are revalued at Market Value for Existing Use for non specialised operational assets and Optimised Depreciated Replacement Cost (ODRC) for specialised assets.
The revaluations are conducted by independent registered valuers on a systematic basis across the Group so that each asset is included at a valuation undertaken within five years.
(e) Depreciation
Depreciation is provided on a straight line basis on all property, plant and equipment other than freehold land and some harbour improvements, at rates calculated to allocate the assets’ cost or valuation less estimated residual value, over their estimated useful lives.
Major useful lives are:
Freehold – buildings 33 to 100 years Wharves 10 to 60 years Wharf rocks 150 to 200 years Wharf piles 60 to 130 years Basecourse 50 years Asphalt 15 years Gantry cranes 10 to 33 years Floating plant 10 to 25 years Plant and equipment 5 to 25 years Electronic equipment 3 to 5 years
(f) Receivables
Receivables are stated at their estimated realisable value after providing against debts where collection is doubtful.
(g) Income Tax
The income tax expense charged to the Statements of Financial Performance includes both the current year’s provision and the income tax effects of timing differences calculated using the liability method.
Tax effect accounting is applied on a comprehensive basis to all timing differences. A debit balance in the deferred tax account, arising from timing differences or income tax benefits from income tax losses, is only recognised if there is virtual certainty of realisation. 36 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
1 STATEMENT OF ACCOUNTING POLICIES (continued) (h) Advances and Investments
Advances and investments are stated at the lower of cost or net realisable value.
(i) Inventories
Inventories are stated at the lower of cost, determined on a first-in first-out basis and net realisable value.
(j) Employee Entitlements
Employee entitlements to salaries and wages, long service leave and other benefits, are recognised when they accrue to employees.
The liability for employee entitlements is carried at the estimated future cash outflows.
(k) Sale of Sand
Income from the sale of sand is recognised in the Statement of Financial Performance.
(l) Financial Instruments
The Group is party to financial instruments with off balance sheet risk to meet financing needs. These financial instruments include bank overdraft facilities, forward foreign currency agreements, foreign currency options and interest rate swap agreements.
The Group enters into interest rate swap agreements to reduce the impact of changes in interest rates on its commercial paper borrowings. Any difference to be paid is accrued as interest rates change and is recognised as a component of interest expense over the life of the agreement.
(m) Dredging
Capital dredging is not depreciated on the basis that maintenance dredging is performed whereby channels are returned to their original state. Maintenance dredging is held as part of harbour improvements and is amortised over five years.
(n) Statements of Cash Flows
The following are the definitions of the terms used in the Statements of Cash Flows:
(i) Cash is considered to be cash on hand and current accounts in banks, net of bank overdrafts.
(ii) Investing activities are those activities relating to the construction, acquisition, holding, disposal and proceeds from property, plant and equipment, finance lease receivables and of investments. Investments can include securities not falling within the definition of cash.
(iii) Financing activities are those activities which result in changes in the size and composition of the capital structure of the Group. This includes both equity and debt not falling within the definition of cash. Dividends paid in relation to the capital structure are included in financing activities.
(iv) Operating activities include all transactions and other events that are not investing or financing activities.
(o) Treasury Stock
Treasury stock held by the Group is shown as a reduction in equity. For treasury stock, subsequently issued, any excess or deficit between the purchase price and issue price is adjusted to paid-in capital.
(p) Dividends
Provision is made for dividends once they have been approved by the Board of Directors. ANNUAL REPORT 2 0 0 6 37
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
1 STATEMENT OF ACCOUNTING POLICIES (continued) (q) Revenue
Revenue is recognised when the related service is performed. If at year end, the service is in progress then the portion performed is recognised in the current year.
(r) Goodwill on Acquisition
Goodwill attributable to the acquisition of a subsidiary represents the excess of the purchase consideration over the fair value of the net assets acquired. Goodwill is amortised to the Statements of Financial Performance on a straight line basis over the shorter of its useful life or 20 years.
(s) Foreign Currencies
Transactions in foreign currencies are converted at the New Zealand rate of exchange ruling at the date of the transaction.
At balance date, foreign monetary assets and liabilities are translated at the closing rate and exchange variations arising from these translations are included in the Statements of Financial Performance.
(t) Goods and Services Tax (GST)
The Statements of Financial Performance, the Statements of Financial Position and Statements of Cash Flows have been prepared so that all components are stated exclusive of GST. All items in the Statement of Financial Position are stated exclusive of GST, with the exception of receivables and payables which include GST invoiced.
(u) Impairment
Annually, the Directors assess the carrying value of each asset. Where the estimated recoverable amount of the asset is less than its carrying amount, the asset is written down. The impairment loss is recognised in the Statement of Financial Performance.
(v) Leases
As lessee: the Group lease certain plant and equipment, land and buildings.
As lessor: equipment is leased out under short term operating leases and is included as property, plant and equipment in the Statement of Financial Position and is depreciated over its useful life. Rental income is brought to account on a straight line basis over the lease term.
Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased items, are included in the determination of the net surplus in equal instalments over the lease term.
Amounts receivable under finance leases are included within receivables and represent the total amount outstanding under the lease agreements less unearned income. Finance lease income is allocated to accounting periods to give a constant periodic rate of return on the net investment and is included in revenue.
Changes in Accounting Policies
Genesis Equipment Lease
The method of accounting for the Genesis equipment lease has been changed this year, from the basis of an operating lease to that of a finance lease.
