I would now like to hand the conference over to Kristen Lie, Napier Port Chief Financial Officer. Please go ahead.
Good morning. Welcome, everybody, to the Napier Port Holdings 2025 Half-Year Results Call. My name's Kristen Lie, CFO. I'm joined on the call this morning with Todd Dawson, Chief Executive, and Blair O'Keeffe, the Chair of the Board of Directors. During this morning's presentation, we will report on the highlights of our first half 2025 financial year, including some detailed analysis of our financial results. We will reference the suite of information released earlier today on the NZX Reporting Platform and also available in the Investor Center section of our website. At the end of our presentation, we'll be happy to respond to any questions you may have. Now, I'll hand over to Blair to get things underway.
Thank you, Kristen. Kia ora koutou, and welcome to our 2025 half-year results presentation. I'm pleased to report that Napier Port is delivering a strong interim result, underpinned by a solid earnings performance for the six months to 31st March 2025. This result reflects the enduring strengths of our business, including a diverse mix of cargo trades and revenue streams, resilient infrastructure that provides operational flexibility and headroom for growth, disciplined cost and capital management generating strong operating leverage, and a proven track record of delivery even in challenging and uncertain conditions. While we remain conscious of the continued volatility in the global trade environment, we are confident that Napier Port's performance to date, together with our operational and financial discipline, positions us well for the second half of the year.
Our team, led by Todd, has performed very well to deliver these results today, and Todd will now take us through the details of the half-year performance.
Good morning. Thank you, Blair. Good morning, everyone. I'm really pleased to be able to present a summary of what has been a strong set of volumes and earnings during our first half of the year. The headline for our result is the step-up we've had in container volumes, which has increased by 14,000 TEU to 112,000 TEU. The main drivers of this increase have been higher wood, pulp, and timber volumes following Pan Pac's return to full manufacturing operations, higher apple volumes on a slightly earlier harvest, and what is currently tracking towards a strong season of good quality fruit and higher pack out rates. We are also benefiting from higher container repositioning activity following service changes among some of the shipping lines.
Bulk cargo volumes have decreased 9.2% or by nearly 200,000 tonnes in the half-year, with the absence of the one-off windthrow and logs and additional Pan Pac logs we saw in the prior year's corresponding period. Cruise vessel visits and passenger numbers dropped from last year's record, also with 77 cruise vessels this year compared to 88 last year. That is a combination of weather-related event emissions and slightly lower overall bookings. We again hosted several double and triple cruise days alongside container and bulk cargo shipping, which has been enabled by investments in Six Wharf Plant and, of course, our flexible workforce. Moving to the next slide in the pack, our Napier Port team have delivered strongly again and demonstrated the agility to respond efficiently to the uplift in volumes, supported by a diverse and resilient cargo and trade base.
Total revenue rose 10.6% to NZD 78.1 million, which is driven by higher container volumes and growth in our average revenue per unit rates for all our main trades. A partial offset with revenue reductions for bulk cargo and cruise has passed through these results also. Our revenue has been supported by cost discipline and operational flexibility in terms of how we have managed cargo and our operations. We've worked really hard to ensure we've responded effectively to meet our customers' needs and capitalize on some of the commercial opportunities that have presented themselves. A good example of this has been our partnership with KiwiRail to bring more logs on rails to Napier Port from the Central North Island, which has contributed to our results during this period.
As highlighted previously, we've continued to focus on yield from our cargo and customer base and positioning for earnings growth. In this period, we are seeing the positive effect of Napier Port's operating leverage as container volumes have stepped up through effective cost control. This has been demonstrated in the result from operating activities for the first half of the year to NZD 33.1 million, an increase of 21.1%. Underlying net profit, excluding the net effective insurance income, increased by 33.4% to NZD 14.8 million in the half. Underlying operating cash flow, also excluding the net effective insurance claim receipts, also grew in the period, increasing by NZD 1.5 million to NZD 26 million. Moving to the next slide. Over the past few years, we have grown our capability to be responsive and adaptable to changes and delivered for our customers.
