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Napier Port lowers earnings foreast due to drop in cargo volume, labour shortages

Napier Port has downgraded its earnings forecast following a fall in cargo volumes, ongoing labour shortages and severe weather conditions.

Container ship in commercial port of Napier, New Zealand.
Seasonal labour shortages in New Zealand's primary sector compounded the impact of Omicron across Napier Port's second quarter, he the company said. Photo: 123rf

The company now expected its underlying profit for the six months ended March to be $16.4 million, which is 23 percent lower than the $21.3m result it recorded a year ago, following decreases in container and bulk cargo volumes of 16.6 percent and 8.7 percent respectively.

"The fall in cargo volumes over the period follows an escalation in global container-based supply chain and shipping disruptions, ongoing seasonal labour shortages compounded by pandemic-related absences across cargo-owners' workforces, and adverse local seasonal weather conditions that have impacted primary sector production," the company said in a note to the stock exchange.

It said if current market conditions persisted its full year underlying result would be between $38m and $42m, which compares with a prior forecast of about $48m.

The trading update stood in stark contrast to comments made by the port chief executive Todd Dawson at the company's annual meeting late last year, where he talked up the possibility of lifting earnings over the current financial year.

In a statement issued this morning, Dawson said Omicron outbreaks and pandemic-related port lockdowns in China had put additional pressure on global supply chains.

"The continuation of seasonal labour shortages in New Zealand's primary sector has compounded the impact of Omicron across Napier Port's second quarter, with labour shortages creating delays to production within customer operations and reduced overall production, contributing to the delay in processing of seasonal harvests and lower volumes of meat into the port," the statement said.

However, Dawson said he was optimistic that the poor weather conditions which had delayed ships getting into the port in February and March were easing.

"The trade environment for key cargoes remains positive with primary sector commodity prices remaining high across New Zealand. We are expecting a stronger second half for meat, forestry and horticulture exports, assuming industry labour is available."

These gains would be "tempered" by rising inflation, Dawson said.

The number of container chips calling into the port for the six months ended March was 102, compared with 133 a year ago.

Dry cargo, which includes wood pump and timber, and refrigerated exports fell 12.7 percent and 20 percent respectively, due to a combination of shipping disruptions, lower meat exports and a delayed apple season.

Log exports decreased 8.7 percent due to a weaker export market conditions, higher shipping conditions, and Covid-19 related disruptions at major Chinese ports.