Dynamic Business: Deloitte Top 200 Index 2024: Mixed results for New Zealand's largest firms (NZ Herald)

Dynamic Business: Deloitte Top 200 Index 2024: Mixed results for New Zealand’s largest firms (NZ Herald)

The 2024 Deloitte Top 200 Index reveals a mixed performance across key metrics, highlighting challenges as well as continued resilience among New Zealand’s largest businesses.

Total revenues for Top 200 companies increased by 4.1%, rising from $235,849 million in 2023 to $245,432m in 2024. This represents a slower pace of growth compared to the 12.4% increase in 2023.

Underlying earnings (ebitda) decreased by 8.1% year-on-year, from $32,690m in 2023 to $30,058m in 2024. This contrasts with the 8.1% increase observed in 2023.

The ebitda margin, an assessment of operating profitability as a percentage of total revenue (total ebitda/total revenue), also declined, slipping from 13.9% in 2023 to 12.2% in 2024, reflecting a 1.7% decrease.

Total profits after tax saw a sharp decline, falling by 57.2% from $11,733m in 2023 to $5,026m in 2024. This is a marked change from the 4.0% increase recorded in 2023. The net profit margin (profit after tax/total revenue) also decreased, from 5.0% in 2023 to 2.0% in 2024.

Total assets increased modestly by 3.8%, from $318,806m in 2023 to $331,076m in 2024, down from a 4.9% increase the previous year.

The No 1 spot in the Top 200 Index has been held by Fonterra since its formation in the early 1990s. This stronghold continues, however, its revenue fell by 7.2%, from $24,580m in 2023 to $22,822m in 2024. This decrease is mainly because of a softening demand in the ingredients channel and a 1% decline in sales volumes from continuing operations.

The 200th-ranked entity in 2024 is Christchurch Airport, with revenue of $233m. This is a 5.0% increase compared to 2023’s 200th-ranked company, Scott Technology, which reported $222m in revenue.

Ebos Group, at No 2, maintained its position with a 6.6% revenue increase, rising from $13,370m in 2023 to $14,254m in 2024. This was driven by organic growth and acquisitions that contributed to growth in its healthcare and animal care businesses. The revenue gap between Fonterra and Ebos decreased by 23.6%, compared to a 2.6% decrease in 2023.

A significant shift occurred as Foodstuffs North Island climbed to third place in the Top 200 (from 10th in 2023), with revenue increasing by 9.1 to $9,235m. Revenue figures for 2023 and 2024 have been grossed up in respect of charge through sales whereby Foodstuffs North Island is now considered to be a principal rather than an agent. Revenue for 2023 has increased from the previous reported figure of $4,299m to $8,462m as a result of this restatement.

The top 10 in the Index has seen some movement in 2024, with Meridian Energy re-entering the top 10 in 10th place (2023: 17th). This pushed Mainfreight out of the top 10 to 11th place (2023: 8th). Woolworths NZ has remained in fourth place, and BP NZ has remained in ninth place.

Fletcher Building has moved down to fifth place (2023: 3rd) and Fulton Hogan has moved down to seventh place (2023: 5th).

Air New Zealand has dropped to eighth place (2023: 6th) and Z Energy moved into sixth place (2023: 7th).

Top profits
The top profit after tax for 2024 was $1168m, reported by Fonterra (ranked first in the Top 200 Index), retaining its position in the top profit rankings from last year.

This figure represents a 5.9% decrease from Fonterra’s profit after tax of $1241m in 2023.

Last year’s second-highest profit was Spark (13th in the Top 200 Index), which reported a profit after tax of $1135m, including a $583m gain associated with Spark’s sale of Connexa. In 2024, Spark’s profit after tax fell to $316m, dropping its ranking to seventh place.

The average profit after tax across all 200 companies decreased from $53m in FY23 to $25.1m in FY24, a 53% decline. This trend reflects challenging economic conditions and broader economic performance.

Infratil (20th) has risen to second place for profit in 2024, up from fourth in 2023. The infrastructure investment firm has seen its profit after tax increase by 28.2%, from $562m in 2023 to $846m in 2024. Infratil acquired full ownership of One NZ, with the result reflecting 10 months’ earnings contribution from One NZ under full ownership.

Retirement village operator, Summerset (174th), is a new entrant to the Top 200 in 2024 and has secured third place with a profit after tax of $440m. This result includes a $442m favourable fair value movement in investment property.

Lotto (31st) has moved up to fourth place in 2024, from eighth in 2023. Its profit after tax increased by 12.8%, from $385m in 2023 to $434m in 2024.

Meridian Energy (10th) has made a significant leap in the rankings, moving from 36th place in 2023 to fifth place in 2024. Its profit after tax rose by 352%, from $95m in 2023 to $429m in 2024.

Spark (13th), One NZ (24th), and 2degrees (37th) have moved out of the top five profits for 2024 but remain in the rankings at seventh, 67th, and 156th place, respectively.

Biggest losses
The biggest loss for 2024 was reported by Woolworths NZ (ranked fourth in the Top 200 Index), with a loss of $1673m. In 2023, Woolworths had the 42nd ranked profit after tax, reporting a profit of $76m. The loss is attributed to lower sales and a $1.6b goodwill impairment loss.

KiwiRail (49th) holds the second biggest loss for 2024, with a loss of $647m. In 2023, KiwiRail had the largest loss of $771m. KiwiRail also had the third biggest loss in 2022 and second biggest loss in 2020.

Goodman Property (193rd) is a new entrant to the Top 200 in 2024, holding the third biggest loss in 2024 of $565m. This compares to a loss of $135m in 2023. Its loss is primarily attributed to fair value losses on the revaluation of investment property.

Wine, spirits and champagne business, Pernod Ricard NZ (121st), and dairy producer Synlait Milk (36th) respectively hold the fourth and fifth biggest losses in 2024.