The change was made as it was decided by management that the treatment of the lease under a finance lease better reflected the substance of the lease. In particular, the option is available to Genesis to extend the original lease term for a nominal fee up to 30 years, which is believed to be the life of the equipment.
The change in accounting policy has resulted in the Genesis equipment assets being reclassified from property, plant and equipment, and replaced by a finance lease debtor. The net effect on the balance sheet is not material. Recognition of lease income is now being made over 10 years to reflect actual lease payments, rather than15 years when the lease was classified as an operating lease. The effect on the surplus before tax in the current year is 871,000$ .
There have been no other changes in accounting policies. 38 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
2 SURPLUS AFTER TAXATION In 2005, the Parent surplus after tax included $2.479 million from the dissolution of Port of Tauranga Services Company Limited and $10.479 million from the disposal of The Owens Cargo Company Limited. Both these amounts were eliminated on consolidation. The $10.479 million was made up of $13.496 million of dividends received which was offset by a loss on disposal of the investment in The Owens Cargo Company Limited of $3.017 million.
3 OPERATING REVENUE Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Dividend income from associates 0 2 1,573 451 Dividend income from subsidiaries 0 0 0 13,496 Interest income on capital notes 1,412 776 1,412 776 Interest on finance lease 4,493 0 4,493 0 Interest income – other 54 5 54 5 Gain on sale of property, plant and equipment 2,181 493 2,181 456 Gain on sale of business 0 163 0 0 Gain on dissolution of subsidiary 0 0 0 2,479 Share of tax paid surpluses of associates (refer to note 16) 2,380 2,194 0 0 Coal berth contribution 0 4,000 0 4,000 Trading revenue 111,903 137,968 112,165 116,235 Total operating revenue $122,423 $145,601 $121,878 $137,898
4 OPERATING EXPENSES Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Operating expenses include: Bad debts written off 2 105 2 105 Depreciation of property, plant and equipment: Buildings 780 1,422 780 1,400 Wharves and hardstanding 4,148 3,816 4,148 3,816 Harbour improvements 63 64 63 64 Plant and equipment 4,384 5,639 4,384 4,047 Total depreciation 9,375 10,941 9,375 9,327
Goodwill amortisation 0 220 0 0 Maintenance dredging amortisation 730 684 730 684 Rail services amortisation 658 658 658 658 Directors’ fees 333 328 333 318 Interest – fixed loans 14,371 13,568 14,371 13,568 Loss on sale of assets 0 64 0 0 Operating lease payments 686 1,589 686 637 Loss on disposal of investment 0 0 0 3,017
Auditor fees: Audit fees paid to principal auditor 77 75 77 75 Fees paid for other services provided by the principal auditor: Taxation advice 20 105 20 105 Other assurance services 5 10 5 10 ANNUAL REPORT 2 0 0 6 39
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
5 TAXATION Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Surplus for the period 44,774 47,815 43,967 57,965 Income tax on the surplus for the period at 33.0c 14,775 15,779 14,509 19,128
Plus/(less) taxation effect of permanent differences: (Gain) on sale of property, plant and equipment (720) (317) (720) (150) Share of associates after tax income (642) (47) 0 0 Non deductible expenditure 7 28 7 26 Non assessable income 0 (1,622) (519) (5,596) Notional interest on employee share scheme (4) (3) (4) (3) Revaluation depreciation 326 343 326 277 $13,742 $14,161 $13,599 $13,682 The income tax expense is represented by: Tax payable in respect of the current period 12,666 14,846 12,523 13,731 Prior year income tax adjustment 0 44 0 44 Deferred taxation (refer note 10) 1,076 (729) 1,076 (93) $13,742 $14,161 $13,599 $13,682
There are no income tax losses or unrecognised timing differences carried forward. Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Imputation Credit Account
Balance as at 1 July 14,881 14,227 14,881 8,896 Income tax payments during the year 13,319 13,634 13,319 13,027 Imputation credits attaching to dividends received in the year 775 5,999 775 5,999 Imputation credits attaching to dividends paid in the year (13,026) (18,979) (13,026) (13,041) Balance as at 30 June $15,949 $14,881 $15,949 $14,881
6 CAPITAL Group Parent Company 2006 2005 2006 2005
Ordinary Shares Issued
Balance as at 1 July 133,887,276 133,886,076 133,967,938 133,967,938 Shares issued during year 2,400 1,200 0 0 Balance as at 30 June 133,889,676 133,887,276 133,967,938 133,967,938
All shares rank equally with one vote attached to each fully paid ordinary share. Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Paid in Capital
Balance as at 1 July 67,488 67,483 67,816 67,816 Shares issued during year 9 5 0 0 Balance as at 30 June $67,497 $67,488 $67,816 $67,816
During the year 2,400 shares (2005: 1,200 shares) at $3.90 (2005: $3.90) were issued to staff from the Port of Tauranga Trustee Company Limited. 40 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
7 DIVIDENDS PAID Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Final 2005 dividend paid 13.0c per share (2004: 13.0cps) 17,416 17,416 17,416 17,416 Interim 2006 dividend paid 7.0c per share (2005: 7.0cps) 9,378 9,378 9,378 9,378 $26,794 $26,794 $26,794 $26,794
A final dividend of13 cents per share ($17,415,832) has been approved subsequent to balance date. The final dividend was not approved until after year end, therefore it has not been accrued in the current year Financial Statements.
