By Theo van de Kletersteeg
Canadian Sailings has recently completed a study comparing financial and other performance data related to federally-operated Canadian ports from 2011 to 2012. Ports of Toronto and Oshawa were not included in the study. Toronto was not included because its financial statements include the operations of Toronto Island Airport, and are therefore not comparable to those of other ACPA ports. Oshawa was not included because we lacked comparative data for 2011 before it became a Port Authority. The study is meant to provide comparative data for the benefit of the management teams of the various ports, which may find actionable items among the data.
In calendar year 2012, ACPA Ports produced aggregate revenues of $ 464.3 million, up 6.0 per cent from $438.3 million in 2011. Operating income of $126.6 million represented an increase of 3.8 per cent over 2011 aggregate operating income of $121.9 million.
By way of comparison, Statistics Canada reported that for the calendar year ended December 31, 2011 (the latest year for which such data are available), Canadian-controlled and foreign-controlled corporations doing business in Canada increased their revenues by 7.9 per cent, to $3.46 trillion, and increased their operating profit by 14.5 per cent to $342.6 billion.
What is the profile of a “typical” ACPA Port?
There is no “typical” ACPA Port because each port is significantly different from the next, resulting from geographic location, size and economic opportunity. Moreover, with Vancouver handing some 40 per cent of all ACPA cargo handled, but responsible for almost two thirds of the comprehensive income generated by all ACPA ports, Vancouver’s stats swamp everyone else’s. Recognizing those limitations, and eliminating only Oshawa from the calculations because of insufficient data for 2011, a “typical” ACPA port handled 19.2 million tonnes of cargo in 2012, up 2.4 per cent from 2011, producing revenues of $28.9 million, up 5.6 per cent from 2011, and an operating profit of $7.9 million, up 3.6 per cent from 2011. At $9.0 million, 2012 “comprehensive” income topped 2011’s comprehensive income of $4.6 million by 94.9 per cent. At $303,363, CEO pay was 4.5 per cent higher than in 2011. “Comprehensive” return on assets stood at 5.2 per cent in 2012, while “comprehensive” return on equity was 7.0 per cent.
If we were to exclude both Oshawa’s and Vancouver’s numbers from the calculations (see figure 2), the results change dramatically: Average tonnage handled increased from 11.8 million tonnes in 2011 to 12.2 million tonnes in 2012, while revenues increased from 17.1 to 18.3 million. Operating income remained the same at $3.3 million. CEO pay increased from $267,100 to $277,900.
Smallest and largest
Saguenay, the smallest in terms of tonnage, produced $86,900 of “comprehensive” net profits on revenues of $1.8 million in 2012. At $6.16, its revenues per tonne of cargo were the highest, and enabled it to afford the highest employee cost per tonne of cargo, $2.51. By contrast, Vancouver, the largest in terms of tonnage, produced “comprehensive” net profits of $89.7 million on revenues of $188.6 million. Its revenues per tonne of $1.52 were 2 per cent above the national average and at 24 cents per tonne, its employee cost per tonne of cargo was 29 per cent below the nationwide average.
Highest returns on assets and equity
In this category, top marks for the highest comprehensive return on equity went to Prince Rupert (21.0 per cent), Quebec (13.3 per cent), Sept Iles (11.1 per cent), and Vancouver (8.8 per cent). Top marks for the highest return on assets went to Prince Rupert (14.6 per cent), Vancouver (7.3 per cent), Quebec (6.9 per cent) and St. John’s (5.3 per cent).
With a revenue growth rate of 40.2 per cent, Port of Prince Rupert underwent the most robust growth of any Canadian federal Port, well above the national average of 5.6 per cent. Quebec (16.8 per cent), Thunder Bay (13.4 per cent) and St. John’s (13.0 per cent) also showed strong growth. Three Port Authorities reported declining revenues.
