An ‘exceptional’ business leader moves on: Port of Tauranga CEO Mark Cairns

A few weeks back, Port of Tauranga chief executive Mark Cairns surrendered his light-filled Mount Maunganui seaside office to his successor and moved into a poky, darker room next door.

The gesture – particularly generous given that the retiring CEO doesn’t leave the building until the end of June – is good for in-house banter, but seemed perfectly natural to those who know Cairns.

Port chairman David Pilkington says the financial performance of New Zealand’s biggest and busiest port under Cairns’ watch “speaks for itself”, but his greatest attribute is his ability to develop staff.

Leonard Sampson, the slightly premature occupant of the CEO’s seat, is an example of this strength, says the chairman. Sampson was selected from within Cairns’ senior executive team after a search “that went far and wide”.

Giving his successor time to get his feet under the desk, literally so, was just par for the Cairns course. “He didn’t do it so he could have a holiday. It was part of a gradual process of bringing Leonard forward and taking half a step back himself.

“There would be very few CEOs who would sit comfortably with that, and it speaks to Mark’s ability,” says Pilkington. “You see so many chief executives who struggle to let go.”

Cairns, 58, isn’t entirely immune to that struggle.

He’s looking forward to directorships on several listed companies, but leaving his “port family” after 16 years will be a wrench.

“It was my dream job when I came here, I love the sector,” says Cairns. “But there’s something really special about this company and its culture. The staff always look to say yes, rather than no.

“The culture here is one plus one equals three – all day long. I’m going to miss my family.”

Cairns doesn’t take credit for the culture, which he says he inherited.

Others won’t let such modesty go unchallenged.

Don Braid, managing director of the NZX-listed global logistics company Mainfreight, says Cairns’ leadership skills have been “exceptional”.

“He has helped to create a world-class port and transformed what really was just a regional port into New Zealand’s premier port.”

Mark Lister, head of private wealth research at Craigs Investment Partners, says Port of Tauranga is one of the highest quality businesses on the sharemarket.

“Much of that success is down to Mark’s leadership as well as his ability to build a strong team around him … he’s been very good at succession planning. As a Tauranga local myself, the only negative I hear said about Mark Cairns is that he has a tendency to exaggerate his fishing stories, sometimes quite significantly.”

Maersk, the world’s biggest container shipping line, thanked Cairns for “exceptional work to develop Port of Tauranga as the main gateway connecting New Zealand with the world”.

“Under the leadership of Mark Cairns we have seen significant developments of the port to enable improved port productivity and efficiency of the entire New Zealand supply chain,” says My Therese Blank, head of Maersk Oceania export market, regional ocean management.

During Cairns’ leadership, the port’s market capitalisation has lifted by $4.6 billion. Cargo volumes have doubled and container volumes trebled.

He headed a bold $350 million capital investment to enable the port to handle big container ships, a project completed in 2016. The following year, Tauranga hosted the biggest container vessel ever to visit New Zealand, a Maersk ship that can carry 11,000-plus containers.

Today the port, the country’s largest by both cargo and container volumes, remains the only one in New Zealand that can host of ships this size.

Owned 54 per cent by the Bay of Plenty Regional Council, with the balance held by NZX investors, the port has returned $860m in dividends to the council since listing in 1992.

The council also has a perpetual preference share issue that’s created a $200m infrastructure fund for major projects, using dividends solely from the port.

The port has several subsidiaries including Northport, a joint venture in Northland with Marsden Maritime Holdings, and PrimePort Timaru.

About 95 per cent of the port’s 270 staff own shares through an employee scheme offering interest-free loans to buy shares.

While Cairns is “really proud” of the lift in the company’s market capitalisation, he’s even more pleased about that staff participation.

“It’s really good to have people at all levels of the organisation pulling me over and saying ‘what are you doing with the bloody share price today?’. They’ve moved from being a wage earner to a shareholder in the company – that’s what I like about being a listed issuer.”

Maritime Union of New Zealand national secretary Craig Harrison says he doesn’t have much to do with Cairns because the port’s business model is based on a high level of contracting out, “which as a union, we have some fundamental issues with”.