The dividends are fully imputed. Supplementary dividends of $171,067 (2005: $155,413) were paid to shareholders not tax resident in New Zealand for which the Group received a foreign tax credit entitlement.
8 RESERVES Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Asset Revaluation Reserve
Balance as at 1 July 350,375 350,865 350,375 350,925 Transfer to retained earnings on disposal of assets (799) (490) (799) (550) Balance as at 30 June $349,576 $350,375 $349,576 $350,375
Retained Earnings
Balance as at 1 July 9,324 1,974 4,372 (13,667) Net surplus for the year attributable to shareholders of the Parent Company 31,032 33,654 30,368 44,283 Transfer from revaluation reserve on disposal of assets 799 490 799 550 Dividends paid (refer note 7) (26,794) (26,794) (26,794) (26,794) Balance as at 30 June 14,361 9,324 8,745 4,372 Total reserves $363,937 $359,699 $358,321 $354,747
9 TERM LIABILITIES Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Commercial paper 202,000 207,500 202,000 207,500 Advances 255 179 0 0 $202,255 $207,679 $202,000 $207,500
Repayable one to two years 202,255 179 202,000 0 Repayable two to five years 0 207,500 0 207,500 $202,255 $207,679 $202,000 $207,500 Weighted average interest rate 6.86% 6.80% 6.86% 6.80%
Advances are contributions by employees to the Employee Share Ownership Plan (ESOP). Refer to note 24.
Standby Revolving Cash Advance Facility Agreement The Company has a financing arrangement with ANZ Banking Group (New Zealand) Limited, Bank of New Zealand Limited and the ASB Bank Limited. The Facility, which is unsecured, matures on 31 December 2007 and provides for both direct borrowings and support for issuance of Commercial Paper. ANNUAL REPORT 2 0 0 6 41
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
10 DEFERRED TAXATION Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Balance as at 1 July 4,910 5,639 4,798 4,891 Current year movement (refer note 5) 1,076 (729) 1,076 (93) Balance as at 30 June $5,986 $4,910 $5,874 $4,798
11 ACCOUNTS PAYABLE AND ACCRUALS Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Accounts payable 2,229 5,794 2,229 5,794 Accruals 2,819 1,120 2,819 1,120 Employee entitlements 2,611 2,983 2,611 2,983 Payables due to associates and related parties 562 673 562 673 $8,221 $10,570 $8,221 $10,570
12 PROPERTY, PLANT AND EQUIPMENT Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Freehold land: At cost 0 0 0 0 At valuation 238,875 239,749 238,875 239,749 $238,875 $239,749 $238,875 $239,749 Freehold buildings: At cost 7,800 27,516 7,800 27,516 At valuation 46,551 46,631 46,551 46,631 Accumulated depreciation (2,180) (1,400) (2,180) (1,400) $52,171 $72,747 $52,171 $72,747 Wharves and hardstanding: At cost 6,415 3,072 6,415 3,072 At valuation 119,028 119,028 119,028 119,028 Accumulated depreciation (7,964) (3,816) (7,964) (3,816) $117,479 $118,284 $117,479 $118,284 Harbour improvements: At cost 1,825 2,552 1,825 2,552 At valuation 78,124 78,124 78,124 78,124 Accumulated depreciation (253) (190) (253) (190) $79,696 $80,486 $79,696 $80,486 Plant and equipment: At cost 83,087 80,469 83,087 80,469 At valuation 0 0 0 0 Accumulated depreciation (32,534) (28,150) (32,534) (28,150) $50,553 $52,319 $50,553 $52,319
Capital work in progress at cost: $10,512 $8,133 $10,512 $8,133
Total cost or valuation 592,217 605,274 592,217 605,274 Total accumulated depreciation (42,931) (33,556) (42,931) (33,556) Total property, plant and equipment $549,286 $571,718 $549,286 $571,718
In the current year interest costs of $285,000 (2005: $509,000) have been capitalised in the cost of work in progress. 42 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
12 PROPERTY, PLANT AND EQUIPMENT (continued) Valuation Information
All land, buildings, harbour improvements, wharves and hardstanding were revalued at Market Value – Existing Use for non specialised assets and Depreciated Replacement Cost (DRC) for specialised assets. The valuation was carried out as at 30 June 2004. The valuation of land and buildings was carried out by registered valuer, Mr L T Green of Almao & Green Limited, and the wharves, hardstanding and harbour improvements were valued by our engineers and reviewed by Opus International Consultants, in accordance with guidelines prepared by the Ernst & Young Real Estate Group. The revaluation increased the value of the property, plant and equipment by $189.2 million for the Group ($189.2 million Parent) in 2004. It is intended that future revaluations will be carried out at five yearly intervals.
Refer also to note 8.
Restriction on Title
An area of 8,000 square metres of land located between the Sulphur Point wharves and the parliamentary approved reclamation does not have title.
Action to acquire a long term lease will be taken in the future.
