Auckland mayor Phil Goff says changes coming to port board, focus on ‘way port is operated’

Auckland mayor Phil Goff has declined an opportunity to express confidence in the Ports of Auckland board of directors, saying it is “in transition with major changes” to its line-up.

Those changes are two recently appointed directors to replace retired governors, with a search under way for three more. Two are also to fill retirement vacancies, including that of former chairwoman Liz Coutts.

Four sitting directors continue on, including new chairman Bill Osborne, appointed in 2017.

The port company, the country’s main imports gateway, is owned by Auckland Council.

Asked by the Herald if it was a concern to him that port directors appeared to have little or no depth of port or freight sector experience, the mayor said “there are a number of areas where the ports board needed strengthening”.

“I was clear one of these areas was health and safety and we have now appointed Hazel Armstrong, who has strong specific skills and experience in the area of health and safety, which is a critical area requiring change in culture at the ports.

“She will be focused on that area.”

Armstrong is a lawyer. She and NZTE chief executive Peter Chrisp were the two recent appointments to the ports’ board.

Goff said three vacancies were in the process of being filled.

“We will be looking to ensure there is a right mix of skills as we look to what changes need to be made in the way the ports is operated.

“The mix of skills will include strong commercial and logistical skills as well as strong experience in governance and in oversight of the performance of management.”

Ports of Auckland is in the spotlight for low productivity during an upsurge in global container shipping, fuelling supply chain congestion throughout the country, and for its poor health and safety record. It’s also turned in disappointing financial results and dividend returns to Auckland ratepayers and its capital intensive container terminal automation project – started in 2016 and yet to be fully implemented – is on Goff’s radar.

With port leaders asked to “please explain” at a major council meeting this week to consider the ports’ half year financial results and second quarter achievements, the Herald put questions to Goff, including whether he had confidence in the port board and its chief executive Tony Gibson.

Goff was also asked if he was satisfied port directors had sufficient oversight of the work of Gibson and senior management.

He said in line with the Port Companies Act, under which the port operates, it was the responsibility of the board “to exercise governance over decisions made by, and the performance of the port’s management”.

“I have been clear to date there are significant concerns around the performance of the ports to act in a number of areas, including health and safety, responsiveness, accountability and performance.

“The board is currently in transition, with major changes to its membership. I expect the refreshed board to exercise strong oversight and to take the actions necessary to ensure improved performance from the port.”

Asked if he had confidence in Gibson and if the chief executive’s job was under review by the council, Goff said the council did not appoint or remove the chief executive, management or employees at the port.

“I have made it clear to the chairs of the ports, it is my expectation the board holds management to account where necessary and exercises the appropriate oversight.”

Before councillors and port leaders held a closed door discussion on Tuesday, the committee which oversees council-controlled entities heard some bad news about dividend returns to the council.

The port had budgeted to pay $10.6m in dividends to the council in 2020-2021, made up of a $9.7m 2019-2020 final dividend and a $900,000 interim dividend for 2021. The actual 2019-2020 final dividend was $4.6m. No interim dividend was paid this year and no further dividends were forecast for the remainder.

Council officials’ guidance to councillors on this news tapped right into growing criticism of the council’s failure to demand more performance accountability from the port.

Their report to councillors said: “The decreased dividend payments forecast for FY21 do not have an impact on the council group’s financial position, as dividends are inter-company payments that are eliminated for group consolidation purposes”.

On the port’s weak half year results, officials said: “Despite being lower than the comparative period last year, (they) were in line with the emergency budget and therefore do not have a significant impact on council’s financial position”.

Covid-19 has punched a $1 billion hole in Auckland Council’s finances, a figure predicted to balloon.

The ports’ 2021 second quarter results showed four lost time injuries against an annual target of zero; a crane rate (container lifts on and off a ship an hour) of 24.6 against an annual target of 32; a ship rate (containers moved on and off ships per hour) of 37.5 against an annual target of 75; a revenue increase of -6.8 per cent against an annual target of 0.3 per cent.

Net profit after tax in quarter two was $9.5m against an annual target of $20.4. Return on equity performance indicators exceeded annual targets.

Earlier this month unaudited figures for the six months to December 31, showed a 20.8 per cent decrease in net profit after tax to $13.6 million, a 7.3 per cent fall in revenue to $114.1m, and a 12.4 per cent reduction in container volumes to 416,173 TEUs compared to the same period last year.

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