Napier Port Holdings Limited (NPH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Napier port Holdings Limited 2026 9 Month Results Announcement. [Operator Instructions] I would now like to hand the conference over to Kristen Lie, Napier port Chief Financial Officer. Please go ahead.

Thank you all for joining us this morning. I'm Kristen Lie, CFO at Napier Port, and I'm joined on the call this morning by Todd Dawson, Chief Executive. Earlier this morning, we released our unaudited interim third quarter and 9 months year-to-date results. In terms of the format for this call, we will provide a high-level overview of the results, and then we'll open up the line for any relevant questions. Let's get straight into it, and I'll now hand over to Todd to get things underway.

Thanks, Kristen, and good morning, everyone, and thank you for joining us today. I'm pleased to report that Napier Port has continued to deliver strong financial performance through the third quarter. 9 months revenue of $134 million, up 11.1% on the same period last year. Our results from operating activities increased 16.6% to $59.3 million, while underlying net profit after tax increased 27.8% to $29.6 million. This represents another strong result and reflects our continued focus on growth, yield management, productivity and operational performance. There are 3 key factors behind today's results. First, we have continued to see positive trends across our container cargo portfolio. Refrigerated exports, including apples and meat have performed well following favorable growing and harvest conditions, while dry cargo categories have also contributed positively. Although overall container volume growth in the year has moderated following the strong growth experienced during 2025, container activity has continued to consolidate and grow. Second, our long-term strategy of investing in infrastructure services and improved operating capability continues to deliver value alongside our active yield management strategies. We have continued to improve revenue per unit and improved our returns across both our container and bulk businesses through enhancing the services we provide to customers and improving our revenue yields whilst delivering ongoing service and capability improvements for customers. Third, we continue to maintain a disciplined approach to cost management. While operating expenses have increased over the period, revenue growth has continued to outpace increases in costs, allowing us to deliver another period of positive margin growth and operating returns. Across our strategic investment program, we've made good progress also. Our new jointly owned dredge vessel was successfully launched into the water at the end of July and is receiving its final fit-out prior to its delivery to New Zealand, which remains on schedule for later this calendar year. New short tension mooring units are now installed and operational, while our container terminal transformation program has entered an exciting new phase with autonomous truck trials underway ahead of broader operational deployment over the next 6 months. These investments are enhancing Napier Port's capability, providing increased capacity, resilience and further operating efficiencies while positioning us to support future growth. I'll now hand over to Kristen to provide more detail on the financial results.

Thank you, Todd. With our third quarter trade volume release in July, we reported container volumes for the quarter 2.5% lower than the strong comparative period in the prior year. The decrease in container volumes for the quarter reflected a higher proportion of empty container repositioning activity occurring earlier in this financial year. For the 9-month period, container volumes increased 1% to 196,000 TEU -- within this total increase, empty container movements have been relatively flat, and we've seen a 17% reduction in transshipments and DLRs and a 5% total increase in higher-yielding fully laden containers, both dry and reefers, most notably across apples, meat, fertilizer, timber and paper products. Despite lower total volumes, third quarter container services revenue increased 21.9% to $35.8 million. For the 9 months, container services revenue increased 18.8% to $85.7 million. Average revenue per TEU increased 17.7% to $439 for the 9 months and is driven by container and cargo mix improvements, tariff and levy increases together with a higher contribution from depot activities. Bulk cargo volumes were 4.6% lower in the third quarter and 2.5% lower for the 9 months compared to the same period last year. Log export volumes remained lower than the previous year as exporters continue to face challenging global market conditions. Log exports for the 9 months were down 5.2% to 1.92 million tons. This was partially offset by stronger fertilizer imports and exports. Bulk cargo revenue for the quarter was marginally reduced at $12.2 million. And for the 9 months, bulk cargo revenue increased 3.8% to $39.2 million. Average revenue per ton increased 6.4% to $16.14, reflecting customer and cargo mix changes together with tariff and levy increases. cruise season concluded in April with 55 calls and more than 88,000 passengers, contributing $6.5 million in revenue compared with $8.3 million in the prior comparative period. This reflects fewer cruise vessels across New Zealand. As noted in our market release, there are currently 50 cruise bookings scheduled for the upcoming 2027 season. Despite the current retrenchment in cruise activity being seen across Australia and New Zealand cruise markets and flat booking numbers, we are seeing a step-up in bookings for the 2028, 2029 season. In terms of operating results, we have invested in our team to support our operational service delivery, resilience and the breadth of projects we are undertaking. We're also seeing continued cargo growth within our Viewpoint supply chain service, which is supporting revenue growth and flowing through to contracted services expense. Despite continuing points of inflationary pressure, revenue growth is translating strongly into operating profit. For the third quarter, total revenue growth of $6.5 million or 15.3%, so the result from operating activities increased $4.3 million or 24.3% to $22 million. For the 9 months, total revenue increased by $13.3 million or 11.1% and the result from operating activities increased of $8.4 million or 16.6% to $59.3 million. Reflecting the strong operating result, underlying net profit after tax increased 38.9% for the quarter to $11.7 million and 27.8% for the 9 months to $29.6 million. During the 9 months, Napier spent $44.2 million on capital assets, including the new dredge vessel, the container channel transformation program, short tension mooring technology, mobile plant replacements, major maintenance and ongoing site management works. We're expecting a further $5 million to $10 million of spend in the remainder of the current financial year. As always, actual spend is dependent upon approvals and timing. Underlying operating cash flow for the 9 months grew 8.1% to $48.6 million. And at 30 June 2026, total drawn debt was $136.5 million, up from $107 million at the end of the 2025 financial year. At June, we had $43.5 million of undrawn banking facilities available, and our total debt-to-EBITDA ratio was 1.88x, representing significant available servicing capacity to support our strategic investments. As noted at the half year results presentation, we are continuing our due diligence to support an investment decision within the next 12 months on the replacement of our crane fleet. No decisions have been made and all investment options are on the table to make the decision best suited to Napier Port's future. Replacement cranes will not be delivered within the current CapEx guidance period covering '25 to '27 financial years. I'll now hand back to Todd.