Most improved profit
Datacom (ranked 34th in the Top 200 Index) recorded the most improved profit, with an 1800% increase, moving from a $2m loss in 2023 to a $34m profit in 2024.

Ngāi Tahu Ltd (138th) achieved the second most improved profit, with an increase of 843%, shifting from a $5.8m loss in 2023 to a $43m profit in 2024.

Mainland Poultry (183rd) holds third place, with a profit increase of 748%. In the current year, Mainland Poultry recorded a profit of $23.5m, compared to a profit of $2.8m in 2023.

Most improved revenue
Costco NZ (ranked 141st in the Top 200 Index) reported the most improved revenue, increasing revenue to $341m in 2024 compared to $21m in 2023, because the current year represents the first full year of trading. This uplift has meant Costco NZ is a new entrant to the Deloitte Top 200 Index in 2024.

Waste Management (83rd), also a new entrant, has the second most improved revenue, with an increase of 325%, from $152m in 2023 to $645m in 2024.

Infratil (20th) achieved the third most improved revenue, with an increase from $1192m in 2023 to $2995m in 2024, because of acquiring full ownership of One NZ, with the result reflecting 10 months of One NZ being consolidated under full ownership.

Gull (46th) holds the fourth most improved revenue, increasing by 117%, from $495m in 2023 to $1076m in 2024. The 2023 figure included revenues for around six months post the change in ownership from Ampol to Allegro.

This is the primary driver of the increased revenue in 2024, as well as increasing fuel prices.

Amazon Web Services (122nd) held the most improved revenue in 2023. Its revenue held largely consistent year-on-year, with a 3.4% increase, rising from $372m in 2023 to $385m in 2024.

Infratil (20th), Emirates Airlines (88th), Auckland Airport (62nd) and Tourism Holdings (60th) are the only companies to be included on this index in both 2023 and 2024.

Airways, Graincorp Commodity, Gull, McConnell Dowell, Mercury, Meridian Energy and Xero are included in both the most improved profit and most improved revenue index in 2024.

Return on assets (ROA) provides an indication of how efficiently a company manages its assets in order to generate earnings. It is calculated by measuring profit against the total assets reported.

Emirates Airlines NZ (ranked 88th in the Top 200 Index) maintains its top position for ROA, achieving 595.4%. In 2023 the airline had a ROA of 325.1%.

Singapore Airlines (123rd) re-entered the Top 200 Index in 2024, and holds the second spot with a ROA of 312.9%.

Lotto (31st) ranked third for ROA, decreasing from second place in 2023, with a ROA of 146.5%.

Pushpay (129th) entered the ROA rankings in fourth place, achieving 48.7% in 2024, a significant improvement from 8.9% in 2023. This is driven by an increase in net profit after tax from $35m in 2023 to $283m in 2024, primarily because of an adjustment in deferred tax.

Aurecon (169th) maintained its fifth-place ranking, with a ROA of 30.6% in 2024, compared to 41.6% in 2023.

Return on equity measures how effectively a company can generate income relative to the amount of money shareholders have invested in the firm.

It is a useful tool for investors, particularly when comparing firms within the same industry and is calculated by measuring the revenue earned against the average equity held over the past two years – to prevent changes in shareholder contributions from skewing the results.

Singapore Airlines (ranked 123rd in the Top 200 Index) has returned to the Top 200 Index in 2024 and occupies first place in the return on equity rankings, with a result of 9164.4%.

Emirates Airlines NZ (88th) has taken second place for return on equity, achieving 808.3% and moving up from third place in 2023.

Lotto (31st) has taken third place for return on equity, moving down from the top spot in 2023, with a return on equity of 623.6% in 2024.

Bunnings (27th) has taken fourth place for return on equity, moving down from second place in 2023, with a return on equity of 499.3% in 2024.

Pushpay (129th) is in fifth place with a return on equity of 179.1%, a notable improvement from 13.2% in 2023 because of its increase in net profit after tax.

This year, 21 companies were added to the Deloitte Top 200 Index. This compares to last year when 22 companies were added to the Index.

Downer (ranked 17th on the Top 200 Index) entered the Index at the highest rank with revenue of $3378m.

Waste Management (83rd) returned to the Index in 2024 with revenue of $645m.

DHL (99th place) with revenue of $522m and Singapore Airlines (123rd) with revenue of $382m were the third and fourth highest-ranked newcomers in 2024.

Just missed the cut
OCS Group (would rank at 201st in the Top 200 Index) narrowly missed the cut by just $3m, with the 200th-ranked company (Christchurch Airport) achieving revenue of $233m.

CablePrice (202nd), Honda NZ (203rd), and DKSH (204th) were close to breaking into the Top 200 Index in the current year, all achieving revenue around $229m.

The Top 30 Financial Institutions Index sees one new addition to the Index, FlexiGroup (ranked 30th).

The Top 30 financial institutions have had a slight decline in their total asset bases this year by $6473m, from $733,803m in 2023 to $727,331m in 2024. This is a 0.9% decrease and contrasts with the 9.3% increase seen in 2023.

The top bank is once again ANZ, holding assets of $194,289m, down 3.4% from $201,134m in 2023. ANZ continues to sit comfortably in the top spot, with a $61,491m gap in total asset value between first place and second place (Westpac). ANZ also outpaces all other banks in terms of profit and equity.

The second place in the Index has been held by Westpac in both 2023 and 2024, with total assets of $132,798m – a decrease of 2.2% from the previous year.

BNZ continues to hold third place, with total assets of $130,065m, a 1.0% decrease from the previous year.

ASB remains in fourth place from 2023, with total assets increasing slightly to $127,089m – up 0.2%.

Of the top four financial institutions, ANZ, Westpac and ASB have had a decrease in profit year-on-year.

