South Port NZ Ltd – Interim Report to 31 December 2018

FINANCIAL PERFORMANCE
The operating performance for the half year was strong with
total revenue increasing by 7.4% to $20.90 million. However
increased repairs and maintenance, including the scheduled
five yearly dry docking of the tug Hauroko ($838K expenditure)
led to a reduction of 7.1% in net profit after tax (NPAT).
South Port New Zealand Ltd’s NPAT in the period was $4.55
million (FY2018 $4.90 million).
At the 2018 Annual Meeting, the Directors advised that 2019
earnings were likely to be approximately 10% lower than in
FY2018. The result is consistent with that guidance.
Several factors impacted on this year’s interim result including:
öIncreased maintenance expense with the scheduled docking
of the harbour tug Hauroko.
öExpectations of dry weather led to an increase of stock food
imports for the dairy industry.
öNew exports of containerised Medium Density Fibreboard
(MDF) being packed at the Intermodal Freight Centre and
shipped on the Mediterranean Shipping Company (MSC)
service through Bluff.
öIncreased storage and packing activities in the warehousing
division.
Although the reported FY2019 interim profit is ahead of
budgeted expectations, this should be read in conjunction
with the Outlook section of this Report.
CARGO
Total cargo activity was 1,772,000 tonnes compared with
1,754,000 tonnes in the prior year interim period. This
represents an increase in cargo flows of 18,000 tonnes or 1%.
However revenue was up by 7.4% due to a favourable cargo
mix, strong performance in the warehousing division and
increased marine activity.
Bulk cargoes continue to be the backbone of the business.
Volumes were comparable to the same period last year with
the exception of fertiliser (-34,000) and stock food (+22,000).
Interim Report
Containerised cargo throughput increased by 10% due to an
increase in both Open Country Dairy finished product exports
and Daiken Southland Limited MDF exports.
Imports of containerised supplementary feeds being
delivered to the Port for the dairy industry declined for the
same period due to a shortage of feed in Australia as a result
of drought conditions in New South Wales.
OPERATIONAL EVENTS
Fertiliser
Fertiliser imports were lower than in the previous period
due to large volumes being carried over from last season.
Volumes are however expected to meet budgeted
expectations by year end which will be slightly down on the
previous period result.
Stock Food
Stock food imports increased over the second quarter of the
financial year due to a dry spring and the expectations of
another dry summer.
Rain has however been plentiful over the summer months
and it is now forecast that the volumes will also fall in line with
budget.
Logs
The newly paved log storage area on the Island Harbour has
been operating for the past nine months. The improvements
that this piece of infrastructure brings are clear with
safer working conditions, better utilisation, an improved
environmental outcome through having a cleaner working
surface and an upgraded drainage system.
Log volumes are similar to last season. However, there has
been a slowdown of exports to the Indian market. Volumes
have also been impacted by poor ground conditions in
certain areas within Southland affecting the ability of logging
crews to harvest their forestry blocks. It is anticipated that
these two factors will lead to a reduction in throughput by
year end of approximately 10% compared with last season.
Dairy
The most recent global dairy trade (GDT) auctions have
delivered small increases which is a reflection of the tightening
in supply of global milk production.
Although New Zealand supply has increased this season
there has been a decline in production in both Europe and
Australia which has impacted positively on the recent auction
events.
Intermodal Freight Centre (IFC)
The IFC is into its third full year of operation. Initially set up
for the receipt, handling and unpacking of imported goods,
containers are now also being packed for export with MDF at
this location for shipment through Bluff.
Serviced by rail from ports, we estimate that on an annual
basis the use of this facility has taken 7,000 truck movements
off the road which has delivered improved environmental
outcomes through reduced emissions while also improving
the safety of our road networks.
Container Shipping Market
The Mediterranean Shipping Company (MSC) continues to
be an important contributor to the Port and to the region’s
exporters/importers, providing a competitive alternative to
shipping lines calling at other ports.
A record volume of 19,800 TEU was handled on MSC during
this interim period, 10% above last year’s throughput as
noted above.
Warehousing
There has been increased handling, packing and storage
of meat, fish and dairy products in both the cold store and
dairy warehouses during the past six months. The recent
completion of the cold store environmental loadout area
and blast freeze is already delivering operational efficiencies,
improving the safety of the operation while meeting the
expectations of the Ministry for Primary Industries.
Maintenance
The scheduled docking of the harbour tug Hauroko was
completed in August, a significant project that occurs every
five years. This occasion involved the removal and overhaul
of one Voith unit (propulsion/drive system), a complete
strip down of a main engine, hull painting / repair work and
replacement of a stern fender.
DIRECTORS
Rex Chapman
Chairman
Rick Christie
Philip Cory-Wright
Thomas Foggo
Clare Kearney
Jeremy McClean
CORPORATE
EXECUTIVES
Nigel Gear
Chief Executive
Geoff Finnerty
Port General Manager
Jamie May
Business Development Manager
Hayden Mikkelsen
Container Manager
Frank O’Boyle
Infrastructure Manager
Lara Stevens
Finance Manager
Murray Wood
Warehousing Manager
Helen Young
Human Resources Manager
GROUP COMPANIES
Parent Company
South Port New Zealand Limited
Subsidiary
Awarua Holdings Limited
WWW.SOUTHPORT.CO.NZ
INTERIM
REPORT
FOR THE SIX MONTH PERIOD
ENDED 31 DECEMBER 2018
Island Harbour, PO Box 1,
Bluff 9842, New Zealand
 +64 3 212 8159
 reception@southport.co.nz
 South Port NZ

CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER 2018
TOTAL EQUITY 39,758 37,270 40,060
Non-Current Assets
Property, plant & equipment 49,091 46,834 47,471
Total non-current assets 49,091 46,834 47,471
Current Assets
Cash 905 535 991
Trade and other receivables 7,031 7,061 5,648

Total current assets 7,936 7,596 6,639
Total assets 57,027 54,430 54,110
Non-Current Liabilities
Employee entitlements 39 47 47
Deferred tax liability 219 405 301
Borrowings – 11,900 7,200
Financial liabilities 296 331 353
Total non-current liabilities 554 12,683 7,901
Current Liabilities
Trade and other payables 3,065 3,032 3,388
Employee entitlements 775 668 1,132
Provision for taxation 653 777 1,629
Borrowings 12,100 – –
Financial liabilities 122 – –
Total current liabilities 16,715 4,477 6,149

Total liabilities 17,269 17,160 14,050
TOTAL NET ASSETS 39,758 37,270 40,060

Net asset backing per share $1.52 $1.42 $1.53
31/12
2017
$000’s
31/12
2018
$000’s
Year to
30/06/18
$000’s
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BUSINESS DEVELOPMENT OPPORTUNITIES
Mataura Valley Milk (MVM)
Construction of MVM’s infant formula plant was completed
and commissioned in the second quarter of 2018 with
processing beginning in August 2018.
The Port is pleased to communicate that MVM has chosen to
export cargo through Bluff on MSC with the first shipment
being recorded in November 2018.
New Zealand Aluminium Smelter (NZAS)
The official opening of the fourth potline was held at
Tiwai Point on 6 December 2018. This potline when fully
operational will consume an additional 60,000 tonnes of
alumina and increase aluminium production by 30,000
tonnes per annum. Over the coming year, the Port will be
working with the team at Tiwai to determine whether there are
additional services we can provide to handle and/or pack any
of this finished cargo into containers for export through Bluff.
ENVIRONMENT
This year the Port has begun recording its greenhouse gas
emissions (GHG). GHG emissions are classified into three
scopes. Scope 1 is direct emissions from owned or controlled
sources; Scope 2 is indirect emissions from the generation
of purchased energy; Scope 3 is all indirect emissions (not in
Scope 2) that occur in the value chain of the Company.
Initially South Port will be tracking Scope 1 and Scope 2
emissions with a view to track Scope 3 emissions in the future.
There are also a number of initiatives that are currently
underway to improve the Port’s impact on the environment
which will be covered in more depth in the Annual Report.
HEALTH & SAFETY (H&S)
The Person Conducting a Business or Undertaking (PCBU)
project – identifying all third party interactions, classifying
contractual relationships and documenting H&S obligations of
the respective parties is almost complete. We are now in the
final stages of obtaining legal opinion on the content before
implementation.
The Port is in the process of purchasing “Bowtie” risk
assessment software. This software will be principally used for
the analysis of critical fatality risks on the Port however can be
used for all types of risk assessment going forward.
Fatigue
A project group with members from all sectors of the Port has
been formed to discuss and work through the construction of
a Fatigue Policy. This is an important issue for all organisations
and will be a primary objective for the Company to complete
over the next twelve months.
Wellness
Another important piece of this puzzle is to facilitate
improvements to staff wellbeing. The implementation of
a structured wellbeing programme will also be a targeted
objective for the Company in the coming year.
OUTLOOK
Over the coming months it is expected that there will be a
number of fluctuations in each bulk cargo category however
by year end the total volume is forecast to be in line with
budgeted expectations. Container volumes are tracking
10% ahead of the previous period and this positive trend is
expected to continue through to the end of the financial year.
Increased maintenance expenditure on the infrastructure and
floating plant, as noted in previous commentary, will continue
to have an impact on profitability going forward.
Based on all known factors at the date of releasing its 2019
interim result, South Port estimates that its full year earnings
should fall in the range of $8.60 million to $8.90 million
(FY2018 - $9.66M).
DIVIDEND
After assessing the anticipated year end result, the Directors
have declared a fully imputed interim dividend of 7.50 cents
per share (2018 – 7.50 cents) payable on 6 March 2019.
In the event that the Company’s FY2019 profit falls within the
above forecast range the Directors are confident that the full
year dividend payment will be consistent with the previous
year.
Financial Statements
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
SIX MONTH PERIOD ENDED
31 DECEMBER 2018
Total operating revenues
from port services 20,918 19,474 40,705
Total operating expenses (12,489) (10,828) (23,258)
Gross profit 8,429 8,646 17,447

