LPC

[Scuffer]

Snoop listen dog I'm not a bitter ex shareholder far from it who says that it can't be sold they are more than a few ways to skin a cat you should know that the company could be broken up and parts sold off Voltaire said we live in the best of possible worlds so anything is possible it just has to be thought of before it can come to pass yes you're right they are insured for the damage and it will be repaired but the council are the ones wanting the cash lots of council buildings were either uninsured or under insured what could otago do if LPC separated into parts and the council were just landlords LPC would still exist and otago would get 15% of the rental

[Snoopy]

What will be interesting is whether LPC out performs POT.I hold POT and Snoopy appeared to buy my LPC shares a few years ago.
Lets say LPC at $2.00 and POT at $9.60.
I note there are 10,000 LPC shares for sale at $2.05 and 3110 POT at $9.70

With your astute purchase of POT Percy, I would say you have outdone me since the council offered $2.80 to you and other small shareholders a few years ago.

As for going forwards from now Percy, I don't like your chances. There are always several ways of looking at valuations. But last time LPC was 'in play' offers in this sector were being pitched at around ten times EBITDA. EBITDA for FY2011 was $32.229m. And no that EBITDA doesn't include any earthquake impact payments. So I calculate a mid range takeover price based on 102.261 million shares on issue of:

$32.229m x 10/ 102.261m = $3.15

CCHL are miserable sods and will pitch any offer right at the bottom end of the fair valuation range. Let's make it a round figure of $3-. Take away the takeover premium and I would say normal market value for LPC is around $2.50. You could say LPC has gone nowhere over the last five years in valuation terms. But those earlier takeover offers were based on exploiting synergies with the Port of Otago. This $3 valuation is for LPC on its own. So the port has been making operational progress, merger or not. Now all that remains to be seen is which of you sharechatters are going to snap up those shares on offer at $2.05 on Monday morning? I would if I hadn't just bought some last week.

SNOOPY

[percy]

Going forward I think LPC prospects are excellent.They have the oPportunity to rebuild for the future.With insurance,ChCh city holdings wanting best return on funds, and best return on assets,I think wise decissions will be made.Only port for the coal trade,import trade,and oil imports .Should they be able to build some cool stores near the wharfs exports of dairy,meat and fresh produce will increase.Crazy but produce exporters only use ports where cool stores are next to the wharf. A merger with either Auckland or Tauranga would have worked/or would work for LPC benefit.I think Peter Davie appears to have brains.Otago will not benefit LPC in any way.Otago only looking after Port Chamers interests.which are limited.
POT. Valuation.? no idea,sorry,however NZ's leading export port [better profits on imports] who is using inland port to balance trade.Management the best in NZ,and should overseas shippers use only one NZ port it will be POT. This is starting to happen.One expects POT to be NZ's hub rather than an Aussie port.
At present the mommetum is in POT's favour.I would expect this will continue . I would find it very hard to sell any of my POT shares,bearing in mind I could buy nearly five times as many LPC shares.I may end up buying some LPC shares but would be in addition to my POT shares.May I recommend POT annual report as an excellent read,and it gives a better understanding of NZ port business.

[Scuffer]

I would like to know why container rates across the wharf in NZ are approx. $220 and in Aussie are twice the price surely that would solve all the problems at the port of Auckland the council would make the profit required. It's a worrying fact that this issue could escalate to all ports in NZ, it's the last thing ChCh needs whilst trying to rebuild, indirectly international shipping lines are controlling our ports. There are three ways for a port to increase profit, faster efficient turn around, reducing wages and increasing across the wharf rates, the shipping companies are controlling these rates by playing NZ ports against each other to the detriment of all NZ, I say it's time this stopped, the repercussions are indeed far traveling, the ports need to take back control of how much they charge why should we subsidise freight.

[Snoopy]

I would like to know why container rates across the wharf in NZ are approx. $220 and in Aussie are twice the price

You know the answer Scuffer, because you gave it later on in your post!

"the shipping companies are controlling these rates by playing NZ ports against each other to the detriment of all NZ, I say it's time this stopped, the repercussions are indeed far traveling, the ports need to take back control of how much they charge why should we subsidise freight."

I take issue with your subsidization comment though. NZ ports are still profitable, even with a charge of $220 to clear each container.

There are three ways for a port to increase profit, faster efficient turn around, reducing wages and increasing across the wharf rates,

I would argue there is a fourth way to boost port profitability. Better match your imports and exports, so that you don't have to ship out or ship in lots of empty containers.

the shipping companies are controlling these rates by playing NZ ports against each other to the detriment of all NZ,

The importers and exporters would disagree with you. The lower the port charge, the bigger the slice of profit left for the importer or exporter.

SNOOPY

[Scuffer]

Snoop of course you are right in ports are still profitable in NZ but some are really struggling and i think in time a lot will become just regional ports. Do you think that the way the law is set up is fair when shipping companies can drive ports in NZ against each other the way they are doing, Timaru is a perfect example they spent up large only to lose out to Lyttelton, maybe they should have tied said shipping line into a binding contract.
The matching of imports exports is a good idea but I heard that ships carry empty containers in NZ simply because they have nowhere to put them, although they seemed to find plenty of room around ChCh for containers during the worst of the quakes, I also heard this is why Auckland council want to reclaim half the harbour, Tauranga has loads of storage room for empty containers, Lyttelton is choked and hence the need for the city depot "the inland port". I suppose we need a few international ports probably three and some small regional ports, that would go to solving a lot of problems, but then it puts freight onto road and rail which are at capacity without upgrading.

