New Zealand Professional Investment Services Firm

Forsyth Barr

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Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Napier Port Challenging Second Quarter</h2>
Napier Port (NPH) has materially downgraded its FY22 earnings guidance while publishing its 2Q22 volumes. It now expects EBITDA of NZ$38m-NZ$42m, down from the previous +10% lift on FY21 EBITDA of NZ$43.8m (Forsyth Barr: NZ$49.8m). At the mid-point this means a c.-17% downgrade. NPH is very exposed to forestry and pip-fruit exports. This&nbsp;cargo&nbsp;concentration adds risk and increases earnings volatility, as evidenced by this trading update. &nbsp;
Weaker 2Q volumes
Weaker profit progress through 2Q22 reflects a material decline in cargo volumes through the quarter. Containers fell -23% against the prior year, while bulk cargo (predominantly logs) were down -21%. Container vessel calls fell 19 to 49 with the average container exchange increasing +7% to 1,224 per vessel. The company references a number of drivers of the slower volume backdrop:
<ul>
<li>Shipping schedule disruption exacerbated in recent weeks with Omicron outbreaks and port lockdowns in China</li>
<li>Extreme weather conditions that have impacted primary sector production</li>
<li>Ongoing seasonal labour shortages</li>
</ul>
Management anticipates a stronger second half for meat, forestry and horticulture exports assuming that industry labour is available.
Cargo volumes table
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
&nbsp;
</td>
<td style="width: 41.8pt; height: 12.75pt;">
2Q22
</td>
<td style="width: 41.8pt; height: 12.75pt;">
2Q21
</td>
<td style="width: 41.8pt; height: 12.75pt;">
Chg
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Containers (TEU ‘000)
</td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Exports
</td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Wood pulp &amp; timber
</td>
<td style="width: 41.8pt; height: 12.75pt;">
11
</td>
<td style="width: 41.8pt; height: 12.75pt;">
13
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-15%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Canned food/other F&amp;B
</td>
<td style="width: 41.8pt; height: 12.75pt;">
2
</td>
<td style="width: 41.8pt; height: 12.75pt;">
2
</td>
<td style="width: 41.8pt; height: 12.75pt;">
0%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Other dry
</td>
<td style="width: 41.8pt; height: 12.75pt;">
2
</td>
<td style="width: 41.8pt; height: 12.75pt;">
3
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-33%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Apples &amp; pears
</td>
<td style="width: 41.8pt; height: 12.75pt;">
3
</td>
<td style="width: 41.8pt; height: 12.75pt;">
5
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-40%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Meat
</td>
<td style="width: 41.8pt; height: 12.75pt;">
4
</td>
<td style="width: 41.8pt; height: 12.75pt;">
5
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-20%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Fresh &amp; other chilled produce
</td>
<td style="width: 41.8pt; height: 12.75pt;">
5
</td>
<td style="width: 41.8pt; height: 12.75pt;">
6
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-17%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Empty
</td>
<td style="width: 41.8pt; height: 12.75pt;">
2
</td>
<td style="width: 41.8pt; height: 12.75pt;">
1
</td>
<td style="width: 41.8pt; height: 12.75pt;">
100%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Total exports
</td>
<td style="width: 41.8pt; height: 12.75pt;">
28
</td>
<td style="width: 41.8pt; height: 12.75pt;">
34
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-18%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Imports
</td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Dry
</td>
<td style="width: 41.8pt; height: 12.75pt;">
7
</td>
<td style="width: 41.8pt; height: 12.75pt;">
7
</td>
<td style="width: 41.8pt; height: 12.75pt;">
0%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Reefer
</td>
<td style="width: 41.8pt; height: 12.75pt;">
1
</td>
<td style="width: 41.8pt; height: 12.75pt;">
1
</td>
<td style="width: 41.8pt; height: 12.75pt;">
0%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Empty
</td>
<td style="width: 41.8pt; height: 12.75pt;">
21
</td>
<td style="width: 41.8pt; height: 12.75pt;">
30
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-30%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Total imports
</td>
<td style="width: 41.8pt; height: 12.75pt;">
28
</td>
<td style="width: 41.8pt; height: 12.75pt;">
38
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-26%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Other containers
</td>
<td style="width: 41.8pt; height: 12.75pt;">
3
</td>
<td style="width: 41.8pt; height: 12.75pt;">
6
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-50%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 13.5pt;">
Total containers
</td>
<td style="width: 41.8pt; height: 13.5pt;">
60
</td>
<td style="width: 41.8pt; height: 13.5pt;">
78
</td>
<td style="width: 41.8pt; height: 13.5pt;">
-23%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 13.5pt;"></td>
<td style="width: 41.8pt; height: 13.5pt;"></td>
<td style="width: 41.8pt; height: 13.5pt;"></td>
<td style="width: 41.8pt; height: 13.5pt;"></td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Bulk (T ‘000)
</td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
<td style="width: 41.8pt; height: 12.75pt;"></td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Logs
</td>
<td style="width: 41.8pt; height: 12.75pt;">
581
</td>
<td style="width: 41.8pt; height: 12.75pt;">
731
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-21%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Other exports
</td>
<td style="width: 41.8pt; height: 12.75pt;">
26
</td>
<td style="width: 41.8pt; height: 12.75pt;">
45
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-42%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 12.75pt;">
Imports
</td>
<td style="width: 41.8pt; height: 12.75pt;">
117
</td>
<td style="width: 41.8pt; height: 12.75pt;">
144
</td>
<td style="width: 41.8pt; height: 12.75pt;">
-19%
</td>
</tr>
<tr>
<td style="width: 111.8pt; height: 13.5pt;">
Total bulk
</td>
<td style="width: 41.8pt; height: 13.5pt;">
724
</td>
<td style="width: 41.8pt; height: 13.5pt;">
920
</td>
<td style="width: 41.8pt; height: 13.5pt;">
-21%
</td>
</tr>
</tbody>
</table>
Source: NPH, Forsyth Barr analysis

