The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Despite beating internal profit forecasts for the first nine months by 79 per cent, Bahamas Waste yesterday warned that its 2015 year-end results could be “severely impacted” if there is no Baha Mar resolution by then.

Disa Campbell, the BISX-listed waste services provider’s chief financial officer, in what amounted to a potential ‘profits warning’ to investors, said the impact would result from having to provide for bad debts.

She added that this applied not only to the accounts for the seven Baha Mar companies in provisional liquidation (nine in receivership), but also to money owed by contractors employed on the $3.5 billion project.

And Ms Campbell warned that Bahamas Waste had, along with others, already begun to feel the effects of the Baha Mar impasse, as it was partly responsible for a more than three-fold increase in its bad debt expenses for the nine months to end-September 2015.

Construction revenue from the [Baha Mar] site during the first half of the year is still a significant contributor to increased net income,” Ms Campbell said in e-mailed replies to Tribune Business questions.

“However, partial provisions on all accounts directly affiliated with the properties now in provisional liquidation, coupled with the trickle-down effect to smaller customers, have been the main drivers of the increase in bad debt provisions.

“Additionally, without any resolution to the project’s status prior to year-end, we will be forced to consider full provisions - not only for these accounts but also for all the construction-related accounts as well as. This could severely affect our year-end results.”

Ms Campbell’s comments again illustrate the ‘ripple effects’ that the Baha Mar crisis continues to have throughout the Bahamian economy, impacting companies across a wide cross-section of industries.

Bahamas Waste claimed for just over $72,000 that Baha Mar entities allegedly owed to it when the former developer began its unsuccessful Chapter 11 bankruptcy protection action in the Delaware courts in late June 2015.

Ms Campbell told Tribune Business that the Baha Mar fall-out, coupled with the continued anemic economy, resulted in a 250 per cent year-over-year increase in the company’s bad debt expense - from $30,000 to $104,577.

And, despite an improved top and bottom line performance, Bahamas Waste also saw its net account receivables increase by 17.2 per cent during the first nine months of 2015 - from $2.196 million at year-end 2014 to $2.574 million.

To control the increase, Ms Campbell said Bahamas Waste was set to employ a “more conservative approach to provisioning, and more stringent policies with respect to collections provided on past due account, but still trying to balance this and work with customers as we know many are struggling.”.

Still, Bahamas Waste was able to produce net income for the nine months to end-September that exceeded its own forecasts by 79 per cent.

Profits rose by more than 27 per cent year-over-year, from $567,351 to $723,291. Earnings per share (EPS) jumped from $0.14 to $0.18.

The increase was driven by improved gross profits, which rose from $2.524 million to $2.745 million - an 8.8 per cent increase year-over-year.

While sales and services revenue was largely flat, rising slightly from $8.134 million to $8.181 million, costs associated with those sales fell by almost $175,000 or 3.1 per cent to stand at $5.435 million.

Ms Campbell told Tribune Business that Bahamas Waste had benefited from a 13 per cent year-over-year decline in fuel costs, which had contributed to a $105,000 saving for the year to end-September.

“New construction projects, new medical waste customers and decreases in fuel prices drive net income increases,” she said.

“However, it could have been better but for a 250 per cent increase in bad debt expense.”

From a financial perspective, Bahamas Waste’s ‘green’ initiatives - waste vegetable oil and cardboard recycling - continue to still drag down its financial performance in the short-term.

While the loss associated with the vegetable oil recycling declined by more than two-thirds year-over-year, from $350,633 to $106,297, the ‘red ink’ connected to the cardboard business grew slightly - from $123,445 to $147,215.

Looking to the near term, Ms Campbell repeated her warning about Baha Mar’s potential impact.

“Favourable gross profit margins are going to be considerably eroded by the increase in provisions for 2015,” she told Tribune Business.

“As for 2016, in the absence of any positive news about Baha Mar or any indications of other new private sector projects, we do not anticipate any ‘pick-up’ in the economy.

“Further, we have no plans for any new projects or initiatives and, as we go into our annual budget exercise, will carefully consider ways to streamline operations.”