The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Despite almost tripling its 2012 half-year profits Bahamas Waste yesterday said its bottom line came in 26 per cent below projections, with the second half outlook clouded by a 40 per cent reduction in its government residential garbage collection rates.

Acknowledging that the final six months of 2012 “don’t look as promising”, Disa Campbell, Bahamas Waste’s chief financial officer, told Tribune Business the BISX-listed waste collection services provider was off-forecast because its cardboard recycling segment had yet to become “a profit centre”.

Volumes had yet to hit target, while an almost 42 per cent drop in global cardboard/paper prices had also hit this venture.

Nevertheless, Bahamas Waste saw its net income for the six months to end-June 2012 more than double, rising 170.3 per cent to $427,94 compared to $158,314 for the same period last year.

Much of the increase was driven by top-line growth generated from Bahamas Waste’s contract with the Government to collect residential garbage in certain inner-city New Providence areas.

But, even here, Bahamas Waste is now experiencing ‘swings and roundabouts’, finding that what the Government gives with one hand it can take away with the other.

For while the Government has improved the duration of Bahamas Waste’s contract, extending it to a six-month deal lasting until end-February 2013, as opposed to a month-to-month basis, it has also cut the rate by 40 per cent - something that is set to eat into the BISX-listed firm’s profit margins.

“We are still 26 per cent below budget,” Ms Campbell told Tribune Business of Bahamas Waste’s 2012 first half results.

“We were expecting more from our recycling ventures, more so the cardboard, because we’re trying to get it to where it’s supposed to be a profit centre. We just haven’t had the volume.”

Commodity price volatility in the global cardboard and paper market had also impacted Bahamas Waste’s earnings from exporting the recycled product.

Ms Campbell said that while the company had earned $110-$120 per tonne for its cardboard exports during the same period in 2011, the last shipment it sent in the 2012 first half earned $100 per tonne - an up to 20 per cent decline.

And, referring to the residential garbage collection contract, she told Tribune Business: “The good thing about that is we’re not on a month-to-month any more with this through the end of the year, but the downside is it’s a significantly reduced rate - discounted by 40 per cent.

“While we will still have the revenue stream, we will have to focus a lot more on the margins, as they will not be as good. They are going to be reduced.

“We’ve had some good margins on the Government work - a lot of that we’ve been able to do with skeleton crews, and we’ve focused on doing it as efficiently as we can. While we will still have a profit, it won’t be as big as the first half of the year.”

On the positive side, Bahamas Waste’s balance sheet remained strong, with current assets of $3.289 million dwarfing their liabilities counterpart of $259,246.

Cash on hand had increased by over $0.5 million, rising from $111,074 at 2011 year-end to $769,269, while accounts receivables were down 19.3 per cent over the same duration to stand at $1.691 million - compared to $2.095 million at year-end.

“We are working feverishly on trying to get receivables down,” Ms Campbell told Tribune Business. “Most of that is we still have an issue with the smaller businesses that are not doing so well. While we have had some successes, there’s still a large portion of smaller customers we are working with.”

Ms Campbell added that the reduction in accounts receivables, coupled with reduced capital expenditure demands in 2012, had contributed to the build-up in balance sheet cash.

“All of our growth has been funded by operational cash flow,” she said, adding that Bahamas Waste still hoped to pay a shareholder dividend this year subject to the outcome of next month’s Board meeting.

Elsewhere, Ms Campbell told Tribune Business that volumes produced by Bahamas Waste’s biodiesel facility - which recycles waste cooking oil from hotels, restaurants and cruise ships - were “up significantly”.

The facility had produced 10,500 gallons of C100 biodiesel in the 2012 first quarter, and 15,860 in the second quarter. To get blended fuel, which is powering 30 of Bahamas Waste’s vehicles, volumes are doubled.

“The price per gallon is coming down, but we still have a long way to go to spread the costs and bring it down to what you’re buying fuel on the open market at,” Ms Campbell explained.

“But the cost is coming down significantly, about $1.50 per gallon since the start of the year.”

Ms Campbell added that Bahamas Waste was focusing on cost reduction, with half-year operating expenses up 14.4 per cent at $1.136 million compared to $992,929 for 2011.

Vehicle repairs and maintenance costs had increased, with the Government contract forcing some vehicles to work a double shift. Damages to vehicles at the landfill had also risen.

For the 2012 first half, Bahamas Waste saw revenues rise by 21.3 per cent to $4.972 million, compared to $4.097 million the year before, with gross profits up 34.4 per cent at $1.57 million from $1.168 million in 2011.

Earnings per share (EPS were $0.10, compared to $0.04.