Our long-term strategy is integrated into the business and supported by robust business cases for investments, disciplined financial management delivering incrementally improved returns across the entire asset base. With the future in mind, we have been evolving our operating model to support the sustainable future of Napier Port. We want to ensure there is a highly scalable, affordable, and efficient operation supported by skilled and invested employees, and we'll be using automation where appropriate also. Three initiatives are all contributing to this future for Napier Port currently. Viewpoint Supply Chain, our supply chain logistics service, is incrementally growing and is a long-term initiative to support the growth of cargo through Napier Port. It aims to deliver value to new and existing customers through supply chain and logistics offerings, balancing import and export supply chains to remove costs for our customers.
NPT is, in practical terms, this investment will introduce battery electric autonomous truck and trailers into our container terminal, replacing diesel-powered equipment for moving containers between the yard and the cranes at wharf site. This will unlock further capacity for us and productivity, reduce congestion in the container terminal, reduce our repairs and maintenance expenditure, and also lower emissions. The new dredge partnership, partnering with Port Otago, will see us share the cost of this investment, and we will have direct access to a dredging capability for both our maintenance and future capital dredging requirements. As part of the Six Wharf development, we obtained resource consents to deepen our shipping channels to 14.5 meters. This dredge vessel will enable us to incrementally deepen our channels as required over time to accommodate larger, deeper draft vessels and also reduce operational restrictions currently in place.
This is a significant strategic initiative for Napier Port, future-proofing Napier's position in the New Zealand supply chain and within the international port and shipping networks that service New Zealand. I'll now hand over to Kristen to go through the details of our result.
Thank you, Todd. On slide eight, total revenue, the 10.6% revenue growth to NZD 78.1 million breaks down into container services revenue increase of NZD 9.1 million or 27.2% to NZD 42.7 million, a bulk cargo revenue decrease of NZD 0.7 million or 2.7% down to NZD 25.5 million, and a cruise revenue decrease of NZD 0.7 million or 8% down to NZD 8.2 million. I note the positive diversification effect here in our trade portfolio. A year ago, we were reporting significant growth in bulk and cruise trade revenues and a decline in container services. This year, we have seen a significant step-up in container services revenue with modest declines across the other two revenue lines. On slide nine, the increased container services revenue was a result of the 13.9% increase in TEU volume, compounded by an increase of 11.7% in average revenue per TEU.
The total TEU volume was up 14,000 in the half-year with significant uplifts in full container and transships and DLRs. Pulp pack volume increased 41% on Pan Pacs returned to full pulp and timber operations, and depot services contributed strong revenue growth despite similar empty container volumes. Average revenue per TEU increased 11.7% to NZD 381 from NZD 341 in the prior comparative period. Factors include significantly higher contributions from pulp pack and depot operations, which made up around 3/4 of the increase, tariff increases, and increased charges towards the cost of our infrastructure investments and customer and cargo mix changes, partially offsetting these unit gains with lower reefers on power and a lower marine contribution. For reference, given the rapidly changing trade environment, last year, 6,000 TEU were exported through Napier Port to the U S. Key trades included timber, apples, meat, onions, and wine.
Bulk cargo revenue decreased by 2.7% in the period. This was on 9.2% lower volume and was partially offset by a 7.1% higher average revenue per tonne. The volume decrease was attributable to log exports, which decreased by 200,000 tonnes, as Todd said, compared to the first half last year. Log exports have been holding relatively steady year to date, with export pricing modest and sentiment subdued with the uncertainty overhanging of global trade frictions. Prior year log volumes were supported by additional unprocessed logs from Pan Pac and the Central North Island windthrow post cyclone. In the current year, the absence of this volume has been partially offset by the export of windthrow one logs previously destined to WPR's pulp and timber mills, now travelling to Napier Port by road and rail for export. Bulk average revenue per tonne increased 7.1% to NZD 14.90 per tonne.
This resulted from customer mix changes, higher marine contributions on smaller average vessel loads, and wharf access fee and tariff increases. Cruise vessel ports continue to be a significant contributor to Napier Port, comprising NZD 8.2 million or 10.5% of the half-year revenue. Cruise revenue in the period decreased by 8% on 11 fewer vessel visits, of which seven were bookings lost due to weather cancellations, partially offset by 5.2% higher average revenue per vessel. Positive average revenue per unit growth was experienced despite smaller vessels and lower passengers per vessel on average. There's one remaining call for this current season, and we have 66 vessel calls booked for the 2026 season beginning in November.