Operating Leases
Included in the Group Financial Statements are land, buildings, plant and equipment leased to customers under operating leases. Group AND Parent 2006 2006 2005 2005 cost/ accumulated cost/ accumulated valuation depreciation valuation depreciation $000 $000 $000 $000 Land 59,751 0 58,700 0 Buildings 35,782 1,344 58,800 1,000 Plant and equipment 0 0 450 22 $95,533 $1,344 $117,950 $1,022
13 RECEIVABLES (NON-CURRENT) Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Finance lease – gross receivable 29,610 0 29,610 0 Unearned finance income (12,822) 0 (12,822) 0 $16,788 $0 $16,788 $0 Gross Receivables From Finance Lease Current Portion Not later than one year (refer note 17) 3,953 0 3,953 0
Non-current Portion Later than one year and not later than five years 15,815 0 15,815 0 Later than five years 13,795 0 13,795 0 Total non-current portion 29,610 0 29,610 0 Total gross receivables from finance lease $33,563 $0 $33,563 $0
Unearned Finance Income Current Portion Not later than one year (refer note 17) (2,794) 0 (2,794) 0
Non-current Portion Later than one year and not later than five years (9,070) 0 (9,070) 0 Later than five years (3,752) 0 (3,752) 0 Total non-current portion (12,822) 0 (12,822) 0 Total unearned finance income $(15,616) $0 $(15,616) $0 ANNUAL REPORT 2 0 0 6 43
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
14 ADVANCES AND PREPAYMENTS (NON-CURRENT) Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Advances to subsidiaries 0 0 0 59 Prepayments 4,043 4,703 4,043 4,703 $4,043 $4,703 $4,043 $4,762 Rail Services Agreement
Port of Tauranga Limited made a $7,500,000 prepayment to Toll NZ Limited (previously Tranz Rail NZ Limited) for expanded services and obligations over a five year period relating to a seven day a week rail link to MetroPort Auckland in2001 . During 2003 a further payment was made to renew the contract for a further 10 years.
15 INVESTMENTS IN SUBSIDIARIES Investment in Subsidiaries Comprise interest held by group
2006 2005 balance name of entity % % date
Port of Tauranga Trustee Company Limited 100.0 100.00 30 June Marsden Port Services Limited 100.0 100.00 30 June
The principal activity of Port of Tauranga Trustee Company Limited is to hold shares in trust for employees. The Company has no trading activities and the issued and paid up capital is $2.
Marsden Port Services Limited holds a 33% share in Northport Services Limited which operates the on-wharf activities at Northport. The Company has issued and paid up capital of $2.
All subsidiaries are incorporated in New Zealand.
Disposal of Subsidiaries in the 2005 Financial Year
(i) Port of Tauranga Services Company Limited The Port of Tauranga Services Company Limited was dissolved during the 2005 financial year. This company held property which was sold on 30 June 2004. As the company held no other properties, it was decided to dissolve the company. This resulted in a $2.479 million gain to the Parent Company which was eliminated on consolidation.
(ii) The Owens Cargo Company Limited On 14 December 2004 the Port sold its 100% shareholding in The Owens Cargo Company Limited and formed a new joint venture company, Toll Owens Limited, which is owned 50% by Port of Tauranga Limited and 50% by Toll Ports NZ Limited.
The affect on the Group’s Statement of Financial Position from the sale of The Owens Cargo Company Limited was as follows: 44 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
15 INVESTMENTS IN SUBSIDIARIES (continued) Group 2005 $000
Fixed assets 19,517 Intangible assets 9,002 Investments 2,329 Bank 523 Taxation 526 Receivables 4,636 Advances 109 Inventory 2,057 Deferred tax (748) Accounts payable and accruals (4,441) Minority interest (8) Net assets 33,502 Gain on sale 163 Consideration $33,665
The consideration received was made up as follows:
Capital notes in Toll Owens Limited 16,599 Ordinary shares in Toll Owens Limited 11,066 Cash 6,000 $33,665
Capital notes and shares in Toll Owens Limited are now shown as an investment in associate, refer to note 16.
Prior to the disposal of The Owens Cargo Company Limited, the investment in the Parent was increased by $11.878 million. On disposal, a loss to the Parent of $3.017 million was realised.
(iii) Forestry Services Tapanui Limited The sale of Forestry Services Tapanui Limited was included as part of the sale of The Owens Cargo Company Limited. ANNUAL REPORT 2 0 0 6 45
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
16 INVESTMENTS IN ASSOCIATES Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Investments in Associates Comprise Capital notes 0 0 16,599 16,599 Ordinary shares at cost 0 0 28,936 28,936 Advances 0 0 4,395 2,635 0 0 49,930 48,170 Balance at 1 July 53,220 25,141 0 0 Share of after tax surplus (refer note 3) 2,380 2,194 0 0 Acquisition of shares 0 11,136 0 0 Acquisition of capital notes 0 16,599 0 0 Net advances to associates 1,760 930 0 0 Disposals 0 (2,329) 0 0 Distributions from associates (1,573) (451) 0 0 55,787 53,220 0 0 Balance as at 30 June $55,787 $53,220 $49,930 $48,170
Included within the carrying value is: Group 2006 2005 $000 $000
Goodwill 14,475 14,475 Accumulated amortisation (1,339) (390) $13,136 $14,085 Capital Notes
Toll Owens Limited have issued 16,599,000 $1.00 capital notes. The notes are unsecured and carry no voting rights. Interest is receivable at the rate of 8.51%. The notes can be converted into ordinary shares of the Company in December 2007 (unless earlier redemption by both parties, or rolled for another three years). All or part of the notes can be converted, however they must be equal amounts converted for each party unless a lesser amount is agreed to by the lesser party.
