The Tribune

• BISX-listed APD says profits $880k above first projection

• But down 7.7% against 2020 as COVID-19 impact bites

• Construction project provides greatest volume boost

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau’s major commercial shipping port beat its original revenue forecast by almost $1.5m for its 2021 financial year, although profits declined by 7.7 percent year-over-year.

Arawak Port Development Company (APD), the BISX-listed owner and operator of the Nassau Container Port, unveiled financial results for the year to end-June 2021 that, while markedly better than projections, were down year-over-year due to COVID-19’s devastating impact on Bahamian economic activity. 

While net and total comprehensive income both dropped by more than $500,000, falling from $7.23m in 2020 to $6.672m this time around, the latter figure was still over $800,000 or 15 percent above initial profit forecasts of $5.976m.

Revenues, too, while down 7.7 percent year-over-year at $28.775m compared to $31.16m in 2020, were still some 4.5 percent or $1.5m higher than the initially forecast $27.525m for the 12 months to end-June 2021.

Dion Bethell, APD’s president and chief financial officer, told Tribune Business that the port owner/operator was down against prior year comparisons because its 2020 financial year featured almost nine COVID-free months given that it closed at end-June 2020.

It was just the final three months of that year which felt the global pandemic’s impact, whereas APD and the entire Bahamian economy and consumer base have been grappling with COVID-19’s consequences for the whole of the 2021 financial year.

Pointing to the consequences, Mr Bethell said: “When you look year-over-year, you see revenues of $28.775m compared to $31.16m in 2020. That is approximately 8 percent or $2.4m less than we would have done in 2020.

“When you look at our expenses for 2021, we were about $1.5m below the prior year. We were able to manage expenses going through COVID-19. When you look at net income for 2021 compared to 2020, we’re about $500,000 below.”

APD’s total expenses dropped year-over-year by 9.3 percent, falling from $15.703m to $14.235m, as the company successfully contained costs. However, Mr Bethell added: “When you look at it volume wise, our TEUs (twenty foot equivalent unit) were about 8 percent under 2020,” Mr Bethell added.

“Our tonnage was about 8 percent over because of some construction activity that kicked in, and vehicle volumes were about 40 percent below 2020. That tells us very few people were importing cars and dealers were not able to sell as quickly as they were during pre-COVID activity.”

Mr Bethell added that APD also beat the revised revenue and profit forecasts it set at its 2021 financial year’s mid-point, when it realised performance was likely to be better than expected when setting its original targets at the start of the year.

He revealed that revenues finished 3 percent ahead of mid-year forecasts, beating them by around $700,000, while net income was some $840,000 ahead of projections. “Our expenses were relatively flat under budget,” Mr Bethell said.

Referring to the out-performing revenues and profits, he added: “The big driver for that was some project cargo... If you look at the period which 2021 covers, which will be from July last year to June this year, one of the first sectors the Government tried to ignite was the construction sector given that the tourism sector was at a standstill.

“That’s where we see the increase in volumes against budget, along with stevedoring and terminal handling of cargo. A lot of it is attributable to bulk cargo, and we saw some uptick in vehicles. We were still below budget on TEUs, but non-containerised project cargo came in for dredging associated with the Nassau Cruise Port.”

That development, as well as construction on the new US Embassy, Gold Wynn, Hurricane Hole and Albany, had ensured cargo volumes continued to move.

“We continue to manage costs, we continue to ensure everybody stays safe, and we continue to ensure that all perishable and grocery items are in the stores so people have no reason to concern themselves with being able to eat,” Mr Bethell added.

“The team continues to do a good job. As the first brick in the supply chain we need to ensure our nation, especially the capital, can forge ahead given the challenging time we are in. We’re very satisfied and comfortable with the results given the times we are in, and we continue to provide tier one service.”

APD previously said it has eliminated the possibility of any tariff rate increase by agreeing a refinancing of its near-$31m preference share debt that will slash interest costs by some $4.5m.

“When we came to market with those preference shares they were at 5.5 percent, and we’ve been able to negotiate a more favourable rate at prime minus 1.15 percent with a cap not to exceed 4.75 percent,” Mr Bethell explained at the time.

Given that the Bahamian prime rate is presently at 4.25 percent, this will slash APD’s long-term interest (debt servicing) costs from 5.5 percent to 3.1 percent once the $30.856m preference share capital outstanding at end-June 2022 is repaid to its investors.

“The difference on that $30m is substantial in terms of the interest savings to the company and, in effect, it’s common shareholders,” Mr Bethell added. “We’re estimating, for the option we considered, to save approximately $4.5m over the life of the facility.

“Given the times we are in, we have to find ways to reduce costs as opposed to increasing rates. This is one option that we felt was best for the company and its shareholders at this time.

“It gives APD an opportunity to obtain lower financing costs on its debt. If you hold preference shares, you’d like to hold that for longer at the higher rate of 5.5 percent, but we have always been prudent in managing our expenses and sought to keep our tariffs down. One way we’ve been able to do that is through refinancing of the preference shares at lower rates.”

The interest savings from the preference shares’ replacement will be spread out over 12 years, which works out to a $375,000 annual reduction in APD’s debt servicing costs.