Ports’ financial performance, 2015 – 24
Ports are vital to the prosperity of New Zealand. A thriving port sector not only connects New Zealand to the rest of the world but also contributes to growth in the wider economy. Our latest report examines the financial performance of eleven major ports in New Zealand from 2015 to 2024. We analysed five financial indicators: return on assets (RoA), return on equity (RoE), gearing ratio, current ratio and dividend yield.
RoA and RoE tended to decrease over the period for many ports, likely driven by difficult trading conditions on the one hand and by the ports’ expanding asset bases on the other. Many ports have invested heavily in infrastructure and equipment over the period, requiring large amounts of capital expenditures. These investments have significantly expanded their balance sheets.
In terms of gearing, ports tend to be managed conservatively with low gearing ratios. Ports that are 100% council-owned also tend to have lower gearing ratios than those with mixed ownership. In recent years, ports that have undertaken significant capital expenditures saw an increase in their gearing ratio as those expenditures tended to be debt-financed.
Most ports had a current ratio above one over the period. For those ports that had a current ratio less than one, it was more a reflection of their accounting policies rather than a sign of genuine liquidity concerns. Ports tend to rely on long-term financing arrangements with major banks. When those debts are classified as current liabilities, it tends to result in a low current ratio.
Ports paid regular dividends to their shareholders. However, ports with mixed ownership had a higher dividend yield on average than those that are 100% council-owned. Measured in book value, South Port had the highest average dividend yield over the period, followed by the Port of Tauranga. Both ports are listed on the NZX. On the other hand, Port Otago had the lowest average dividend yield over the period.
Overall, South Port and the Port of Tauranga stand out as strong performers as measured by RoA, RoE and dividend yield. Meanwhile, Lyttelton Port and CentrePort performed relatively poorly over the period. Lyttelton Port had large asset write-downs in 2016 and 2020, while CentrePort was impacted by the 2016 Kaikōura earthquake and, more recently, by the cancelled Project iRex.
In conclusion, performance was mixed in the port sector. Given the challenging trading conditions many ports have faced in recent years, skillful port management will be crucial for improving their performance. This report finds that ports with mixed ownership tended to perform better than 100% council-owned ports, while events such as natural disasters and asset write-downs had an adverse impact on port performance.