“But you have to respect where he has taken the port to and the service it delivers to the greater North Island and in general, the whole of New Zealand.”

Cairns’ first degree was in civil engineering – which, as he puts it, uses the left side of his brain. He likes building things but it’s people development that’s had his heart.

As a “massive subscriber” to the importance of emotional intelligence in business, he has made a point of developing the right side of his brain, getting management qualifications that include a Masters of Management degree.

So it’s little surprise that the safety of all the people who work in the potentially hazardous port environment has been his most acute focus.What keeps him awake at night isn’t a repeat of the 2011 Rena container vessel grounding – though that was a bad time personally – it’s safety.

“We didn’t have that great a safety record when I started,” says Cairns. “One of the first things I did, a small thing, was to make the first paragraph of my board reports about safety. It still is today.

“Some directors said ‘is safety now more important than profitability?’ and I said yes.

“You can’t have a profitable organisation without a safe organisation. We’ve had a massive shift and the main difference is personal accountability for safety. Rather than have a whole raft of consultants and supervisors, we’ve put the training in place and require staff to operate it.

“Above all else we value human life.

“We used to have people saying this is an industry where we always have accidents. I said BS. Every accident is preventable and if you think working at the port is a place you’ll have regular injuries, this isn’t the place for you.”

Every employee has Cairns’ authority to stop all machines and work if they see an unsafe situation.

The Rena incident was Cairns’ “darkest hour”. “Even though it happened miles away from the port, even out of our radar contact, I think a lot of the community blamed the port. The ship was coming into the port.

“It had a massive effect on the community and the environment and it got very personal as well.”

Another challenging time was the consent process to dredge the harbour for the big ships project.

“We got right to the Court of Appeal but I like to think we learned lessons, particularly around engagement with iwi.”

The port engages with three iwi and 28 hapū.

It has issues with one hapū, Cairns says, over a $68m proposal for a container terminalextension. The project was recently rejected for Government fast-track process consideration and is now off to the Environment Court.

It would create 368 jobs in construction and 81 permanent jobs and, says Cairns, is urgently needed to ease upper North Island supply chain congestion and maximise the value of the port’s recent 50:50 partnership with Waikato-Tainui, developing an inland port at Ruakura, Hamilton.

Cairns is clearly frustrated by the setback. “Ports are critical infrastructure. We are a small island trading nation with a very difficult geography of a long, narrow mountainous country.

“Our economy is primary sector exports and we are further from markets than any of our competitors. We just have to have a highly efficient supply chain and with 99.5 per cent of our goods going through ports, they are a big part of the economy.

“Ports have to be efficient. You don’t wait until you desperately need the infrastructure as we are now. You have to plan for it. If it takes four to five years for consents for critical infrastructure, New Zealand is in trouble.”

Cairns counts as achievements the signing of long term strategic operating alliances, first with Oji Fibre, a major pulp, paper and fibre packaging provider, and with Kotahi, New Zealand’s largest containerised freight exporter. Both deals are on their second extensions.

The Kotahi deal consolidated virtually all North Island primary export cargo on Tauranga, serving NZ Inc. well in the current supply chain and shipping congestion.

More to the point, it gave the port confidence to make the $350m capital investment to be able to handle big ships, says Cairns.

Which brings him to his biggest criticism of New Zealand’s ports: poor capital discipline.

“I’m a cheerleader for the mixed ownership model. If you look at those [part-listed] companies that have capital discipline, their performance is quite different to those that are wholly-owned by, and operating as local government trading enterprises … but ratepayers don’t seem to care.

“Every dollar we spend doesn’t just have to pass muster with the board; we have to think of those 13,000 shareholders and the 15 very smart analysts that are going through everything.

“I think having really good discipline in critical infrastructure is so important to a small island trading nation.”

He’s encouraged that the Auditor-General is eyeing ports’ financial performances, and by Transport Minister Michael Wood’s recent comment that a conversation is needed about ports making a reasonable return on investment.

“The ports are not regional development playthings,” says Cairns.

“I’m really proud of the $860m in dividends we’ve paid to our council. But our prices are typically 30-40 per cent lower than Australian ports.”