I've gotta go Snoop but I do enjoy your comments and hope to carry on our discourse at another time.

[Snoopy]

Going forward I think LPC prospects are excellent.They have the opportunity to rebuild for the future. With insurance, ChCh city holdings wanting best return on funds, and best return on assets, I think wise decisions will be made.

I have been studying the LPC FY2012 annual report, and particularly the treatment of insurance payments. LPC are reportedly still in dispute with their insurers over some claims. Bizarrely all those insurance payments are forced through the income statement. So the reported annual profit for LPC need not bear any relation to the profitability of the underlying port business. Blame IFRS I guess!

The 'earthquake income' is listed in three categories: Additional costs, Insurance Income and Assets written off (that last one is usually negative, surprise surprise).

IFRS requires that port assets are written down in the year that damage occurs. But the offsetting insurance payments are only recognized when there is near certainty they will flow into the balance sheet.

LPC was fully insured for replacement value up to current building standards. They also had income protection insurance. I was wondering who pays for the temporary repairs to get the port operational?

If LPC has full replacement cover, then probably the insurance company does not want to pay once to get the port operational and again when the wharf is finally rebuilt properly. Income protection insurance will pay for lost income, for a time. But they won't pay for the restoration of assets (the wharves) so that income can be restored. How do businesses hit by the earthquake handle this insurance conundrum?

SNOOPY

[percy]

Insurance.?? LPC will need the meanest nastiest lawyers in NZ.Trouble is those bast'rds work for the insurance companies.I have wondered what the value of "Barney" wharfes is.Building new wharfes in the hope they will get used was madness.If they weren't earning I can't see insurance companies coming up with full replacement cover.People I have spoken to have no faith in insurance companies.Income protection insurance has proven to be a joke.So what LPC gets fom its insurance companies is impossible to try and figure out.
The down turn in coal is not too bad as LPC earns most of its profits from imports.See a buyer there at $2.20.
I have not followed for awhile as I have held onto my POT,but would think they are still good value.

[Snoopy]

I was wondering who pays for the temporary repairs to get the port operational?

If LPC has full replacement cover, then probably the insurance company does not want to pay once to get the port operational and again when the wharf is finally rebuilt properly. Income protection insurance will pay for lost income, for a time. But they won't pay for the restoration of assets (the wharves) so that income can be restored. How do businesses hit by the earthquake handle this insurance conundrum?

Those attending the AGM today got the answer to my question. The $52m in temporary repairs incurred in getting the port operational is covered by the very good quality insurance policies that LPC held. $35m has already been received and the $15.2m is certain enough to declare it a done deal.

The forecast profit plunge to $13m-$15m for FY2013 is I think not necessarily as bad as it sounds. The loss of cruise ship revenue, previously covered by business interruption insurance, was expected. The Spring Creek Mine may be gone. But most of the LPC coal comes from Stockton, so the downturn in coal trade is not as great as I for one expected. Furthermore the 'record' earthquake adjusted profit of $17.0m for FY2012 contains some tax adjustments that I will need to investigate further. At this stage this FY2012 net after tax profit I believe to be overstated by up to $4m because of these tax issues, on a like for like comparison basis with pre-earthquake result years.

A question was put as to the progress of the new land reclaimation, which is already being used for used car storage. 3Ha is complete already. MD Peter Davie estimated that rubble from the CBD would be good for 4Ha of the 10Ha land to be reclaimed. The rest would be able to be sourced from rubble from Port Hills rock clearing, particularly around the Summit road. So it looks like the whole reclamation will be achieved at a reasonable cost.

The representatives from Christchurch City Holdings and Port of Otago were uncharacteristically vocal at question time. Councillor Corbett for CCH let it be known that the Christchurch City Council was keen to see a return of dividends. Later in the meeting two individual shareholders piped up and said that if LPC needed their capital generated to redevelop the port they should take that option, and keep the dividend suspended!

The Port of Otago man got stuck into the board for their relatively poor workplace safety record over the last year. He also asked about the total insurance proceeds that LPC was likely to receive. He wasn't the only one to ask about this and Chairman Fisher became slightly agitated at this continuing line of questioning. The "insurance deal" is apparently that LPC will be paid out in dribs and drabs as the reconstruction work is done. That being the methodology, there is no overall insurance payment figure available, and indeed the board are not allowed to hold back this kind of information from public shareholders if they did possess it. CFO Kathy Meads has been assigned to oversee the insurance claim process and a team of half a dozen are working through these issues. The full rebuild of the port up to modern earthquake standards could be up to seven years away.

The overall message was that there will be no "insurance windfall". Port reconstruction costs are liable to be greater than the insurance payouts because LPC will be building a larger capacity port to cater for the demands of the 21st century and beyond. Of course they will end up with a thoroughly modern port, albeit one that is not insured for natural disasters in the future. That has to be the big uncertainty that hangs over LPC.

SNOOPY

discl: hold LPC

[percy]

SNOOPY.
Thank you for your report.I looked up the board and am impressed.ChCh City Holdings and Port of Otago having to ask questions at the agm is music to my ears.With strong board and good management the future looks good.Sorry, but the two major shareholders do come with poor historys of self interest,which in the past have not been in LPC's best interest.Having to get councillor Barry Corbett to ask the questions has made my day>!!!!!
I would think any investment greater than insurance payouts will be well thought out and place LPC in a good position as South Island's leading port.