ANZ reported a decrease in profit from $2,289m to $2,217m (a 3.1% decrease), Westpac reported a decrease in profit from $1,298m to $1,184m (a 8.8% decrease) and ASB reported a decrease in profit from $1,559m to $1,455m (a 6.7% decrease).

BNZ was the only top four financial institution to report an increase in profit, from $1,414m to $1,509m in 2024 (an increase of 6.7%).

Kiwibank has retained its fifth-place spot, with total assets of $36,650m. Kiwibank’s total assets have increased by 8.3% from $33,838m in 2023. ASB has dropped to fourth place in 2023 from second in 2022, with total assets of $126,896m.

Cumulative profits for the Top 30 financial institutions have increased by 0.8% from $7715m in 2023 to $7775m in 2024.

Cumulative equity has increased by 5.4% from $65,823m in 2023 to $69,356m in 2024.

The top seven financial institutions have remained the same seven entities from 2023 to 2024.

Heartland Bank has moved up to eighth place from ninth place in 2023, which has caused HSBC to move down from eighth place in 2023 to ninth place in 2024.

MUFG remains consistent, holding 10th place in 2023 and 2024.

It is noted that certain financial institutions may have released unaudited earnings announcements that are not reflected in the indices or commentary above.

 

US Business Summit 2024: US capital – The spur for New Zealand’s growth story

Co-founder of Shasta Ventures and a 24-year veteran of venture capital, Rob Coneybeer discussed how New Zealand can position itself to attract foreign direct investment. Rob shone a light on New Zealand’s appeal as an investment destination, sharing insights into how the country could attract much needed foreign direct investment and thrive in the global market.

He was joined by Hon Barbara Edmonds, a former tax lawyer and Labour’s Finance Spokesperson, who spoke about how New Zealand can take advantage of US investment, bringing a fresh perspective on Labour’s approach to fostering stronger economic ties and capitalising on opportunities.

Moderator: Tim McCready Summit MC

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US Business Summit 2024
22 November 2024 at Cordis, Auckland. Brought to you by NZ INC. and Auckland Business Chamber.

US Business Summit 2024: Bright ideas and big markets – Dr Will Barker & Professor Delwyn Moller

Two visionary New Zealand leaders shared how advanced technologies in green metal extraction and aerospace innovation were addressing global challenges, from climate change to resource scarcity, while also creating vast opportunities in international markets.

Will Barker, CEO of Mint, highlighted how urban waste can be transformed into valuable green metals, reducing reliance on traditional mining and enabling a low-carbon, circular economy.
Professor Delwyn Moller presented cutting-edge innovations in aerospace technology, showcasing how Earth observation systems and advanced remote sensing are being used to address global challenges.
Moderator: Tim McCready – Summit MC

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US Business Summit 2024
22 November 2024 at Cordis, Auckland. Brought to you by NZ INC. and Auckland Business Chamber.

Mood of the Boardroom: University of Auckland leads innovation strategy amid higher education challenges (NZ Herald)

Mood of the Boardroom: University of Auckland leads innovation strategy amid higher education challenges (NZ Herald)

Higher education is one of the country’s most valuable assets, and in a time of economic uncertainty and evolving global challenges, we must ensure it is integrated as a critical component of the country’s ambition and broader national strategy.

That is the view of the University of Auckland vice-chancellor, Professor Dawn Freshwater, who believes building a future-focused, quality-driven education strategy for the country is more vital than ever. She highlights the growing intersection between education, industry and Government as crucial to this effort.

Freshwater says education in New Zealand is often overlooked, and siloed, hampering the country’s ability to position itself credibly globally.

“We must be clear on how we differentiate New Zealand on the world stage. We are coming from a strength-based approach in terms of building our economy and engaging internationally for the future.

“But I have not heard a strategy that addresses that.”

She says education is not seen as a business and it is not seen as an integral part of NZ Inc, but rather sitting outside it.

“The absence of a coherent approach across science, innovation, education, research — that links with immigration settings and future employment skills development — is a concern.”

She emphasises the need for businesses to understand their future skills requirements and engage in shaping the conversation.

“Businesses will need more highly qualified graduates with diverse skills for the future, but the reality is they won’t need everyone to be a graduate. We need to work in a much more cohesive way to drive an agenda that truly meets the needs of business.”

Freshwater believes the era of “massification,” or mass participation in higher education, is over.

“That was never a business model that was going to be sustainable, nor does it deliver the right employment outcomes,” she explains, calling for a different approach that is integrated into the country’s long-term planning.

“We need to shift towards a multi-layered education sector that brings about differentiation for future skills, and the quality required to graduate people into highly skilled jobs.”

However, Freshwater cautions against reducing the purpose of higher education to solely prepare students for employment. “It may seem contradictory, but our goal should be to graduate students who can drive business and innovation. That goes beyond just preparing them for jobs.”

Quality vs volume

The balancing act between quality and volume in higher education, she notes, is not unique to New Zealand.

She highlights how some international institutions, including some in the Russell Group (the 24 leading UK universities) and the Group of Eight (Australia’s leading research-intensive universities), tweak their entry requirements to maintain student numbers — often concerning cross-subsidies and in response to the challenges of funding research excellence and maintaining and investing in a world-class student experience that remains competitive.

For the university and New Zealand, Freshwater favours prioritising quality over volume. “As soon as you start to get into volume-driven decisions over quality-driven, you start to lose your credibility internationally and nationally,” she explains.

“Access to higher education is both a privilege and a right. The University of Auckland is a comprehensive university, and so it is important that we focus on breadth, but not at the expense of quality, that doesn’t drive the right message and send a signal about who we are and what we stand for.”

However, focusing on quality at the expense of student volume presents its own risks.

“If New Zealand drops volume and instead focuses on quality, then we are not going to have eight comprehensive universities in this nation,” Freshwater warns.

“And if you drop volume, you need the sector to work through what the overall education sector is going to look like to pick up those people to make sure that everybody has access to an education that is relevant and impactful.”