Group 2006 2005 $000 $000
Share of surplus less deficit of associate companies before tax 2,905 3,291 Taxation (525) (1,097) Share of surplus less deficit of associate companies after tax $2,380 $2,194
INTEREST HELD BY Group 2006 2005 balance name of entity principal activity % % date
Northport Limited Port 50.00 50.00 30 June North Tugz Limited Towage services – Northport 25.00 25.00 30 June Northport Services Limited Port operating – Northport 33.00 33.00 30 June MetroBox Auckland Limited Storing, cleaning and inspecting containers 50.00 50.00 30 June Toll Owens Limited Marshalling and stevedoring 50.00 50.00 30 June
All associate entities are incorporated in New Zealand. 46 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
16 INVESTMENTS IN ASSOCIATES (continued) Northport Limited
On 28 July 2000 Directors of Port of Tauranga Limited signed a 50:50 joint venture agreement with Northland Port Corporation (NZ) Limited (NPC). The parties have built a deep water port at Marsden Point which loaded its first ship in June 2002 and trades as Northport Limited.
Northport Limited also holds a 50% share of North Tugz Limited with Ports of Auckland Limited holding the remaining 50%. North Tugz Limited has been established to undertake the marine services within the Whangarei Harbour including Marsden Point.
Northport Services Limited is responsible for the operations at Northport and is equally owned by Marsden Port Services Limited, NPC and Carter Holt Harvey.
MetroBox Auckland Limited
On 29 September 2003 Port of Tauranga Limited acquired 50% of MetroBox Auckland Limited (MetroBox), the remaining 50% share of the company is held by Toll NZ Consolidated Limited.
MetroBox fits in with the Groups strategic objective of developing a “freight village” in South Auckland with MetroPort, giving customers the ability to select from a range of container handling services.
The Board of MetroBox consists of four Directors, two from Toll NZ Limited and two from Port of Tauranga Limited. The two Port of Tauranga Directors are Tony Reynish and Graeme Marshall.
Toll Owens Limited
On 14 December 2004 Port of Tauranga Limited acquired 50% of Toll Owens Limited. The remaining 50% is owned by Toll Limited.
The consideration for the acquisition of our interest was made up as follows:
$000
Capital notes 16,599 Shares in Toll Owens Limited 11,066 $27,665
Toll Owens Limited operates marshalling and stevedoring operations in most New Zealand ports.
The Board of Toll Owens Limited consists of four Directors, two from Toll NZ Limited and two from Port of Tauranga Limited. The two Port of Tauranga Directors are John Parker and Mark Cairns. ANNUAL REPORT 2 0 0 6 47
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
17 RECEIVABLES (CURRENT) Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Trade receivables 11,243 14,351 11,243 14,298 Finance lease receivable 1,159 0 1,159 0 Receivables from associate and related parties 190 306 190 359 Provision for doubtful debts (100) (100) (100) (100) $12,492 $14,557 $12,492 $14,557
Finance Lease Receivable (refer note 13) Finance lease – gross receivable 3,953 0 3,953 0 Unearned finance income (2,794) 0 (2,794) 0 $1,159 $0 $1,159 $0
18 ADVANCES AND PREPAYMENTS (CURRENT) Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Employees in share ownership plan (refer note 24) 0 0 54 82 Prepayments and sundry receivables 3,224 3,142 3,224 3,138 Rail services agreement (refer note 14) 658 658 658 658 $3,882 $3,800 $3,936 $3,878
19 INVENTORIES Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Inventory of parts and consumables 43 7 43 7 $43 $7 $43 $7
20 OPERATING LEASE OBLIGATIONS Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Obligations payable after balance date on non cancellable operating leases are as follows: Within one year 301 397 301 397 One year to two years 236 252 236 252 Two years to five years 345 575 345 575 $882 $1,224 $882 $1,224 48 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
21 RELATED PARTY TRANSACTIONS During the year the Parent Company has had the following transactions with related parties:
The Owens Cargo Company Limited - Income $0 (2005: $1,633,236) Vessel charges, rentals. - Expenses $0 (2005: $3,623,056) IT services, advances, plant repairs, labour supplied. Toll Owens Limited - Income $2,878,442 (2005: $1,139,491) Vessel charges, rentals. - Expenses $5,808,678 (2005: $3,599,827) IT services, advances, plant repairs, labour supplied. Northport Limited - Income $41,365 (2005: $8,752) Reimbursements.
Northport Services Limited - Income $121,497 (2005: $340,468) IT services, reimbursements.
The Group has paid legal fees of $84,203 (2005: $175,000) to Holland Beckett during the year, of which Mr M J Smith is a consultant. These services were undertaken on normal commercial terms.
During the year, the Group entered into transactions with companies in which Group Directors hold directorships. These transactions have occurred on normal commercial terms.
No related party debts have been written off or forgiven during the period.
No interest is charged on advances to associates.
Advances to associates at the year end are as follows: Parent Company 2006 2005 $000 $000
Toll Owens Limited 0 700 MetroBox Auckland Limited 1,285 1,285 Northport Limited 3,000 0 Northport Services Limited 110 650 $4,395 $2,635 Controlling Entity
Quayside Securities Limited owns 55.00% of the ordinary shares in Port of Tauranga Limited.
Quayside Securities Limited is beneficially owned by Bay of Plenty Regional Council.