Napier Port Challenging Second Quarter
Napier Port (NPH) has materially downgraded its FY22 earnings guidance while publishing its 2Q22 volumes. It now expects EBITDA of NZ$38m-NZ$42m, down from the previous +10% lift on FY21 EBITDA of NZ$43.8m (Forsyth Barr: NZ$49.8m). At the mid-point this means a c.-17% downgrade. NPH is very exposed to forestry and pip-fruit exports. This&nbsp;cargo&nbsp;concentration adds risk and increases earnings volatility, as evidenced by this trading update. &nbsp;
Weaker 2Q volumes
Weaker profit progress through 2Q22 reflects a material decline in cargo volumes through the quarter. Containers fell -23% against the prior year, while bulk cargo (predominantly logs) were down -21%. Container vessel calls fell 19 to 49 with the average container exchange increasing +7% to 1,224 per vessel. The company references a number of drivers of the slower volume backdrop:

Shipping schedule disruption exacerbated in recent weeks with Omicron outbreaks and port lockdowns in China
Extreme weather conditions that have impacted primary sector production
Ongoing seasonal labour shortages

Management anticipates a stronger second half for meat, forestry and horticulture exports assuming that industry labour is available.
Cargo volumes table




&nbsp;


2Q22


2Q21


Chg




Containers (TEU ‘000)







Exports







Wood pulp &amp; timber


11


13


-15%




Canned food/other F&amp;B


2


2


0%




Other dry


2


3


-33%




Apples &amp; pears


3


5


-40%




Meat


4


5


-20%




Fresh &amp; other chilled produce


5


6


-17%




Empty


2


1


100%




Total exports


28


34


-18%




Imports







Dry


7


7


0%




Reefer


1


1


0%




Empty


21


30


-30%




Total imports


28


38


-26%




Other containers


3


6


-50%




Total containers


60


78


-23%










Bulk (T ‘000)







Logs


581


731


-21%




Other exports


26


45


-42%




Imports


117


144


-19%




Total bulk


724


920


-21%




Source: NPH, Forsyth Barr analysis

Napier Port (NPH.NZ): Challenging Second Quarter; Guidance Downgrade