In terms of operating expenses, total operating expenses have increased NZD 1.7 million or 4% to NZD 44.9 million compared to the first half of last year and decreased NZD 1.3 million or 2.7% compared to the second half of last year. This is despite the 13.9% increase in container volumes being the more cost-intensive part of our business and continuing inflation pressures. For the period, employee benefit expenses increased NZD 1.2 million. Other operating expenses increased NZD 1.2 million on higher stevedore administration and insurance costs, and property and plant expenses decreased NZD 0.6 million on lower fuel and power costs and plant and site maintenance expenses. On slide 13, the result from operating activities or EBITDA equivalent significantly increased NZD 5.8 million or 21.1% to NZD 33.1 million for the half-year period. This resulted from strong operating leverage as the NZD 7.5 million revenue increase significantly exceeded the NZD 1.7 million OpEx increase.
This also provided a strong overall margin percentage increase to 42.4%, our first greater than 40% operating margin half-year period since the 2021 financial year. This is an area of continued focus for us. As we have noted, we have been focused on growing our revenue streams, controlling our costs, and improving revenue mix variables where we can influence, and this is bearing tangible fruit with both revenue growth and earnings growth. Slide 14, our higher operating result has driven the underlying net profit to an increase of NZD 3.7 million or 33.4% to NZD 14.8 million in the half. Our reported unadjusted net profit of NZD 20.2 million for the period benefited from NZD 7.5 million of additional insurance net income, which represents the final settlement of our Cyclone Gabrielle material damage and business interruption claim.
Higher depreciation, amortization, and impairment expenses resulted from new assets and our periodic review of asset lines and residual value assumptions, resulting in changes in depreciation rates for principally our crane and mobile plant fleets. Finance costs on our unhedged proportional variable debts decreased alongside the decreased amount of borrowings. Slide 15, CapEx during the half-year was NZD 11.6 million or NZD 13.6 million in actual cash flow spend terms. Half-year spend was directed to site major maintenance, mobile plant replacements and major maintenance, floating plant major maintenance, and towards the dredge build. For the 2025 financial year, we expect a total CapEx spend of around NZD 25-29 million, which will include further spend on mobile plant replacements, dredge payments, and spends towards our terminal transformation project.
Slide 16, reported cash flow from operating activities increased to NZD 34.6 million with improved underlying earnings and supported by NZD 11 million of material damage business interruption insurance proceeds received in the half-year period. Underlying operating cash flow, excluding insurance claim receipts and associated tax effects, also grew in the period, increasing by NZD 1.2 million- NZD 25.8 million. The final 2024 financial year dividend payments in December of NZD 12 million increased from NZD 7.1 million in the prior comparative period. Given the strong operating cash flow, we were also able to reduce gross debt by NZD 6.5 million during the period. Capital management, an update. We have flagged previously we are expecting around NZD 120 million of total capital expenditure across the 2025 to 2027 financial years inclusive. This is subject to change in approvals.
The main components are approximately NZD 80 million replacement maintenance spend, which includes provision for two cranes, mobile plant fleet replacements, and wharf major maintenance. Around NZD 40 million capacity and growth spend, which includes investment in the dredge, partnership with Port Otago, and a terminal transformation project. We commenced our seeding investments for the risk reserve investment fund last month and been tracking at roughly NZD 500,000 per month so far. Our unadjusted debt to EBITDA ratio at the end of the period was 1.54 times, which is below our capital management target range of two to three times. We expect this to rise to within our target range as the effective insurance claim proceeds pass and as we execute on the capital spend program. Lastly, a brief update on our sustainability initiatives and emissions. Total gross emissions increased for the half-year by 8.2% compared to the prior comparative period.
This has resulted from higher diesel use from more containers and generator hours this year, related to higher container volumes. This was partly mitigated by lower electricity use. On a relative metric basis, emissions per cargo tonne increased by 11.5% as the more emissions-intensive container volumes were a higher component of total cargo tonnes, outweighing various efficiency and reduction measures we have adopted, such as increasing our ECHA reach deck fleet. Now I hand back over to Todd and Blair for concluding remarks.
Thanks, Kristen. Just on slide 19, Napier Port enters the second half of the financial year with confidence supported by a strong first half performance and continued momentum despite the uncertainty in global trade and some of the key international markets. We are using all three major levers available to us to drive returns, pricing, volume, growth, and cost control.