22 COMMITMENTS Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Capital Commitments
Estimated capital commitments for the Group contracted for at balance date but not provided for $692 $1,321 $692 $1,321 ANNUAL REPORT 2 0 0 6 49
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
23 CONTINGENT LIABILITIES Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
$8,222 $8,000 $8,222 $8,000
Port of Tauranga Limited has given an $8 million guarantee over Northport Limited’s indebtness and obligations to the Bank of New Zealand.
24 EMPLOYEE SHARE OWNERSHIP PLAN
The Company has an Employee Share Ownership Plan (ESOP), in terms of section DC12 of the Income Tax Act 2004, and as at balance date the ESOP held ordinary shares in the Company (0.06% of Company’s share capital) (2005: 0.06% of Company’s share capital).
To finance the plan the ESOP borrows from the Company interest free, repayable over three years. The ESOP has no external funding. The ESOP has a non beneficial interest in all shares allocated to employees, and a beneficial interest in shares which have not been allocated.
Neither the Company nor its related parties have rights to acquire shares held by the plan.
Employees are able to subscribe for shares up to a value of $2,340 once every three years.
The value of shares issued is set at 90% of the average market price of the share on the day of issue.
At balance date the Company held 78,262 shares (2005: 80,662), of these 69,600 (2005: 69,600) were allocated to employees and have been paid up to $262,252 (2005: $181,961), and $54,160 (2005: $143,653) remains to be paid. This is to be repaid over a three year term. No shares are subject to options.
The Trustees of the ESOP are appointed by the Directors of the Company.
The shares held by the ESOP carry the same voting rights as other issued ordinary shares. Voting rights attaching to the shares held by Trustees are to be exercised by the Trustees in the case of a vote on a poll, on any particular resolution, as the Trustees in their discretion think fit.
25 FINANCIAL INSTRUMENTS Credit Risk
Financial instruments which potentially subject the Group to credit risk, principally consist of bank balances, receivables, and interest rate swap agreements.
The Group generally does not require collateral. The Group continuously monitors the credit quality of the financial institutions that are counter parties to its off balance sheet financial instruments and does not anticipate non performance by the counter parties.
Maximum exposures to credit risk as at balance date are: Group Parent Company 2006 2005 2006 2005 $000 $000 $000 $000
Receivables $29,280 $14,557 $29,280 $14,557
The above maximum exposures are net of any provision for losses and unearned finance interest on these financial instruments. Maximum exposure on interest rate swap agreements is limited to any net balance receivable which reflects the difference between the interest payable by the two parties to the agreement.
The only significant concentration of credit risk relates to the finance lease receivables for the Genesis equipment lease at $17,947,000 (2005: $0). Management are satisfied with the credit quality of this debtor and does not anticipate any non performance. 50 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
25 FINANCIAL INSTRUMENTS (continued) Interest Rate Risk
As at 30 June 2006, the Group had interest rate agreements outstanding with the ANZ National Bank Limited, Commonwealth Bank of Australia and the Bank of New Zealand Limited. The total notional principal amount was $175 million (2005: $148 million). These agreements effectively change the Group’s interest rate exposure on the floating rate to a series of fixed rates ranging from6.095% to 7.31% per annum (2005: 6.095% to 7.31%).
Group Policy
The Group from time to time utilises forward rate agreements and interest rate swaps to manage interest rate exposures for future periods. The Group’s treasury policy stipulates that a minimum of 45% of the Group’s borrowings must be fixed at any given time. The balance of the borrowings are taken out on a floating rate basis utilising the Standby Revolving Cash Advance Facility.
Fixed Rate Agreements amount calendar year average maturity rate $20.0 million 2007 6.28% $30.0 million 2008 6.29% $55.0 million 2009 6.57% $20.0 million 2011 6.59%
Interest Rate Option amount maturity cap floor $15.0 million 14.09.06 7.31% 6.50%
Forward Start Swaps amount commencing maturity rate $5.0 million 12.09.07 12.09.10 6.27% $10.0 million 10.10.07 11.10.10 6.56% $15.0 million 31.03.08 31.03.11 6.47% $5.0 million 14.09.06 14.09.11 6.55%
The interest rate on the bank overdraft is currently set at 9.00%.
Cash at bank, receivables, advances and investments are not considered by the Company to be interest rate sensitive.
Currency Risk
As at 30 June 2006, the Group had options to purchase US$2.1 million foreign currency (2005: US$0). These foreign currency options are used to hedge the Group’s foreign currency risk on certain operating expenditures. ANNUAL REPORT 2 0 0 6 51
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006 FOR THE YEAR ENDED 30 JUNE 2006
25 FINANCIAL INSTRUMENTS (continued) Foreign Currency Options amount calendar year average expiry date strike price US$700,000 2006 0.6863 US$1,400,000 2007 0.6547
Fair Values
The estimated fair values of the Group’s financial assets and liabilities are noted below:
Group Parent Company 2006 2006 2005 2005 carrying fair carrying fair value value value value $000 $000 $000 $000
Assets Investments 55,787 55,787 53,220 53,220 Foreign currency options 94 361 0 0 Interest rate swaps 159 1,586 44 (677)
Liabilities Term liabilities 202,255 202,255 207,679 207,679
The following methods and assumptions were used to estimate the fair value of each classes of financial instrument.
Cash, Accounts Receivable, Accounts Payable, Short Term Debt The carrying amount is the fair value for each of these classes of financial instrument.
Investments The fair value of unlisted investments is their carrying value at balance date.
