The Tribune

• Net income $1.2m above forecasts

• And revenue ahead 23% or $1.73m

• Company eyes 11% annual profit rise

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau’s main commercial shipping port is targeting an $808,000 year-over-year increase in net profits for its 2023 financial year after first quarter net income exceeded forecasts by some 56 percent.

Arawak Port Development Company (APD), the BISX-listed owner and operator of Nassau Container Port, gave shareholders a boost ahead of this week’s annual general meeting (AGM) by revealing that profits for the three months to end-September 2022 were almost $1.2m ahead of projections.

It attributed the bottom line performance to increased import activity driven by The Bahamas’ continued economic reflation after fully emerging from COVID-related restrictions, with higher revenues generated in storage fees, twenty-foot equivalent (TEU) container throughput volumes and vehicle imports.

The Arawak Cay-based port operator also disclosed that it is projecting a 10.9 percent increase in full-year net income to $8.226m - a target that again seems in danger of being beaten if the first quarter trends persist for the full 12-month period to end-June 2023.

But, despite revenues for the three months to end-September tracking 23 percent or $1.728m ahead of forecast, with TEU volumes for the period almost 4 percent over budget, APD management said they are being “extremely conservative” in not projecting any major increase in imports related to multiple foreign direct investment (FDI) driven construction projects in 2023.

“For the 2023 fiscal year, we are budgeting gross revenue of $30.619m or 2.2 percent more than the prior year’s actual gross revenue,” APD told investors in its annual report. Full-year revenues for 2022 came in at $29.96m, meaning the company is forecasting just a $623,000 year-over-year top-line increase, although the impact on profits is forecast to be much more.

“Net income is projected to be approximately $8.226m or approximately $808,000 more than the 2022 actual net income of $7.418m,” the BISX-listed port operator revealed. “Our net income is currently 56 percent or $1.197m over budget as of September 30, 2022. This is attributable to the increase in storage fees, and TEU and vehicle volumes, being over budget.

“Ongoing projects currently include Global Port Holdings (Nassau Cruise Port) and downtown redevelopment; the US Embassy; Goldwynn Condo Hotel and Residences; and South Ocean resort. All these projects are in progress. Management remains extremely conservative and does not foresee any significant project volumes during financial year.”

APD added that total TEU container throughput volumes for the 2023 full-year are forecast to be 9,000, or 7 percent higher, than 2022’s 127,000 forecast. Container volumes for the 12 months to end-June 2022 came in slightly above forecast at 128,995, which also represented an 8 percent jump over 2021’s 118,962 TEUs.

“Nassau Container Port’s TEU volumes as of September 30, 2022, are tracking 3.94 percent over budget. Total revenues as of September 30, 2022, are tracking about 23 percent over budget,” APDs annual report revealed. “Total market volumes are estimated to be around 136,000 TEUs for 2023 or 9,000 TEU above the 2022 budgeted volumes of 127,000 TEUs.

“Our total revenues as of September 30, 2022, are over budget by approximately $1.728m or 23 percent. Total expenses as of September 30, 2022, were over budget by $665,625 driven mainly by increase in terminal handling fees related to import volumes and storage.”

Turning to the full-year performance for the 12 months to end-June 2022, the Nassau Container Port operator confirmed that it “exceeded budgeted net income projections. Budgeted net income was $6.208m while actual net income for 2022 was $7.418m, which is $1.21m or 19 percent more than budget.

“The company’s total revenues for 2022 were $29.96m, which is $1.185m or 4 percent higher than the prior year’s $28.775m. Net income for 2022 totalled $7.418m, which is 11 percent higher than the prior year. This was largely attributable to the rebound of economic activities from COVID-19 on our local economy and project-related cargo.

“Our direct operating margin (DOM) for 2022 was 50 percent. Our budgeted DOM for 2022 was 48 percent. For the period ended September 30, 2022, our DOM is 53 percent, which is 2 percent more than our budgeted DOM for the same period. During the year, APD declared and paid dividends to ordinary shareholders of $5.497m (2021: $4.997m) representing $1.11 per share. As of June 30, 2022, basic and diluted earnings per share were $1.48. The prior year’s were $1.34.

Breaking down import activity for the year to end-June 2022, APD said: “Actual TEU volumes for 2022 of 128,995 were over budget by 1,995 TEUs or 2 percent compared to our budgeted 2022 volumes of 127,000 TEUs. Additionally, bulk car volumes of 10,056 were 456 or 5 percent more than 2022 budgeted car volumes of 9,600.

“This resulted in revenues of approximately $1.911m from landing and security fees for vehicles. Additionally, revenues from reefer fees were approximately 56 percent over budget during financial year 2022. Stevedoring revenue was over budget by $263,724 during financial year 2022.”

Looking ahead to potential port projects in 2023, APD said there was “a clear indication” that the Government is ready to move ahead with constructing a Customs freight station at its property for the clearance and inspection of flagged cargo. It added that the previous “sticking point” on how the project will be financed appeared to have been resolved through importers being asked to pay Customs fees direct to APD to reimburse its initial outlay.

“The construction of a dedicated Customs freight station at the port to facilitate the inspection and clearance of flagged cargo has been under discussion at APD for several years in keeping with the company’s growth strategy and national mandate,” the annual report said.

“ However, previous government administrations were not minded to engage in this project. The good news is that there has been a clear indication that government is ready to move forward on our proposal. Formerly, the sticking point was repayment to APD for the funds that would be expended to bring this project to fruition. Now, the idea is to authorise importers to pay certain Customs fees directly to APD to amortise the costs.”

Spotting similar hints of progress with the proposed vehicle inspection facility, the port operator added: “When APD acquired the franchise to land imported vehicles at Nassau Container Port, almost immediately the notion arose to create a building for the Road Traffic Department that would facilitate vehicle inspection, licensing and insurance providers.

“The idea is to allow importers to drive vehicles off the dock fully up to code in all respects. There is also indication that government is ready to move on this proposal as well.” Dion Bethell, APD’s president and chief executive, also disclosed that the Prime Minister’s Office had demanded that shipping companies explain the huge cost increases they passed on due to rising global fuel prices and post-COVID supply chain bottlenecks.

“In a letter from the Office of the Prime Minister, shippers serving The Bahamas were asked to explain cost increases. It came as no surprise that justifications referred to the cost of fuel for all aspects of the movement of goods shipped on sea and trucking inland,” Mr Bethell added.

And Michael Maura, APD’s chairman, disclosed that upgrades to the company’s corporate structure are also in motion. “As we look ahead the company will transition once again, building upon the great work of the past and advancing new Environmental, Social and Governance (ESG) initiatives,” he wrote.

“The Board has retained KPMG Bahamas to assist in the design and implementation of this new corporate framework. The objective is to further enshrine and align necessary environmental, social and governance practices within the company’s internal and external engagements with employees, customers, shareholders, our community, and our environment.

“The commitment to the ESG framework ensures that APD’s future continues to be bright. Lenders, shareholders, supply chain partners, regulators and more consider ESG adoption and implementation as a measure in a company’s risk profile.”