Forging ahead

In the absence of a clear overarching national strategy, the University of Auckland is taking the lead to do things that will drive the agenda.

“We are really thinking about the innovation strategy for the nation,” Freshwater says.

“We are prioritising entrepreneurship, innovation and the commercialisation of research at the highest levels of the university.”

This commitment is evident in initiatives such as the Business School’s Centre for Innovation and Entrepreneurship (CIE), providing students and staff across all faculties with opportunities to develop entrepreneurial thinking and capability.

Another example is the university’s newest campus in Newmarket, the centre of a growing innovation precinct. Acquired in 2013, the site focuses on engineering, science and health technologies, and is home to more than 20 start-up and growth companies. The precinct includes purpose-built research facilities and co-location amenities designed to advance the university’s broader innovation goals.

By creating an environment that fosters research, innovation, and collaboration, the University of Auckland aims to attract top talent, students, and thought leaders. It’s a strategy Freshwater sees as essential to strengthening New Zealand’s global competitiveness for the future.

The University of Auckland is a sponsor of the Herald’s Mood of the Boardroom project

2degrees Auckland Business Awards finalist announcement

Infrastructure: Government eyes tolls and congestion charging to fund roadingICBC: Innovative funding for green infrastructure

Marking a significant shift in the country’s transport policy, the Government Policy Statement on Land Transport indicates that road pricing, such as tolling and time-of-use charging, will play a key role in delivering the Roads of National Significance programme as part of a broader package of transport revenue and investment tools.When asked if all the Roads of National Significance would be tolled, Transport Minister Simeon Brown said: “I imagine we’ll be tolling every single one of them, which is a recommendation.”Infrastructure New Zealand, the country’s peak infrastructure sector body, supports the Government’s proposed use of road tolling to fund the new Roads of National Significance.

“Safe and efficient four-lane and grade-separated highways are not cheap, yet they are a critical piece of the puzzle when it comes to improving New Zealand’s land transport network,” said Infrastructure New Zealand chief executive Nick Leggett.

“Tolling is the way to go to help deliver these new highway projects.

“The reality is if we want modern first-world infrastructure then that will need to come through greater use of user-charging mechanisms such as tolling.”

Time-of-use charging

While the Auckland regional fuel tax was scrapped by the National-led Government on June 30, legislation will be introduced this year to enable time-of-use schemes to be developed to reduce travel times on New Zealand’s busiest roads.

“Congestion is a tax on time and productivity,” said Brown.

“It means that we are away from home for longer, sitting in gridlock. It results in fewer jobs being done, fewer goods being moved, and delays to services across the city.

“Faster, more reliable travel times will increase productivity, and lower costs for businesses and their customers. That is why we are enabling time-of-use schemes to be put in place.

“Enabling time-of-use schemes is a priority for our Government and a commitment under the National-Act Coalition Agreement.”

Brown stressed that time-of-use schemes will improve network efficiency to increase productivity and enable people and freight to get where they need to go quickly and safely – and that they are not about raising revenue.

“Any money collected through time-of-use charging will also be required to be invested back into transport infrastructure that benefits Kiwis and businesses living and working in the region where the money was raised. Councils will not be able to spend this money on other priorities or pet projects,” he said.

Auckland is set to be a focal point, with the Government prioritising working with Auckland Council. The city already faces severe traffic issues, with private vehicle travel accounting for nearly 75% of commuting across the Auckland region.

The Mayor of Auckland, Wayne Brown, has long been an advocate for time-of-use charging – a term he prefered over the broader “congestion charging”.

“What we’re talking about is time-of-use charging rather than congestion charging,” he explained. “Congestion charging is when you put a ring around the city, like London, and you have to pay to go into it.”

His preference is for dynamic charging, which encourages motorists to adjust their travel time, route, or mode of transportation to keep choke points flowing during peak times.

A 2020 Ministry of Transport report found that time-of-use charging could reduce congestion in Auckland by around 8-12% when fully implemented, similar to the traffic levels seen during the school holidays.

A 2017 report from the New Zealand Institute of Economic Research calculated the economic and social benefits to Auckland if the road transport network was operating at capacity Monday to Friday to be between $0.9 billion and $1.3b. If the average speed across the network was close or equal to the speed limit (free-flow), this benefit would be even greater – between $1.4b and $1.9b.

In June, Auckland Council’s transport and infrastructure committee approved a time-of-use charging scheme to be designed for the Auckland region on the city’s motorways and arterial routes.

“It’s about making the most of what we have and bringing Auckland in line with similar cities,” the mayor said. “It’s a tried and tested solution, and one that’s relatively low-cost.”

Auckland Council has suggested that the initiative would need to be supported by “reliable” public transport, and if the scheme designed is successful, it would likely launch alongside the City Rail Link in 2026.

Timeline for implementation

The Government is drafting a bill to amend the Land Transport Management Act 2003. This will establish the legal framework necessary to introduce time-of-use charging schemes aimed at managing road network demand. This is expected to be introduced to Parliament before the end of this year and will be reviewed by the Transport and Infrastructure Select Committee in 2025.

Once enacted, local authorities will be able to propose and develop time-of-use schemes in partnership with the New Zealand Transport Agency (NZTA), who will act as the majority partner. The Government, through the NZTA, will also have the authority to propose a scheme.

After a scheme is designed, it will be submitted to the Minister of Transport for approval, then implemented through an Order in Council with clear rules governing the scheme, providing road users with certainty about where, when and how much they will be required to pay.

To maintain the effectiveness of these schemes, they will be granted some operational flexibility.

For example, they will be able to adjust charges without the need for public consultation, but only at pre-determined intervals and provided the charge remains below the maximum. They will require regular monitoring and reporting, particularly on changes in travel times and traffic volumes.

Reporting on the amount of revenue generated and its subsequent use will also be required.