Interest Rate Swaps The fair value of these instruments is estimated based on the valuations provided by the Group’s bankers. The carrying value of interest rate swaps represents net interest accrued and is contained within Advances and Prepayments in the Statements of Financial Position.
Foreign Currency Options The fair value of these instruments is estimated based on the valuations provided by the Group’s bankers. Initial option premiums paid are capitalised and then expensed over the life of the option agreement. The carrying value of currency options represents the unamortised option premium and is contained within advances and prepayments in the Statements of Financial Position.
Term Liabilities The carrying value is the fair value due to the borrowings being on floating interest rates.
Credit Facilities The Group has a total bank overdraft facility of $500,000 (2005: $500,000).
26 SEGMENTAL REPORTING The Group operates in one industry that being the facilitating of export and import activities. 52 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2006
27 EVENTS SUBSEQUENT TO BALANCE DATE On 7 July 2006 an advance of $500,000 was made to MetroBox by each of the two shareholders, Port of Tauranga Limited and Toll NZ Consolidated Limited. This payment was made to assist with cash flow requirements. On7 August 2006 Specialised Container Services Limited took over the management of MetroBox, which will continue to offer container services at MetroPort.
28 TRANSITION TO NEW ZEALAND EQUIVALENTS OF IFRS In December 2002 the New Zealand Accounting Standards Review Board announced that International Financial Reporting Standards (IFRS) will apply to all New Zealand entities for periods commencing on or after 1 January 2007. Entities will also have the option for early adoption of the new standards for periods beginning on or after 1 January 2005.
Since this date New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) have been issued. In complying with these, New Zealand entities will be in compliance with IFRS.
Analysis of the potential impacts from the conversion to NZ IFRS commenced in October 2004. The Company has considered the impacts of NZ IFRS implementation, both from a reporting and an operational perspective. The objective of the Company is to ensure the conversion to NZ IFRS occurs within agreed and required timelines (under the Financial Reporting Act 1993), ensuring:
- minimal operational impact on Port of Tauranga Limited; and
- all relevant parties are consulted.
Port of Tauranga Limited Group intends to adopt NZ IFRS and report for the first time under these standards for the year ended 30 June 2008. Upon adoption of NZ IFRS, comparative information presented in the Financial Statements will be restated to meet the requirements of the new standards, and the financial impact of that adoption will be disclosed.
Key differences in accounting policies identified to date include:
(a) Accounting for Derivatives
Under NZ IAS 39, derivatives must be fair valued and recognised on the balance sheet. Movements in the fair value of such instruments must be recorded either through the income statement or equity depending on hedging documentation and effectiveness. Under NZ GAAP the Company records the impact of derivatives on a cash settlement basis. During the current year, the Company has restructured its debt funding maturities to be in alignment with its interest rate derivatives and has established the required systems, policies and documentation required to comply with NZ IAS 39.
(b) Accounting for Taxation
Under NZ IAS 12, deferred tax will be calculated using a “balance sheet” approach. Deferred tax assets and liabilities will be recognised where there are differences between the accounting and tax value of balance sheet items.
Currently Port of Tauranga Limited Group records the income tax effects of timing differences calculated using the liability method. It is not expected that the change will have a material impact on Port of Tauranga Limited Group results.
The purpose of this disclosure is to highlight the areas of impact the Group expects as a result of transitioning to NZ IFRS from current New Zealand accounting standards, based on the standards and interpretations as they are today.
Due to the 2008 anticipated adoption date, the Group has not at this stage been able to reliably estimate the impact of differences in the Financial Statements.
It is possible that future developments to NZ IFRS will change the nature of the adjustments required by the time the Group reports its first Financial Statements prepared under NZ IFRS. ANNUAL REPORT 2 0 0 6 53
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Notes to and forming part of the Financial Statements Statutory Information FOR THE YEAR ENDED 30 JUNE 2006 as at 2 3 august 2 0 0 6
SHAREHOLDER INFORMATION The ordinary shares of Port of Tauranga Limited are listed on the New Zealand Exchange. The information in the disclosures below have been taken from the Company’s registers at 23 August 2006.
TWENTY LARGEST ORDINARY EQUITY HOLDERS holder number held % of issued equity
Quayside Securities Limited 73,687,536 55.00 ANZ Nominees Limited 7,258,228 5.42 Custodial Services Limited – A/c 3 2,547,142 1.90 Citibank Nominees (New Zealand) Limited 1,767,837 1.32 National Nominees New Zealand Limited 1,706,662 1.27 Custodial Services Limited – A/c 2 1,147,018 0.86 First NZ Capital Custodians 1,063,823 0.79 Accident Compensation Corporation 1,033,152 0.77 MFL Mutual Fund Limited 918,947 0.69 Westpac Banking Corporation 720,046 0.54 Peter Hanbury Masfen & Joanna Alison Masfen 520,000 0.39 Guardian Trust Investment Nominees (RWT) Limited 456,778 0.34 Newburg Nominees Limited 436,760 0.33 Tea Custodians Limited 340,754 0.25 Custodial Services Limited – A/c 1 335,080 0.25 Custodial Services Limited – A/c 4 310,991 0.23 Lloyd James Christie 305,000 0.23 Custodial Services Limited – A/c 9 292,884 0.22 ABNED Nominees NZ Limited 280,116 0.21 Karen Maureen Pensabene 260,000 0.19 Total 95,388,754 71.20%
DISTRIBUTION OF EQUITY SECURITIES range of equity holdings number of holders number of shares held % of issued equity
1 – 4,999 7,031 12,393,348 9.25 5,000 – 9,999 1,258 8,106,057 6.05 10,000 – 49,999 800 12,710,222 9.49 50,000 – 99,999 29 1,835,626 1.37 100,000 – 499,999 22 4,109,576 3.07 500,000 and over 6 94,813,109 70.77 Total 9,146 133,967,938 100.00% 54 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Statutory Information as at 2 3 august 2 0 0 6
SUBSTANTIAL SECURITY HOLDERS
The following information is given in accordance with Section 26 of the Securities Amendment Act 1988. According to notices received, the following persons were substantial security holders in the Company as at 23 August 2006.