Thank you, Kristen. We continue to operate in an environment where global economic and geopolitical uncertainty creates challenges for many of our exporters. Despite this, demand for the reasons food and fiber exports has remained resilient and our diversified cargo base continues to provide stability and prospects for future growth. With the consolidation of higher container activity in the current year, we have also seen increasing interest and growth in vessel pools by container shipping lines. This saw the additional seasonal calls by Maersk with the Southern Star service and additional MSC service through to Northeast U.S.A. and Europe being added into the third quarter, which were welcomed by cargo shippers. Unfortunately, NSC is now advised that its U.S.A. and Europe direct Eagle service will cease at Napier Port late in August this year. Whilst this demonstrates the dynamic nature of global container shipping, shipping lines and new services are attractive to our cargo, and we continue to work closely with shipping lines on the evolution of services calling Napier. We remain confident in our investment strategy of improving our capacity, capabilities and operational efficiency to enhance Napier Port's long-term service offering. Our strategic investment program is progressing to plan with major milestones already achieved across the program. As these investments come into operation, they will further improve the efficiency of our operations and strengthen the service we provide to our customers. We reaffirmed today that our underlying result from operating activities for the year ending 30th September 2026 will be around the top end of our previously communicated guidance range of between $70 million and $74 million, assuming a continuation of the current operating conditions. Overall, we're pleased with the progress we've made during the first 9 months of the financial year and look forward to updating shareholders again at the full year results in November. I'll now hand back to Kristen.

Thank you. That concludes our prepared remarks. We'd like to provide the opportunity for those on the call to ask questions related to our presentation and therefore, I hand back over to the moderator to do so.

[Operator Instructions] Your first question comes from Andy Gully with Forsyth Barr.

A few questions from me, and congrats on another strong performance in terms of the further uplift in profit. First one around pricing and unit revenue growth, pretty impressive unit revenue growth if we just take out that third quarter in isolation. So very strong relative to the prior year. And I recognize your yield enhancement measures, which you referred to in the prepared remarks are clearly bearing fruit. I'm just kind of more interested in the broader backdrop when we think about where pricing is now and where you see it can get to, particularly in light of this time of the year where you your tariff schedule is going to be updated soon and you'll be communicating with your customers over the coming weeks, I suspect, in terms of the pricing backdrop for next year. Is there anything to suggest that we can't continue on with the kind of price increases or unit revenue increases that we've been generating in recent years, which has been a multiyear and pretty impressive backdrop in terms of the broader pricing backdrop when we think about FY '27 and FY '28, particularly in light of the fact that return on capital is still what I suspect is still below your expectations around WACC? Sorry, long-winded question.

Andy, Todd here. Yes, I guess what we've said in the past around, I guess, expectations moderating from levels seen around price increases. I think we still believe that to be the case. that other competitors around the port industry have been quite aggressive with their recent pricing. We're probably thinking about more of a steady approach from here. But we will obviously still take into context what other ministry partners are doing as well. The backdrop around price in terms of what the major customers like shipping lines and things are willing to tolerate at the moment has been a little bit fluctuating given that they have been gone from relatively boom times post COVID to more spare times -- but equally, some of the recent results that they are putting out are pretty impressive as well. So we're going to have to take all that into context and think about where we want to land in regards to trying to achieve that ROIC target that we've set out to achieve 5 to 10 years post. So your long-winded question has responded with a long-winded answer. And I guess we wouldn't be disclosing what we're going to be doing around our tariffs just yet, but we are taking all those factors into consideration. But underlying sort of expectation would be less aggressive than what we've seen perhaps in the past.

I guess that's a message that -- and I appreciate that answer, Todd. It's a message you've been probably been giving us for 12, 18 months, but this year has been extremely strong again. And I guess there's reasons for that and some of that will reflect some of your investment. But the message I'm getting is that it won't be as strong as this year, next year or the year after and probably on an ongoing basis. Is that fair?

Yes. I mean this year, we've obviously benefited as well from what I refer to as yield, which is that mix of cargo as much as it is around price. So that has been quite beneficial for us in terms of the uplift we're seeing, particularly things like meat and apples and going through the export on the bulk side. Obviously, there's a mix of different commercials with those and that can contribute towards the yield on the bulk if we have a more favorable customer pushing more volume through the port too.

Yes. Okay. No, that's fair. So next question just around the log market. You referred to some challenging conditions in the broader global backdrop around logs. What are you hearing from key export partners around current harvesting activity in terms of crews out in the forest, number of days, et cetera, and how that may look over the next 3 to 15 months?

It's probably hard to 15 months. But in the last few months, we've seen -- and I think we've talked about the fact that the log exports have been under pressure mainly due to fuel pricing and the cost of harvesting forests that are further afield. So they've moved crews back towards fuel price pressure. We have seen -- I think that's been reflected in the lower volumes coming through the port as well that we've talked about. But equally in the last month or so as fuel prices have come down a little bit and demand has been pretty stable in China in terms of offtake and things we actually are seeing a bit of an uptick again as well as I think that's also influenced by weather as well in terms of what they can actually harvest out of the forest dry versus wet. So we have seen a bit of an increase again, and we would expect the next few months to be relatively stable sort of 3 months out. Crystal ball gazing really to say what we expect in 15 months' time or further field.