Our diverse cargo mix continues to show resilience and global demand for food and fibre that we export remains stable. Key projects underway will position us to keep growing our capability and to be able to capture opportunities as they arise. The container terminal transformation and new dredge partnership will both support future capability and earnings growth. We are mindful of global trade uncertainties and the potential effects on our producers' export markets and expect to see some softening of the log exports in the near term. Reflecting the strong first half result and current trading environment and assuming a continuation of current conditions, we revised our guidance for the underlying result from operating activities for the full year to a range of NZD 59 million-NZD 63 million, which has increased from the range previously announced of NZD 55 million-NZD 59 million.
Our commitment to delivering WACC level returns within 5-10 years post export development remains in place, and we're on track to do this. I'll now hand back to our Chair, Blair O'Keeffe.
Thank you, Todd. After a challenging last few years, it is great to see the region rebounding and the whole Napier Port team put considerable effort into delivering this result. The board is pleased to pay a fully imputed interim dividend of NZD 0.04 per share, which has increased from the NZD 0.03 per share paid at the same time last year. In addition, to recognize the strong financial position of the group and improved profitability arising from the finalization of the Cyclone Gabriel insurance claim, a fully imputed special dividend of NZD 0.025 per share has been declared. The record date for the interim and special dividend entitlements is 13th June, and the payment date will be 26th June. I'll now hand back to Kristen, who will conclude the presentation.
Thanks, Blair. That concludes our prepared presentation. We'd like to provide the opportunity for those on the call to ask questions related to our presentation, and therefore I will hand back over to the moderator to do so.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from Andy Bowley from Forsyth Barr. Please go ahead.
Thanks, moderator. Morning, guys. A few questions from me, the first of which is around the guidance upgrade. Just wanting to reconcile where you are today with what you were telling us back at the Investor Day a couple of months ago. Then you were suggesting you were tracking towards the top end of the previous guidance, so circa NZD 59 million. The new guidance range has that at the bottom. I guess the question being, have things improved further over the last couple of months in terms of where you were when you first set that original guidance or otherwise? If you could just elaborate a little bit more in terms of the confidence around this new range.
Good morning, Andy. Yeah, thanks for the question. I guess earnings guidance is probably more of an art than a science. I guess probably start with that. At any point in time we're evaluating the information available to us. As we speak today and the sort of the half-year marker sort of falls right in that sort of, I guess, intensive export season. The benefit we have today in terms of our updates, I guess, are all incorporated into that revised guidance. Obviously, the range is still reasonably sort of wide. We've seen some good markers in things like the apple harvest and things like that. We're yet to see the full effects of the season coming through, but there's some definitely positive signs which we think support, I guess, where we've come to in that range.
Was that a little bit of extra color?
Yeah, I mean, back in the Investor Day, obviously early in the season, we were hopeful of a good growing season, but that's certainly flown through. Lines left it fairly late to bring empties in this year. We had a big strong flush of empties coming through in the first sort of during the season. We have had a lot more DLR transshipments as well coming through on the container side. We have done pretty well, I think, this first half of the year around cost management as well.
Great. No, thanks, guys. I guess slightly improved trading relative to initial expectations, but more confidence in terms of where you're heading.
A couple of questions just around a couple of the trades and in no particular order, but starting off with cruise, as that's the one that seems most challenged at the moment and looking at another step down in bookings for next year. What are the cruise lines now telling you about thereafter, so FY 2027 and beyond? I'm just keen to get a sense of where you see cruise going over the medium term.
In the medium term, I think New Zealand's still got some challenges to face. Cruise lines really are looking two to three years out their bookings. What we're indications that we're getting from the cruise industry across New Zealand's cruise market is that we should expect to have sort of lower bookings for the next couple of years. They've obviously had some pretty strong market conditions in the northern hemisphere and put in their capacity where they're making the most money, which has been in the northern hemisphere.
