By NEIL HARTNELL
Tribune Business Editor
Arawak Port Development Company (APD) cut budgeted expenses by more than $1 million to produce a 3.5 per cent profit increase for its 2014 financial year, offsetting the failure to hit revenue and cargo throughput targets.
Michael Maura, the Nassau Container Port operator’s chief executive, told Tribune Business that the improved bottom line resulted from the BISX-listed company aligning costs with its top-line.
“I think that the company performed well from the perspective that our gross revenues were under-budget,” Mr Maura said of the year that closed on June 30, 2014. “That resulted from our volumes also coming in under-budget.
“We just took solid, hard management decisions, operating management decisions, at all levels. We’ve been able to make sure business expenses fell in line with volumes.”
Dion Bethel, APD’s chief financial officer, added: “Even though revenues and volumes were under budget, net income was higher than budgeted. We exceeded what we had budgeted by about $180,000.”
APD’s total comprehensive income rose to $3.616 million for the 12 months to end-June 30, 2014, up by 3.5 per cent from the prior year’s $3.495 million.
Earnings per share (EPS) also increased slightly, from $0.70 per share to $0.72 per share, which will benefit APD’s government and shipping company shareholders (with a 40 per cent equity stake each), plus the Bahamian public which holds the remaining 20 per cent.
Mr Maura, meanwhile, revealed to Tribune Business that cargo throughput at the Arawak Cay port, as measured by imported twenty-foot equivalent units (TEUs), came in 4.5 per cent below APD’s own internal projections.
The port operator had forecast 70,200 TEUs would move through Arawak Cay in the year to end-June 2014, but the final total came in at 67,053 - a 3,165 “shortfall”.
This pattern was repeated with APD’s bulk aggregate business, which came in 26.6 per cent below volume forecasts for the year.
While the port operator had projected receiving 650,750 bulk aggregate tonnes during the 2014 financial year, the actual amount imported was 477,479 tonnes - a 173,000 “shortfall”.
Mr Maura told Tribune Business that “the biggest hit we took was how fast the infrastructure component of the Baha Mar project ended”, a development that directly impacted bulk aggregate imports to New Providence. He said this business had now returned to its more historical ‘imported tonnage’ level.
Translating this into ‘dollar figures’, Mr Bethel said the reduced cargo volumes meant APD’s top line gross revenues came in $595,000 below forecast, finishing at $25.758 million compared to $26.353 million.
The real boost, though, came on operating expenses, with APD able to find more than $1 million in cost savings to bring this in at $19.597 million, compared to projections of $20.608 million.
This enabled APD to beat its earnings before interest and depreciation (EBITDA) target, the company coming in at $9.08 million compared to projections of $8.393 million.
“We came in a little bit ahead of budget, so even though the volumes decreased, we managed the costs appropriately so we came in a little ahead of budget,” Mr Bethel told Tribune Business.
Mr Maura, meanwhile, explained that there had been little change to the cargo volumes the Arawak Cay port is expected to process on Baha Mar’s behalf.
While APD had initially projected a ‘spike’ in Baha Mar-related imports, its chief executive said these cargo volumes were still coming, albeit spread out over a longer period of time - as shown by Baha Mar’s new late Spring 2015 opening date.
“The project has been extended, and what should have happened over a shorter period of time is now spread out over more months,” Mr Maura told Tribune Business.
He added that a different cargo type would also be dealt with. APD had previously expected to be handling Baha Mar’s food and beverage imports by now, given its earlier December 2014 opening target.
Mr Maura, though, said this would now be pushed back to summer 2015, with APD likely handling the development’s furniture, fixtures and equipment imports through year-end and into next year’s first quarter with construction ongoing.
The APD chief also told Tribune Business that a reduction in the Arawak Cay port’s tariffs was unlikely in 2015, given that the TEU volumes required for this to happen were not forecast to materialise.
“I do not believe so,” Mr Maura said, when asked by Tribune Business if a rise in cargo volumes would allow for a price reduction and still enable the port hit its minimum 10 per cent internal rate of return (IRR) target.
“The reason for that,” the APD chief added, “is we do not anticipate any material increase in volumes. We had, in June this year, a rate increase of $28 per 20-foot unit.
“That was pretty minimal, and was the first increase we had in a little over two years.”