holder number of shares held %
Quayside Securities Limited 73,687,536 55.00 Infratil Limited 7,084,865 5.28
The total number of issued voting securities of the Company as at 23 August 2006 was 133,967,938.
DIRECTORS’ SECURITY HOLDINGS held by associated beneficially held persons
30.06.06 30.06.05 30.06.06 30.06.05
A W Baylis 0 0 0 0 A W Capamagian 0 0 15,000 8,750 J M Cronin 0 0 2,500 2,500 J S Parker 17,500 17,500 20,950 15,950 D A Pilkington 0 0 0 0 M J Smith 0 0 40,000 52,500 Sir Dryden Spring 25,000 10,000 0 0 H M Titter 0 0 20,000 20,000 ANNUAL REPORT 2 0 0 6 55
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Statutory Information Financial and Operational Five Year Summary as at 2 3 august 2 0 0 6 as at 3 0 J U N E 2 0 0 6
FINANCIAL year year year year year 2006 2005 2004 2003 2002 $000 $000 $000 $000 $000
Revenue 122,423 145,601 151,103 145,953 110,796 EBITDa 69,908 73,886 73,898 71,523 57,809 Surplus after taxation 31,032 33,654 33,652 31,235 25,911 Dividends paid related to earnings 26,794 26,794 26,794 24,101 22,084 Total equity 431,434 427,187 420,330 222,758 214,113 Net interest bearing debt 197,942 205,781 182,411 179,762 175,824 Total assets 647,896 650,346 630,526 420,926 411,330 Interest cover (times) 4.1 4.5 5.2 4.7 5.8 Shareholders’ equity (%) 66.5 65.7 66.7 52.9 52.1 Return on equity (%) 7.2 8.0 15.1 14.6 9.5 Share price ($) 5.35 4.95 5.18 4.35 7.40 Market capitalisation ($) 716,728 663,141 693,954 582,445 495,215 Net asset backing per share ($) 3.22 3.19 3.14 1.66 1.60* Earnings per share (cents per share) 23.2 25.1 25.1 23.3 -
The Board approved a final dividend of13.0 cents per share ($17.4 million) after year end payable on 6 October 2006.
Assets were revalued by $189.2 million effective 30 June 2004.
* Adjusted for 2:1 share split in November 2002.
OPERATIONAL year year year year year 2006 2005 2004 2003 2002
Cargo throughput (000’s tonnes) 12,278 12,622 12,242 12,104 11,391 Containers (TEUs) 423,138 438,214 394,403 349,796 322,516 Cargo ship departures 1,197 1,207 1,240 1,312 1,281 Berth occupancy (%) 28 30 32 35 34 Total cargo ship days in port 1,543 1,642 1,501 1,948 1,875 Turn-around time per cargo ship (days) 1.3 1.4 1.2 1.4 1.5 Cargo tonnes per ship 10,257 10,457 9,872 9,223 8,892 Average cargo ship gross registered tonnage (GRT) 18,066 17,864 17,505 17,685 17,800 Average cargo ship length overall (metres) 170 167 166 166 165 Number of employees - Port of Tauranga Limited 156 159 148 139 134 56 ANNUAL REPORT 2 0 0 6
PORT OF TAURANGA LIMITED AND SUBSIDIARIES Directory for 2006
DIRECTORS SOLICITORS
J S Parker, Chairman Holland Beckett A W Baylis Tauranga A W Capamagian J M Cronin BANKERS D A Pilkington ANZ National Bank Limited M J Smith Bank of New Zealand Sir Dryden Spring Commonwealth Bank H M Titter CMG SHARE REGISTRY EXECUTIVE For enquiries about share transactions, change of M C Cairns, Chief Executive address or dividend payments contact: C J Boocock, Chief Financial Officer T H James, Corporate Services Manager Link Market Services Limited G J Marshall, Commercial Manager PO Box 91976 A P Reynish, Property Manager Auckland Mail Centre Auckland 1142 REGISTERED OFFICE New Zealand
Salisbury Avenue Telephone ...... 09 375 5999 Mount Maunganui Facsimile...... 09 375 5990 Tauranga 3116 Email...... [email protected] Private Bag 12504 Tauranga Mail Centre FINANCIAL CALENDAR Tauranga 3143 6 October 2006...... Final dividend payment New Zealand 31 October 2006...... Annual meeting Telephone...... 07 572 8899 21 February 2007...... Half year results announcement Facsimile...... 07 572 8800 March 2007...... Half year report published Internet...... www.port-tauranga.co.nz 16 March 2007...... Interim dividend payment Email...... [email protected] 30 June 2007...... Financial year end 22 August 2007...... Annual results announcement AUDITORS September 2007...... Annual report published
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