Administrative expenses (1,756) (1,741) (3.650)
Operating profit before
financing costs 6,673 6,905 13,797

Financial income 10 9 22
Financial expenses (312) (333) (601)
Net financing income/(costs) (302) (324) (579)
Other income 23 279 290
Surplus before income tax 6,394 6,860 13,508
Income tax (1,843) (1,959) (3,850)
Net surplus after income tax 4,551 4,901 9,658
Other comprehensive income – – –
Total comprehensive surplus
after income tax 4,551 4,901 9,658
Basic earnings per share $0.173 $0.187 $0.368
31/12
2017
$000’s
31/12
2018
$000’s
Year to
30/06/18
$000’s
CONSOLIDATED STATEMENT OF CASH
FLOWS
SIX MONTH PERIOD ENDED
31 DECEMBER 2018
Cash flows from operating
(note 8) 3,417 2,887 12,342
Cash flows from investing (3,550) (1,473) (3,805)
Cash flows from financing 47 (2,554) (9,221)
NET INCREASE/(DECREASE) (86) (1,140) (684)
IN CASH
31/12
2017
$000’s
31/12
2018
$000’s
Year to
30/06/18
$000’s
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Notes to the
Financial Statements
1 ACTIVITIES OF SOUTH PORT GROUP
The Group is primarily involved in providing and managing
port and warehousing services.
2 ACCOUNTING POLICIES
The Group is a Financial Markets Conduct (FMC) reporting
entity for the purposes of the Financial Reporting Act
2013 and the Financial Markets Conduct Act 2013. These
financial statements comply with these Acts and have been
prepared in accordance with the New Zealand equivalents
to International Financial Reporting Standards (NZ IFRS)
and other applicable Financial Reporting Standards, as
appropriate for profit-orientated entities. These financial
statements comply with International Financial Reporting
Standards (IFRS). There has been no change in accounting
policies. All policies have been applied on a consistent basis
with the most recent annual report.
3 AMENDMENTS TO NZ IFRS
Two new standards are effective for annual periods ending
30 June 2019, namely:
öNZ IFRS 9: Financial Instruments
öNZ IFRS 15: Revenue from Contracts with Customers
The Group does not expect these standards will have a
material impact on the balances presented in the financial
statements nor the period in which revenue is recognised.
The adoption of these standards will result in changes to the
Group’s disclosures.
4 TAXATION
Income tax expense comprises current and deferred tax
at the company tax rate of 28%. Income tax expense is
recognised in the Statement of Comprehensive Income
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2018
R T CHAPMAN
Chairman
N G GEAR
Chief Executive
5 SEGMENTAL REPORTING
The South Port Group operates in the Port Industry in
Southland, New Zealand, and therefore only has one
reportable segment and one geographical area based on
the information as reported to the chief operating decision
maker on a regular basis. South Port engaged with one major
customer who contributed individually greater than 10% of its
total revenue for the period ended 31 December 2018. This
customer contributed $4.22 million for the six months ended
31 December 2018 (2017: $3.95 million).
6 SUBSEQUENT EVENTS
On 18 January 2019 a fire was located in a leased warehouse
on the Island Harbour, causing isolated damage to the roof at
the north east section of the shed. An investigation is underway,
however the ignition point is believed to be a loader that had
been operating inside the warehouse during the day.
Total equity at beginning
of the period 40,060 37,223 37,223
Surplus after income tax 4,551 4,901 9,658
Other comprehensive
surplus/(loss) – – –
Total comprehensive surplus 4,551 4,901 9,658
Distributions to shareholders (4,853) (4,854) (6,821)
Total equity at end of the period 39,758 37,270 40,060
31/12
2017
$000’s
31/12
2018
$000’s
Year to
30/06/18
$000’s
UnauditedUnauditedAudited
7 STATEMENT OF CHANGES IN EQUITY
SIX MONTH PERIOD ENDED
31 DECEMBER 2018
Surplus after taxation 4,551 4,901 9,658
Add/(less) items classified
as investing/financing activities – – –
Add/(less) non-cash items 1,824 1,432 3,077
Add/(less) movement in working
capital (2,958) (3,446) (393)
Net cash provided by operating
activities 3,417 2,887 12,342
8 NET CASH FLOW FROM OPERATING
ACTIVITIES