The Secretary of Transport will oversee the schemes, ensuring they meet their objectives, and the Government will have mechanisms to intervene if an approved scheme fails to deliver its anticipated objectives.

New York demonstrates the challenges

Congestion and time-of-use charging has been successfully implemented in many major cities around the world.

Singapore first introduced a congestion charge in 1975, requiring drivers to pay a flat fee to enter a restricted zone during peak hours, reducing congestion by 20%.

By 1998, it evolved into a fully automated electronic road pricing system, significantly reducing traffic, boosting public transportation usage and lowering emissions.

Stockholm introduced a seven-month trial in 2006, which saw traffic volume drop 22% per day on average and emissions fall by 30%.

This led to a referendum in 2007, which saw the scheme become permanent. Stockholm’s implementation demonstrated that once congestion charging is introduced, explained, and successfully tested, it was supported by a majority of the population.

Research by the Seattle Department of Transportation, which has explored its own congestion charging scheme, found that once a detailed proposal for congestion charging is established, but before its full implementation, public support is usually low. This can be attributed to the disadvantages of pricing becoming more evident than potential advantages or fears that the technical system might be overly expensive or fail to work.

Once a system is in place, public support generally increases, usually driven by the system working and people happy with the benefits, or their initial fears not being realised.

Nevertheless, overcoming initial fears will need to be carefully managed in any rollout in New Zealand, especially in times of economic pressure.

The recent experience of New York City’s implementation highlights this challenge. Despite years of preparation and the installation of necessary equipment, New York City’s congestion pricing plan – due to be rolled out on June 30 this year – was “indefinitely paused” by Governor Kathy Hochul on June 5.

The first-in-the-nation congestion pricing scheme, approved in 2019, would have seen cars charged $15 to enter a large swath of Manhattan.

Hochul slammed on the brakes at the last minute before its introduction due to concerns about the timing and state of the city’s post-pandemic recovery.

She said she feared New Yorkers could face “unintended consequences” if the plan was introduced.

The pause leaves the city’s public transport system without an additional $1b per year in funding, with delays expected for improvements in traffic congestion, air quality, and its dilapidated subway system.

It may also discourage other US cities from pursuing similar pricing initiatives that were looking to New York City’s implementation as a case study for their own rollout.

Government priorities

The Government is prioritising 17 Roads of National Significance, recently highlighted in the Government Policy Statement on Land Transport (GPS). The New Zealand Transport Agency is expected to begin procurement, enabling works, and construction of the first seven within the next three years.

  • Takitimu North Link Stage 1, connecting Tauranga and Te Puna, is already under way, with construction on Ōtaki to North of Levin set to begin next year.
  • The next phase of projects includes Belfast to Pegasus (Canterbury, including a bypass through Woodend), the Hawke’s Bay Expressway, SH1 between Cambridge and Piarere (Waikato), SH29 Tauriko (near Tauranga), Takitimu North Link Stage 2 (Te Puna to Ōmokoroa), Mill Road (South Auckland), and Ara Tūhono Warkworth to Wellsford (northern Auckland).

Research shows appetite for congestion charge

Aucklanders are up for a conversation on congestion pricing, or time-of-use charging.

Commissioned by policy and advocacy organisation the Northern Infrastructure Forum and delivered by Koi Tū: The Centre for Informed Futures, a think tank and research centre at the University of Auckland, research has explored the views of the community on congestion charging.

It found Aucklanders understand that what is happening now isn’t working, and new approaches need to be considered. While panel members surveyed supported congestion pricing in principle, they had some concerns. The research concluded:

  • The primary objective of congestion charging must be to reduce congestion.
  • There should be the strategic use of discounts and exemptions to mitigate social impacts.
  • Revenue collected must be used exclusively to provide transport options for Aucklanders (particularly public transport options).
  • Congestion charging should be kept simple and transparent.

That means: people need to know what they’re paying and when, with timing and pricing reviewed regularly; initial geographical boundary for the charging zone must not be too complex; it must be user friendly with reliable payment systems; there should be clear communication of benefits, particularly decongestion benefits.

ICBC: Innovative funding for green infrastructure

In its latest climate report, ICBC New Zealand, the New Zealand arm of the Industrial and Commercial Bank of China (ICBC), has reaffirmed its commitment to supporting New Zealand’s climate transition and is actively identifying climate-related risks and opportunities.

“We are in the process of dynamically integrating the green financing concept into our operation and development and striving to create greater value for our stakeholders,” says James Gill, director of corporate and institutional banking at ICBC New Zealand. “We will concentrate our efforts on improving governance, strategy, risk management, metrics, and targets, striving to make greater contributions for a good future.”

Gill says the bank recognises the need for innovative funding solutions to address the country’s infrastructure needs and support the development of green infrastructure.

Over its 11 years of operation in New Zealand, ICBC New Zealand has played a significant role in key infrastructure projects. These include the Transmission Gully motorway, developed through a public-private partnership (PPP), and the Ruakura Superhub – a 490ha development in Hamilton – residential development areas, industrial, retail and logistics, including a 30ha inland port. “Supporting these projects is our way of helping to move New Zealand forward,” says Gill.

“ICBC New Zealand is passionate about the opportunity in New Zealand to build productivity-boosting, climate-resilient infrastructure and improve outcomes for the country.”

The bank also acted as mandated lead arranger and joint sustainability coordinator for a $400 million funding package for Wellington City Council’s new sludge minimisation facility, an environmental initiative adjacent to the existing wastewater treatment plant at Moa Point that is set to reduce landfill waste by 80% and carbon emissions by 60%.

The project was facilitated under the Infrastructure Funding and Financing Act 2020 (IFF), which allows debt to be raised without impacting the council’s balance sheet. This approach preserves the council’s debt capacity for other uses. Instead, Crown Infrastructure Partners will manage a special-purpose vehicle (SPV) that will levy most rate-paying properties in the city for 33 years, starting from July 2024.

