The Tribune

• APD chief: We won’t be ‘financial burden’ to public

• But rising fuel, energy costs threaten profit squeeze

• Shipping gateway’s half-year profit beats goal by 5%

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau’s major commercial shipping port has pledged it will not increase any tariffs despite growing fuel and energy cost pressures that threaten its profit targets for the 2022 financial year.

Dion Bethell, Arawak Port Development Company’s (APD) president and chief financial officer, told Tribune Business had had given such assurances to the Prime Minister during the latter’s meeting with wholesalers and importers as the BISX-listed company seeks to do its part in easing inflation’s impact on hard-pressed Bahamians.

Some 90 percent of New Providence’s commercial sea freight comes through the Nassau Container Port, and the APD chief voiced optimism that it will still meet earnings projections for the 12 months to end-June 2022 without rate increases to match the anticipated hike in costs.

“There’s no plans or intent to increase tariff rates,” Mr Bethell told this newspaper. “We’re just mindful of the current environment. The impact of inflation will certainly be a significant factor, not just for APD but for everyone. High fuel prices, the fractured supply chain as it tries to recover, the impact of what’s going on in Ukraine, all these things factor together.”

APD’s tariffs impact the cost of all goods purchased by New Providence residents, and he confirmed he had given a similar assurance on its intent to hold the line when himself and some of the country’s largest retailers, wholesalers and importers met Philip Davis QC recently.

“One thing we assured them of is we haven’t increased rates for eight years, and there are no plans to increase rates now,” Mr Bethell disclosed. “The greatest impact on global cargo costs is outside our control related to global shipping costs.

“No assurances were made to decrease our rates, but assurances were given that we won’t be increasing them. In unique circumstances, we do what is necessary to ensure that the impact of the services we provide is not a financial burden to the general public because, over the years, we have not increased our rates. We certainly won’t be increasing them in times like this.”

Mr Bethell’s assurance will provide some modest relief to hard-pressed Bahamian consumers and households already grappling with the impact from US inflation hitting 40-year highs in early 2022. As a country that imports virtually all it consumes, and with many of these goods manufactured in or transported through the US, these price rises are being passed on to The Bahamas.

And the APD chief said shipping carriers are already passing on higher fuel costs to customers via the bill of lading, as oil prices soar due to a combination of increased demand as the global economy reflates post-COVID and Russia’s invasion of Ukraine.

“Shipping costs have increased in the freight bill. There will be some pass through from the carriers to the importers, but on APD’s part of that bill, there will not be any increase in rates,” Mr Bethell added, urging all consumers and businesses to “remain prudent and make wise choices” to head off inflation’s impact.

“I’m sure there will be some impact on our business ahead, especially since we’ve made a decision not to increase any of our rates,” he told Tribune Business. “Of course, there’s underlying costs as with any business. Fuel is an important part of our business, and the likelihood of the cost of fuel increasing is very possible.”

APD’s ownership is split 40/40 between the Government and shipping industry, with Bahamian public investors holding the 20 percent balance. The Memorandum of Understanding (MoU) between the former two, which formalised the company’s creation under the last Ingraham administration, stipulates that it must make an annual internal rate of return (IRR) of a minimum 10 percent.

However, noting concerns that Bahamas Power & Light’s (BPL) fuel hedging strategy was not renewed on time, Mr Bethell said APD was also bracing for an increase in energy costs “despite our measures to contend with our solar powered system”.

He added: “We still consume a lot of electricity at night for lighting of the port, so I am sure it will have some impact on our business. The overall trickle down impact of inflation as we try to emerge from this COVID environment will mean a general increase in the cost of doing business.

“As it is now, we’re not certain how inflation will impact certain types of imports like vehicles. Persons will be prudent, and may make decisions to defer purchases with higher prices on the horizon.”

While vehicle imports for the three months to end-December were ahead of the prior year comparative by 17 percent, Mr Bethell added: “Our vehicle volumes remain below the pre-COVID (June 2019 to December 2019) volumes by approximately 31 percent.

“We are uncertain as to how this will trend given the shortage of new cars globally due to the pandemic and the high demand of used cars globally.” However, the APD chief revealed that - while twenty-foot equivalent unit (TEU) volumes were flat for the six months to end-December 2021 - the “progressive recovery” that the company had forecast was “pretty much on track” with budget.

“We were a little above budget on the bottom line, we were slightly under on expenses and slightly over on non-TEU volumes at the mid-year,” Mr Bethell said of APD’s first-half performance. “We had some project cargos that came in for Albany, Sandals and the Nassau Cruise Port.

“We ended up close to 5 percent on profit profit projections. We were about 3-4 percent under-budget on expenses, and about 4 percent over-budget on non-TEU related revenues. Given the over-budget performance that we experienced through the first-half, I’m hopeful that the overall impact by year-end will put us very close to the targeted budget forecasts.”

Mr Bethell said APD’s bulk tonnage volumes for the six months to end-December 2021 were ahead of pre-COVID levels by some 64,000 tons due to major construction projects underway on New Providence. TEU volumes were down 3 percent compared to pre-pandemic levels but that gap is expected to narrow between now and the 2022 financial year’s end-June close.

APD’s $4.357m first half profit is some 25 percent ahead of the prior year comparative. “Our year-to-date revenue ($15.6m) is approximately $1.4m or 10 percent above our prior year revenue of $14.2m,” Mr Bethell added.

“Our year-to-date expenses ($7.2m) are approximately $327,000, or 5 percent, above our prior year expenses of $6.8m. As at (end-December 2021, EBITDA is $8.5m (compared to $7.4m) or 15 percent above the same year-to-date period prior year.”