In general, the feedback from the cruise industry is that they find New Zealand and Australian market very challenging at the moment in terms of both costs, some of the rules around biofouling, etc., coming at New Zealand being challenging for them to meet, and that there has been a general feeling of being unwelcome in New Zealand from the cruise industry. I think we as a group, ports, are working really hard to correct some of those perceptions, working really hard with the government to make sure that the cruise industry feels welcome. We are sort of seeing indications that for at least the next couple of years across the industry, bookings will be subdued, if not down. As I say, it is probably going to be a couple of years before we expect to see those coming back up again.
FY 2027 could well be another set down relative to FY26?
I would hope that FY 2027 could be flat on what we're looking at for 2026. Obviously, we might see a few more bookings come back in for 2026. Yeah, there might be some later ones. Certainly, 2027, I wouldn't expect a material jump up. Yeah.
Great. No, thanks, Todd. Lastly on logs, the outlook commentary there talking about a subdued near-term outlook. Recognize you're getting some of that Ernsl aw One volume come through from Central North Island on rail. Is there any other rail coming from out of region from a logs perspective? Are you being successful in targeting that part of the market?
Ernslaw One's the only major export logs coming from out of region on rail. At the moment, still road versus rail is still very competitive for the other exporters that will be coming from that sort of lower Central North Island catchment area. No, the answer to that question, Andy, is just Ernslaw One.
Does that Ernslaw One volume offset some of the challenges that you're seeing in the kind of the in-region market in the context of where log pricing is currently?
To a small degree, yes. It is supplemental to the regional catchment, the immediate regional catchment. The outlook on logs is really just a reflection of where we think the major market, China, might sit over the next three to four, six months as we kind of as the global uncertainty around tariffs and things flushes through the macro environment.
Just in terms of framing that subdued export outlook, is that just referring to the next six months, the second half, with reference to first half and second half last year? Or is there another way we should be reading into that in terms of beyond into FY 2026 from what your log exporters are telling you?
No, just what we're saying is for the second half of this year. Yeah.
Yep. Okay. Thanks, guys. Appreciate it.
Thank you. The next question comes from Wade GardIner from Craigs Investment Partners. Please go ahead.
Hi, guys. Look, can I just go back to the guidance questions? The new range implies sort of NZD 26 million-NZD 30 million in the second half. I know there's seasonality there, cruise, etc. Your pipfruit is generally weighted towards the second half. Last year, in the second half, you did an EBITDA of NZD 24.5 million. That really included handpack was not up and running then. You have got a bit of pipfruit season this year. I'm just sort of wondering what would it take to get to that bottom end of the range? It seems to me, given what you have just printed in the first half, that the top end of the range looks reasonably easily doable.
Hi, Wade. Thanks for the question. I suppose one kind of nuance on that is the timing of the product or the cargo. We have noted a better, I suppose, apple harvest. What we have also seen is a bring forward of that by, I mean, a couple of weeks, I think, on average. I guess it is probably a broad yardstick. Reflected in our half-year volumes, it is probably more of the potential harvest. That is one factor in that. I think typically we do earn, I guess, overall, big pitch, I guess, a lower sort of percentage, less than half, I guess, of the annual percentage in that second half. I mean, just again, there are a whole bunch of variables here. We obviously, fingers crossed, etc. We are looking positively forward.
Okay. I mean, that was the other thing I was going to ask because it was about the skew of that apple harvest. It is a little bit earlier. What should we assume in terms of the full year growth? Do you have a view on that?
Sorry, which part of it?
Just the pip fruit or the apple harvest in total for the year rather than first half versus second half. Do you have a view as to what the total volumes will be relative to last year?
Yeah, we're probably reluctant to put a number on it, but we do think it's more positive than last year.
Okay. On the cruises, you've said 66 booked for next year, and you lost seven. Was it seven this year due to weather? Typically, what could you add in terms of late bookings? Could it be another 10? Was it more like low single digit?
Yeah, it's probably more low single digits, Wade, if anything. By this time for next year is mostly locked in. We might get another couple expected ones, but it's mostly locked in.
I mean, losing seven for weather, that seems quite high. The weather I thought this summer was certainly up here was pretty good. What would you normally lose for weather?
Look, yeah, we lost quite a lot at the beginning of last year. Hawke's Bay had some pretty adverse weather over Christmas and January. Around Auckland, I think you had pretty stable weather. We had some good strong winds and swell conditions in those earlier months of the cruise season. That is where they kind of fell out. It was pretty good for the remainder. Look, we would expect anyway sort of two to five a year to drop out due to those sorts of factors across the season. This coming season, the first cruise ship is not until about November, which most other years we would expect them to turn up in October.