Gill says IFF as a model provides another tool for local governments to access private financing over the long term, paying for it via targeting the direct beneficiaries of the projects.

“The defined repayment profile is attractive and allows higher levels of leverage than otherwise might have been possible.”

The project, which began construction in May 2023 and is expected to be completed by June 2026, will use chemical and mechanical processes to treat and dispose of wastewater sludge, generating biogas for heat and electricity to power the treatment process. Sludge is now piped 9km across the city to landfill, where it is buried.

“ICBC New Zealand looks forward to supporting New Zealand’s growth objectives as we have previously through the PPP and IFF infrastructure financing models,” says Gill.

“Our long-term commitment to the country positions us well to support these projects from conception to completion and throughout their operation.”

ICBC helps the world to go greener

As the world’s largest bank by total assets, ICBC is a global leader in sustainable development, promoting green finance and supporting projects that contribute to a sustainable future.

The bank’s latest Corporate Social Responsibility Report, released earlier this year, highlights its commitment to green finance and pursuit of innovation-driven development and new sustainable development opportunities.

Some of the bank’s contributions to sustainable projects include:

Uzbekistan wind power plant

The Dubai branch of ICBC acted as lead arranger, organising a US$900m international syndicated loan with international multilateral institutions to finance a major wind power project in Uzbekistan.

Upon completion, the project is expected to cut carbon emissions by 1.4 million tonnes annually.

By enhancing the power infrastructure in Central Asia, it will play a pivotal role in the region’s energy transition, contributing to global efforts towards sustainable economic and social development.

Green bus project in Hangzhou

The Hangzhou branch of ICBC has been instrumental in advancing Hangzhou’s new energy public transportation system.

The branch has provided over RMB4 billion in cumulative working capital loans and extended more than RMB1b in credits for projects including the acquisition of new energy buses and the construction of stations. As a result, all buses in Hangzhou’s downtown areas have been replaced by new energy buses, making low-carbon transportation a viable and popular choice for the city’s residents.

Marine carbon sink ecological products in Guangdong Province

Nan’ao County Island, located in South China, is home to Guangdong Province’s largest oyster cultivation base, with an annual output exceeding 30,000 tonnes.

Recognising the environmental benefits of oysters, which capture and store carbon dioxide as they grow, the Guangdong branch of ICBC introduced a “loan pledged with right to expected earnings of marine carbon sink” financing product.

This allows farmers to secure loans by pledging the expected earnings from the carbon sink value derived from their oysters, providing crucial financial support for sustainable aquaculture practices.

Green building project in Beijing

The Beijing branch of ICBC, acting as the lead bank, provided a syndicated loan of RMB270m to meet the funding needs of an enterprise for an intelligent green building project using prefabricated components.

After completion, it will be able to achieve an annual production capacity of one million square metres of prefabricated components, while solving problems such as noise, dust, material waste, and environmental pollution in the traditional construction industry and building material manufacture.

Agribusiness & Trade: Has offshore investment swamped our dairy sector? (NZ Herald)

Agribusiness & Trade: Has offshore investment swamped our dairy sector? (NZ Herald)

The allure of New Zealand’s dairy industry has not gone unnoticed on the global stage. The country’s reputation for high-quality dairy products and well-established supply chains has seen international investors increasingly drawn to the sector.

A recent report from market research firm Coriolis on the New Zealand dairy industry lays out the investment landscape in New Zealand dairy processing. The industry has attracted foreign investment from across the globe. China, Japan, Singapore, France, the Netherlands, the UK and Germany are all significant sources of investment.

Coriolis managing director Tim Morris says the “smart money” can see New Zealand is winning in dairy.

“New Zealand is really good at dairy and the rest of the world have realised it,” he says. “Since deregulation of the industry, we have had wave after wave of global firms show up because they know they need to have a position here.”

Despite the presence of multinationals in New Zealand, the report shows that most of the capital committed to the sector remains domestic, both into co-operative processors and through private capital.

In total, the industry is made up of investment from five private equity firms, 14 global multinationals, seven state-owned enterprises, three local co-operatives, three locally listed firms, two Māori investor groups and hundreds of private family interests.

The report lays out five key objectives that are driving strategic investment activity in the New Zealand dairy industry.

1. Strengthening existing market positions
In 2019, Westland Milk Products was bought by Chinese dairy giant Inner Mongolia Yili Industrial Group Co Ltd (Yili) for $588 million. Since then, Yili has supported further investments to strengthen the West Coast dairy company’s position.

In 2021, Westland announced it would invest $40m to double its consumer butter manufacturing capacity. The following year it acquired Hamilton-based foodservice butter processor Canary Foods.

Last year, Westland announced a $70m investment to construct a new lactoferrin plant at its Hokitika facility. Supported by parent company Yili, this investment will more than treble production capacity of the multifunctional protein. Lactoferrin has growing international demand across a variety of nutritional categories because of its reported health benefits.

Increased competition as more players enter the market is driving a shift higher up the value chain, with focus shifting to producing higher-margin, value-added products rather than just raw milk.

Morris notes that this more developed competitive framework is a marked change from the past. “This shift necessitates a strategic approach to investment and operations, ensuring that New Zealand’s dairy industry remains competitive on the global stage,” he says.

One such approach is the diversification of product categories into high-value niches such as infant formula (particularly specialty formulas designed for the dietary management of special infant feeding needs), protein supplements, and functional foods that can offer health benefits beyond basic nutrition.

New Zealand produces numerous innovative dairy-derived nutraceuticals. For example, New Image’s Symbiotics brand sells a goat milk drink with phosphatidylserine to support awareness and cognition.

These products not only command higher prices but also cater to growing consumer demands for health and wellness.

2. Arriving to take a position in New Zealand
In the past five years, multinational companies including Lactalis (from France), Froneri (UK), Olam (Singapore), Wilmar (Singapore) and Imanaka (Japan) have entered the New Zealand dairy industry.