Employee cost to move one tonne of cargo (see figure 4)
There were very significant differences between Ports in terms of income performance. In 2012, three ports produced negative operating income, versus two in 2011. However, whereas the aggregate negative incomes in 2011 amounted to $224,400, the 2012 number had increased to $1.9 million. Only one port produced negative “comprehensive” net income. Ports that increased their comprehensive income by more than $1 million were Montreal (41.3 million), Vancouver ($22.8 million), Prince Rupert ($5.6 million) and Quebec ($4.2 million). “Comprehensive” losses result mostly as a result of a re-evaluation of the value of the employer’s pension assets in relation to its pension obligations.
Revenues per tonne and operating income per tonne (see figure 5 and 6)
Average revenues per tonne of cargo handled declined slightly from $1.55 in 2011 to $1.51 in 2012. The sharpest increases were registered by Prince Rupert (21.3 per cent), Belledune (19.0 per cent), and St. John’s (18.3 per cent). The sharpest decreases were registered by Port Alberni (19.0 per cent), and Trois Rivieres (6.7 per cent).
Average operating income per tonne of cargo remained unchanged between 2011 and 2012 at $0.43/tonne. However, results for individual Port Authorities varied widely.
Only three ports do not own an investment portfolio from which they derive investment income, or own one that produces insignificant income. Comparing 2012 to 2011, aggregate investment income remained unchanged at $7.3 million. With investment income of $3.8 million, Port of Montreal generated by far the highest investment income, followed by Port of Thunder Bay ($762,200).
Capital expenditures (see figure 8)
In 2012, aggregate net capital expenditures of all federal ports rose sharply from $156.5 million to $202.9 million, representing an addition to the combined asset base of 7.4 per cent. It should be noted that the reported capital expenditures are only those that, from an accounting point of view, were paid for or were the obligation of individual Port Authorities, and do not include capital expenditures paid for by way of grants or contributions from federal or provincial governments. The largest year-over-year increases in capital expenditures were incurred by Saint John (355 per cent), Prince Rupert (183 per cent), and St. John’s (130 per cent). Relative to their total asset base, the largest investments were made by Port Alberni (21.8 per cent), Sept Iles (13.9 per cent), and Saguenay (10.2 per cent).
One might also wonder how much of an investment is required to handle one tonne of cargo, much like one might want to know how much it costs to “create” one job. Typically, one would like to address this question by referring to a series of data that spans many years. Our data, however, are limited to the three years from 2010 to 2012 and should be viewed with some caution, partly because the data range is short. Also, one would expect that larger ports benefit from economies of scale, whereas smaller ports do not, which means that smaller ports typically have to spend more for every tonne of cargo that is handled. Lastly, the operations of some ports span different activities, not just cargo handling, and significant capital expenditures may have been spent in support of those “other” operations. Recognizing those limitations, the biggest “bang for the buck” was obtained by Windsor, which handled 15.8 million tonnes of cargo during the above time period, but incurred capital expenditures of only $386,000, for capital expenditures of $0.02 per tonne. At the other end of the spectrum was Saguenay, at $9.45 per tonne. In Western Canada, the average was $0.44 per tonne, whereas the average in Eastern Canada was $0.79 per tonne.
Salaries, wages and benefits
During 2012, salaries, wages and benefits grew by an average rate of 4.6 per cent. However, on a per tonne basis, compensation rose by a more modest 2.2 per cent during 2012.
CEO pay and Board compensation
Average CEO pay rose by 4.5 per cent in 2012, a sharp decline compared to 2011’s increase of 11.1 per cent. When measured on a per tonne basis, CEO compensation remained unchanged at 3.45 cents per tonne. Aggregate CEO compensation for all of the federal ports in the study (except Oshawa) in 2012 was $4,853,800, for an average of $303,360 per Port Authority. Lowest CEO compensation was $166,600, while the highest paid CEO earned $686,000. The highest year-over-year pay increase was 192 per cent, while at the other end of the spectrum, the deepest cut in CEO pay was 44.0 per cent. CEO compensation of four Port Authorities was reduced. Eight Port Authorities increased CEO pay by 8 per cent or more.
Board compensation in 2012 amounted to as much as 62.9 per cent of CEO compensation. Board compensation declined by 1.7 per cent in 2012.