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A barometer of economic activity13 May 2010

Andrew Moffat, CEO of the Port of Tyne spoke candidly at the port's AGM, Insight on 6th May about trading performance in 2009. He says: The port is a barometer of economic activity - internationally, nationally and regionally - and therefore, unsurprisingly, the port experienced a decline in cargo and traffic volumes in 2009.

 "Year end results for the Port of Tyne show a 16% fall in turnover, down from £50 million in 2008 to £41 million."

Yet, despite the difficult economic environment throughout 2009, the Port of Tyne has delivered a robust set of results. Income declined to £41 million, while EBITDA, despite falling 23%, remained strong at £6.6 million. The resulting profit before tax was £2.2 million.

While the Port of Tyne accounts for nearly 80% of all river tonnages, other operators are clearly important to the vibrancy of the region. Total tonnages handled on the river fell by 35% to 3 million tonnes, reflecting a decrease in the volume of all traffic handed. In particular, the port's own coal import business, whilst third party tonnages reduced primarily as a result of a fall in demand for construction materials.

Total bulk and conventional cargo tonnage was down 36%, reflecting a decline in coal imports resulting from the relatively high price of coal against other fuels which saw power generators switching, where possible, to lower cost inputs such as gas.

However, Mr Moffat emphasised that the port is already experiencing an upturn in trade. He explains "Despite the reduction in the year of coal imports, energy remains central to the future development of the port's business. The 10-year agreement signed with Drax Power in Q4 2009 represents a major long term investment that will take full advantage of the Port of Tyne's excellent deep water berths, facilities, manpower and rail connectivity.

"The agreement is for the provision of handling and covered storage facilities for between 0.5 million and 1.4 million tonnes per annum of imported biomass and involves a £16 million investment by the port."

In addition to the Drax agreement, MGT Power announced plans last August to build their Tyne Renewable Energy plant on the port's north bank estate in North Shields. Subject to planning approval, this plant is expected to burn over 2 million tonnes of biomass per annum.

At the end of 2009, the Engineering Business, now a subsidiary of Dutch-based IHC, located its operations in a 7,500 square metre warehouse behind the port's 750 metre long Riverside Quay. Mr Moffat says: "This means for the first time the port will be handling project cargo associated with the significant and growing off-shore sector".

The good news is that, given the port's status as a barometer of economic activity, the Port of Tyne is beginning to see the beginnings of recovery in trade.

Despite last year's global downturn in the demand for cars which resulted in a 31% reduction in the number of cars being handled, the Port of Tyne remained the 14th largest car port in Europe.

Says Mr Moffat: "As the result of the initiatives taken by various governments to assist the level of consumer demand for cars, the port started to see a more positive trend towards Q4 2009 and in Q1 this year, car volumes are up 31% against the same period last year.

"We are also nearing the completion of an 11 acre car terminal on our south bank estate for Hoegh to use as a transhipment hub to help improve the efficiency of their shipping operations".

Port of Tyne Logistics saw a fall in container volumes during 2009, due to both the decrease in consumer demand and the fact that historically, containers coming through the port include a significant level of imported automotive parts. Activity levels are now on a more positive upward trend with container volumes in Q1 2010 up 44% against the comparable period in 2009. This trend is expected to continue now that JML have moved their operations from south east England to the Port of Tyne.

With the move, JML, one of the port's tenants, and a world leader in retain screen promotions as well as a major force in TV home shopping, have not only massively increased their presence but is expected to increase their container volumes through the port during 2010.

Cruise and Ferry passenger numbers through the port's International Passenger Terminal saw a fall of 10% in 2009. Mr Moffat says: "Since the closure of the Newcastle Bergen route in 2008, we have been working with strategic partners to reopen the route. In fact, the recent travel disruption caused by volcanic ash from Iceland has had a positive impact on the ferry business. DFDS enjoyed a boost in passenger bookings and a one-off sailing between Stavanger and the Tyne highlighted not only the importance of geographical and trade links between the region and Norway but also the need to re-establish a permanent service."

In talking about the future outlook for the port, Mr Moffat announced the recent organisational changes and developments taking place within the port. He says: "Our organisational changes and developments are reflected in many ways, including the appointments of Ian Gibson as Director of the centralised Logistics operation, John Hudson as Chief Finance Officer and Steven Harrison as Chief Operating Officer, both John and Steven have extensive private and non-ports sector experience. All of these initiatives are designed to drive improvements in the performance of the business, and to ensure the organisation is well positioned to take advantage of growth opportunities, as they arise."

Mr Moffat explains "Already this year activity levels across most business areas, with the exception of imported coal, are showing signs of recovery.

"There are, of course, longer term opportunities and the announcement in January by the Crown Estate, awarding Round 3 of the offshore wind development rights, is also of major significance with around 9GW of power planned to be generated by offshore wind energy plants. This will generate a demand for port capacity to manufacture, assemble, service and maintain these wind farms, and businesses located on the banks of the river, including the Port of Tyne, are well placed to benefit from the development of this source of renewable energy."

Another positive development for both the region and the Port of Tyne is the recent announcement that the Nissan plant at Sunderland is to manufacture both the electric battery and assemble the first electric car, the Leaf, from 2013.

Although trading in 2010 has shown improvement, overall it is expected that the economic climate will continue to be as challenging as it was last year. To support its customers and all river users, the Port of Tyne has maintained its Schedule of Conservancy Charges at 2009 levels; and has been able to do this with the support of everyone at the Port by maintaining 2009 pay levels into 2010.

"General improvements in economic activity are now being recorded and starting to have a positive impact on 2010 trading levels, says Mr Moffat "and the port continues to be well placed to exploit and is, in fact exploiting, new opportunities through continued investment."

To view the Port of Tyne Annual Review 2009, click here

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