The arrival of new players is transforming the sector, with more companies eyeing New Zealand’s milk supply.

One notable entrant stirring up the sector is Singapore-based food and agribusiness conglomerate Olam. It has established a new milk processing and exporting operation in Waikato under the name Olam Food Ingredients (Ofi).

Ofi is challenging Fonterra by offering farmers a premium milk price to entice them away from the co-operative.

Despite this increased competition, the Coriolis report highlights that total milk production in New Zealand peaked in 2015 after a long period of growth but has stalled over the past 8-9 years.

Morris explains that this is due to the balance between milk price paid to farmers and their production costs. With input costs rising faster than milk prices, there has been little incentive to boost production.

3. Seeking new growth platforms
Companies are moving into more attractive areas of the industry. Notable examples include:

Nestle Health Science, a global leader in nutrition, bought The Better Health Company in 2022, which included the supplements brand GO Healthy. Nestle Health Science described the acquisition as a strategic fit, enhancing its global portfolio of active lifestyle and health and wellness brands.
In 2020, New Zealand’s largest seafood company, Sanford, acquired a 50% stake in Two Islands. This merger leverages marine collagen, a by-product of Sanford’s certified sustainable hoki fishery, which is used in Two Islands’ range of beauty and wellbeing products.

4. Investing in increasing sustainability
Companies are investing in sustainability to align with changing customer, consumer and government requirements. Examples include:

Talley’s Group, New Zealand’s second-largest food company, acquired Nature’s Flame, a producer of wood pellet biofuel from Norwegian pulp and paper company Norske Skog. This renewable fuel, derived from timber processing waste streams, is being used to reduce the company’s carbon footprint by replacing coal in some dairy plants.
Fonterra recently announced a $790m plan to decarbonise its operations. The plan includes exploring technologies to phase out coal and transition to renewable energy across its manufacturing sites.

5. Divesting non-core businesses
Fonterra’s recent announcement that it is considering full or partial divestment options for some or all of its global consumer business, which includes well-known brands such as Anchor, as well as its integrated businesses Fonterra Oceania and Fonterra Sri Lanka.

This strategic move will allow the co-operative to focus on being a business-to-business dairy nutrition provider, working closely with customers through its high-performing ingredients and foodservice channels.

Fonterra says this refocus will strengthen its role in the dairy nutrition value chain, leveraging its strength in producing world-class, innovative ingredients for customers to take to consumers.

Another example of divestment was seen from Synlait, which last year announced its plans to sell off its household dairy brands Dairyworks and Talbot Forest Cheese in order to pay down debt. At the time, Synlait said this move would allow it to focus solely on its value-added, advanced nutrition and foodservice businesses.

6. Dairy remains an attractive investment
Morris is clear that the dairy market will remain an attractive investment into the future and doesn’t mince his words on the potential for “alternative milk” to supersede the industry.

“It is easy for people to convince themselves that because their daughter is vegan, or friends of theirs have started to drink oat milk, that everywhere on Earth is suddenly just like them.

“It’s just not true.

“Silicon Valley venture capitalists will try to convince you that we are at peak cow or peak milk or some other such nonsense. Any minute now, mothers everywhere will be feeding their children massive amounts of vat-grown sludge instead of real, natural, healthy milk and dairy products.

“There is no actual evidence anywhere for this common fantasy. Veganism is trending down, fake food start-ups are failing, while milk consumption is heading only one way, up.”

The data supports increasing consumption.

Dairy currently ranks as the third-largest food source by volume, following grains and vegetables, with the average person consuming around 90kg of milk and dairy products annually — equivalent to 117kg of raw milk.

Total global milk consumption is growing. Global raw milk production grew by 169 million tonnes (or 22%) in the last decade, or roughly 17 million tonnes yearly — a figure that equates to a “new New Zealand” (20.7 million tonnes) worth of dairy production every 1.2 years.

In 2022, the global dairy industry produced 930 million tonnes of milk worth an estimated $840 billion — that is at least twice as large as the total revenue of tech giant Apple for the last financial year, and 11,000 times more volume than lithium.

Sunlight of Spain, climate of Bordeaux, and water …

New Zealand is the world’s largest dairy exporter by value, commanding 14% of global trade and a market share that is trending up over the long term.

New Zealand has a robust dairy supply chain, with 4.7 million cows spread across over 10,000 dairy farms. It is the leading dairy supplier for many countries, particularly in Asia, capturing 55% of the China market, 50% of Thailand, 42% of Indonesia, 40% of Malaysia and 61% of Nigeria.

“New Zealand is the size of Italy with the population of Singapore,” says Morris. “It has the sunlight of Spain, the climate of Bordeaux, and abundant water — both on a per-person and a per-square-kilometre basis.”

New Zealand has almost 50 large raw milk intake sites and, depending on definition, 600-700 dairy companies. Extending further into the supply chain, New Zealand also has a farmer-owned dairy genetics firm, two farmer-owned fertiliser firms and three farmer-owned farm supplies firms.

“All of this comes together to make New Zealand the most competitive dairy producer and exporter on the planet,” says Morris.

Capital Markets Report: How artificial intelligence is being used to detect fraud, find sharemarket patterns and act as virtual assistants

Capital Markets Report: How artificial intelligence is being used to detect fraud, find sharemarket patterns and act as virtual assistants

The pace of artificial intelligence (AI) innovation has been remarkable, as has been the speed with which businesses are adopting it.

AI’s impact is evident in virtually every sector, including capital markets and financial services, where it is being used in data analysis and decision-making, customer experience, and operational efficiency.

Recent analysis from McKinsey suggests generative AI could have a significant impact on the banking industry, generating value from increased productivity of 2.8 to 4.7 per cent of the industry’s annual revenues, or an additional US$200 billion ($325b) to US$340b.