Yep. Okay. Okay. Yeah, that's probably it from me. Thank you. Oh, actually, sorry, while I've got you. You said it was about 2/3, I think you said, or 3/4 of the increase in the container yield was due to the port pack coming back on. What was the actual sort of lift in the underlying tariffs?
Across containers?
Yeah.
I mean, there's a kind of an annual review of tariffs, I guess, and the associated levies. There was an adjustment in kind of the beginning of or end of last financial year, beginning of this financial year to, for example, our infrastructure levy. That went up from NZD 52.50- NZD 61.20 per TEU, for example. There's, I mean, that sort of ongoing element of, I guess, adjustment to those tariffs and levies and what have you. Revenue per TEU was up 11.7% from NZD 341- NZD 381.
I'm just trying to, I guess, yeah, I'm just trying to understand within that how much of it is sort of lifts and charges to container lines and the timing of that as various contracts roll on and off.
Yeah, as you know, there's no sort of one particular figure for all the lines, Andy, because they are all individually negotiated. There might be only two or three in a year. I can't give you a specific number around that.
Okay. All right. Thank you. That's all for me.
Thank you once again. To ask a question, please press star one on your phone. The next question comes from Stephen Lynn from Way to Go Limited. Please go ahead.
Yeah. Just want to ask. I was talking to the gatekeeper where the tourists come in when they have to jump back on the boat through the gate. He was saying during the Art Deco weekend, I think it's mid-February, isn't it? Art Deco weekend, about that sort of time, that people didn't want to come back on the boat because they had concerts and all sorts of stuff, right? A bit sad about having to leave at lunchtime or whatever, halfway through the day or halfway through the afternoon or evening. I just had a quick thought. I thought, well, you got six wharves there. Maybe in 10 years' time, if you plan it properly with all the cruise industries, have six ships come in for the Art Deco weekend. How about that? Anyway, that's some food for thought.
The other thing I was going to say with probably the increased apples is a lot of the apple growers pay hourly now instead of contract. There is not as much bruising or there is not as much rubbish going through the packed sheds. A lot of these orchards are getting bigger pack-outs. There is probably a reason for your increase in volumes. You are probably going to get bigger volumes because in the cool stores, I think they have six months. They keep apples for six to nine months, do not they? The other thing I was going to ask, have you filled up that warehouse, any warehouse that you had where you stored all the wood from the Central North Island?
Oh, thanks for those contributions. I think that's a good thought. Your last question there around the warehouse, yeah, we're finding various different uses for customers with that warehouse post Winstone Pulp & Paper's exit. Yeah, it's not fully at capacity. If you've got ideas or customers that you think you can throw our way, we'd be more than interested and happy to explore those opportunities. No, thank you.
Yeah. I just saw in the today, they released the export, the crop for the wine. The wine crop this year is 34%, about 34%. It has been a good wine-growing season or grape-growing season. There are no real bottles. All they do is send the bulk stuff up to Auckland and bottle up there and put on the ships. Maybe you want to put in a significant contract to some of the local wineries to form a little thing, maybe have a little bottling plant out there so you can export some bottles straight out from Napier instead of sending the bulk liquid up to Auckland. Anyway, that's just a couple of insights. Another question, you probably always ask this, anything happening about the Sea Gliders? Any more developments on the Sea Gliders?
No, no further developments on the Sea Gliders.
That's right, mate. Next time I'm in Napier, I'll go northern at the airport. Those guys at Sun Air, where they are. Hey, all good? Great result, guys. I haven't done anything about that operation I talked to you about last time at the shelter's meeting. I've just been so busy, but I'll get around to doing something to increase the tourism. All right, mate. Hey, have a good one, guys. Thanks for the special dividend.
You're welcome.
Thank you. At this time, we're showing no further questions. I'll hand the conference back to Kristen for any closing remarks.
Thank you, everyone, for joining us this morning for the Napier Port Holdings 2025 half-year results call and for your questions. I look forward to providing you with a further update on progress with our nine-month central results announcement expected to be announced towards the end of August. That ends our presentation. Have a good day and goodbye. Thank you.