Some people may claim that ports are geographical monopolies that can charge what they like, but “that’s rubbish”, he says. “If you look at the average return on capital employed in the sector, 1 to 2 per cent is just a joke.

“[Those] local governments would be better having it in Bonus Bonds.”

Cairns has long said that if port companies invested and priced to reflect their cost of capital, a natural hierarchy of ports would soon emerge.

“And you wouldn’t have everyone trying to be an international container hub port. If you look at our freight demand and our import and export locations in the country, we don’t need 13 international hub ports.

“There will never be a cargo aggregation to justify $100m investments to have ports as international container hub ports.”

Cairns notes that the Port Companies Act may be old, but it does make the point that a port must be run as a successful business.

The typical local authority argument that their wholly-owned port is successful because it stimulates the regional economy and promotes tourism doesn’t wash with him. “Profit is not a dirty word. You’ve got to be profitable to be a sustainable, long-term business.”

He isn’t saying New Zealand needs fewer than 13 ports. “But they need to have different roles. A really good example is PrimePort Timaru. We were invited to be a 50 per cent shareholder there and that port is now a regional bulk port and a regional feeder port.

“That’s its role. It’s not an international container port and it is investing accordingly.”

Northport has a great future, Cairns believes, and more resources will be invested there.

Which brings us to the debate about the future of Auckland’s port. Sited on premium, restricted land in the city’s CBD, its capacity to handle growing future cargo volume is generally considered limited.

Cairns says the Auckland port will do what Sydney’s did. “The container terminal moved out of the city centre to Port Botany near the airport. Bulk liquids moved to Glebe Island, cars moved to Port Kembla and the bulk cargo moved to Newcastle.

“You’re not going to have a binary situation with Ports of Auckland closing and we need a new port in Manukau or the Firth of Thames. You’ll have cargo moving to Tauranga and Northport, and infrastructure will be built accordingly.

“The Firth of Thames option had a negative [net present value] of $44b. Who in their right mind is going to stump up to invest only to lose $44b – because that is what the analysis shows.”

Notwithstanding the 24 port studies already done – a 25th has been suggested by the new Transport Minister – Cairns wants to make something clear. Any suggestion that Tauranga and Northport don’t have the capacity to handle Auckland volumes is about as fruitless as all the port studies.

To get an external perspective on its strategic planning, Tauranga commissioned a top Netherlands analytics firm to confirm that it had capacity to handle, without any reclamation, three million TEUS (containers) at Sulphur Point. The port now handles 1.2 million.

The message came back. “As of today we could handle all of Ports of Auckland’s volume and all of Tauranga’s volume. Once we do the [berth extension] we will have another 1 million containers headroom.”

Meanwhile, Cairns believes the Ruakura development is the next game-changer for the sector.

“It’s as big as the CBD of Auckland. It will provide the next quantum shift, as Auckland businesses shift south they will be going to Ruakura.”

He says being a CEO “can be a really lonely job at times”. Being respectful of executives and providing support for them in his new governance roles will be a focus.

As CEO he’s learned to listen and watch more, and speak less – and that will also apply in the boardroom. “The biggest lesson for me is if you give people the tools and resources they will always exceed your expectations.”

His pet hates? “Bureaucracy. And people who don’t have empathy. They can’t see the effect they have on other people in the organisation. That drives me nuts.

“Governance is very different to management. You have to achieve your results by influence so the empathetic side of leadership becomes even more important.”

Mark Cairns

Age: 58
CV: CEO, Port of Tauranga 2005-21; CEO Toll Owens 2004-05; CEO Owens Cargo 2002-04
Independent director: Sanford, Freightways, Meridian Energy
Education: BE first class hons civil engineering; Master of Management
Passions: Fishing, boating, diving, examples of fine European automotive engineering

Port of Tauranga

Market capitalisation: $5b ($532m when Cairns started)
Revenue 2020: $302m
Net profit after tax 2020: $90m
Total shareholder return last 10 years: 23.3 per cent per year
Imports 2020: 9m tonnes
Exports 2020: 15.8m tonnes
Ship visits 2020: 1515

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