In the financial industry, AI is able to rapidly process and extract insights from enormous amounts of data.

It can bring together information from a variety of sources, such as real-time trading data, social media, economic indicators, and geopolitical events.

The analysis of unstructured and complex data was previously time-consuming.

However, machine learning – a key component of AI – is now being used to rapidly identify market patterns. This allows for live insights, which can be critical in financial markets.

Fraud detection
The threat of fraud is a constant concern in the financial sector, requiring detection and prevention abilities to protect both firms and their clients.

Given AI’s ability to identify patterns and anomalies in data, it can process vast amounts of transactions and spot potential fraud with greater speed and accuracy. The ability to process data in real-time is critical in mitigating losses and preventing fraudulent transactions from being completed.

Since AI systems can learn and adapt continuously from historical data, fraud detection capabilities are able to improve over time, identifying new fraudulent tactics as they emerge. This also helps to prevent false positives of legitimate transactions, minimising customer inconvenience.

Later this year, Mastercard will launch its generative AI model that will help banks improve their assessment of transactions. Mastercard says its AI enhancement, which assesses the relationships between multiple entities surrounding a transaction to determine its risk, will boost fraud detection rates on average by 20 per cent and as high as 300 per cent in some instances.

“The precision of the solution – achieved by scanning potential points of sale in real time – has been shown in our own analysis to not only increase accuracy, but also reduce the number of false positives by more than 85 per cent,” says Mastercard’s president of cyber and intelligence, Ajay Bhalla.

Virtual assistance
AI-powered virtual assistants provide the ability to offer 24/7 support, handling inquiries with levels of efficiency that were previously impossible.

This is being used to a varying extent by different organisations in the finance sector, but the highly regulated nature of the industry necessitates cautious implementation.

Speaking at a recent AI summit, Promiti Dutta, Citi’s head of analytics acknowledged the potential of AI and large language models, but noted they can be problematic when precision is the goal.

“Things can go wrong very quickly, and there’s still a lot to be learned,” she said. “In an industry where every single customer interaction really matters, and everything we do has to build trust with customers, we can’t afford anything going wrong with any interaction.”

Dutta said that while a customer might forgive an online shop suggesting a pair of shoes in the wrong colour, the stakes are higher in the financial services.

“If we tell you to get a loan product that you don’t necessarily want or need, you lose a little bit of interest in us because you think ‘Oh, my bank really doesn’t understand who I am’.”

She says that Citi is starting conservatively, and making sure there is always a human in the loop for anything assisted to learn what it is doing – and what it is not doing.

Less risky is the use of virtual assistance internally within firms. Last year, investment bank Morgan Stanley launched its own AI assistant to enhance the efficiency and effectiveness of its financial advisers and support staff.

The assistant, developed in collaboration with ChatGPT founder Open AI, provides access to the firm’s internal knowledge database of around 100,000 research reports and documents. It allows users to find and tailor information for clients almost instantaneously.

Morgan Stanley co-president Andy Saperstein told staff that generative AI will “revolutionise client interactions, bring new efficiencies to adviser practices, and ultimately help free up time to do what you do best: serve your clients”.

As well as enhancing client interactions, AI is transforming operational management within these institutions.

Automation of routine tasks, including account management, credit checks and report generation, allows employees to focus on more strategic tasks requiring human insight. This shift not only has the potential to reduce cost, but also enhance efficiency.

Regulatory compliance
In such a highly regulated sector, AI is helping to automate regulatory compliance processes and ensure adherence to rules and regulations. AI-powered systems can also help to eliminate manual errors and reduce the risk of non-compliance.

One example is Citigroup’s response to United States federal regulators’ new capital rules. The investment bank used AI to dissect a 1089-page document to analyse the text and articulate the implications of the changes for the bank’s leadership.

Looking ahead, regulation of AI itself is an area to watch. The financial sector must prepare for a wave of legislation, codes of conduct and guidelines – some of which is already occurring. While the benefits of AI are evident, it has the potential to exacerbate existing risks and introduce new ones.

Firms will have to consider AI within existing compliance frameworks to ensure that as they embrace the advantages of AI, they remain vigilant of its possible pitfalls.

AI driving global stock markets skyward
The recent surge in AI has translated to impressive gains on global stock markets, which saw their strongest first-quarter performance in the past five years. Investors have shown an insatiable appetite for technology stocks, fuelled by the potential of AI to revolutionise industries worldwide.

At the forefront of this market rally is Nvidia, a leading chip designer whose role in the deployment of AI technologies has been crucial. Its market value soared by more than US$1 trillion in just the first three months of this year.

Recent analysis from Goldman Sachs suggests that Nvidia represents the first phase of the AI boom. It says the next phase will involve infrastructure companies that are essential to the development of AI: semiconductor firms, cloud providers, data centres, security software and utilities companies.

The third phase, it projects, will benefit those companies that can enhance their revenues from the adoption and monetisation of AI technologies.

“Software and IT services seem best positioned for this phase of the AI adoption cycle, with many companies describing how their tools will enable other companies to utilise AI,” Goldman Sachs says.

The fourth phase will favour those companies that achieve significant productivity improvement through the adoption and integration of sophisticated AI.

“Software and services and commercial and professional services have the largest potential earnings boost from widespread AI adoption via labour productivity,” Goldman Sachs says. “These three industries have a combination of a high share of their wage bill exposed to AI automation and relatively high labour costs.”

Project Auckland: Panel discussion on ‘Accelerating Auckland’ (video)

Tim McCready moderates a panel discussion themed “Accelerating Auckland” with CEO of the EMA Brett O’Riley, Deputy Mayor of Auckland Desley Simpson, and Vice-Chancellor of the University of Auckland Dawn Freshwater. The panel discussion was held at the launch of the NZ Herald’s 2024 Project Auckland report following a speech from the Minister for Auckland Hon Simeon Brown.