The Tribune

• Eyes 7% increase for 2024 as all imports rise

• But $2m revenue fall on no storage fee repeat

• ‘Talk’ of PI Ritz-Carlton, Melia’s replacement

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau’s main commercial shipping port is targeting a 7 percent year-over-year increase to break the $10m profit barrier in 2024, its top executive asserting yesterday: “The economy has turned.”

Dion Bethell, Arawak Port Development Company’s (APD) president and chief financial officer, told Tribune Business the BISX-listed operator is forecasting a near-$650,000 bottom line improvement for the year to end-June 2024 despite anticipating a $2m year-over-year fall-off in revenues.

He revealed that APD, in which both the Government and shipping industry each hold 40 percent ownership stakes, is basing its revenue forecast upon projections that it will not enjoy a reoccurrence of last year’s 126.5 percent increase in storage fees, which more than doubled to $3.595m compared to just $1.587m in 2022.

Mr Bethell, pledging that APD will be “very vigilant and prudent” in managing its operations, told this newspaper the company is aiming to keep its 2024 costs “flat” with last year’s $17.161m and is budgeting for just a 1 percent reduction in these total expenses.

To make up for the predicted 6 percent year-over-year revenue decline, and still increase profits, APD’s 2023 audited financials show it developed some new earnings streams that will likely bear full fruit in 2024. Its balance sheet has a new line item featuring $2.48m worth of investments, namely its purchases of Bahamas government bonds and shares in the mutual fund owning 49 percent of Nassau Cruise Port.

APD’s financials show these investments generated $455,128 in interest income during the second half of its 2023 financial year, helping to lower its net financing costs by $250,000, and they will now be able to make an impact for a full 12 months for the first time.

Mr Bethell, confirming that the investments are part of APD’s strategy to put balance sheet cash, which stood at $16.194m at end-June 2023, to work and yield higher returns, added that ongoing resort, foreign direct investment (FDI) projects and other construction-related developments are forecast to continue aiding import volumes through 2024.

The APD chief added that among the anticipated projects is the creation of 400 rooms and 60 residences where the Melia Nassau Beach resort once stood by Baha Mar’s owner, Chow Tai Fook Enterprises (CTFE), while there has been “talk” of a proposal for a “23-storey Ritz-Carlton hotel” on Paradise Island.

Striking an upbeat tone over APD’s prospects, Mr Bethell said container import volumes passing through APD’s Arawak Cay facility are now 7 percent above those generated during 2019’s pre-COVID period. “We’re seeing volumes pick up. The economy has definitely turned and is on an upward trending trajectory,” he told Tribune Business.

“We’re pretty much, in terms of container volumes, 7 percent over what pre-COVID volumes were in 2019. Over this year now, we are estimating that for 2024 there will a 2 percent increase [in container volumes] notwithstanding that we have quite a lot of projects going on. The majority of those are construction projects and, at some point, we expect them to translate into container volumes.”

Besides the US embassy’s completion, Mr Bethell said other developments likely to generate potential construction material imports are the Wynn Group’s 14-storey Goodman’s Bay penthouse if it obtains the necessary approvals; Aqualina’s phase two on the Cable Beach strip; and the possible transformation of Atlantis’ Beach Towers into the Somewhere Else concept by Pharrell Williams and David Grutman.

“There’s the University of The Bahamas dormitories which are supposed to go up at the old Road Traffic Department site on Thompson Boulevard,” Mr Bethell added. “There’s the Royal Caribbean project on the western end of Paradise Island.

“There’s some demolition going on there, and they’re forecast to develop rooms and residences. They’re expected to put up 400 rooms and 60 residences. There’s talk of a 23-storey Ritz-Carlton hotel on Paradise Island. Then there’s Albany that is supposed to be beginning construction on another tower.

“There’s talk of Bluewater Marina on Hanna Road, the southern end of Fox Hill Road. Then there’s Venetian Village at the junction of Old Ford and Windsor Road. There’s also talk of the Paradise Island Yacht Club. While we are aware some are underway and some are in the pipeline, when we budget, especially on bulk volumes, we put some elements into that. That’s on the construction side.”

APD, as the gateway for at least 90 percent of New Providence’s international shipping cargos, is a key facilitator of The Bahamas’ import-driven commerce and thus a key gauge of this country’s economic strength. Besides storage revenues more-than-doubling, the Arawak Cay port’s 2023 top-line also received another $2m-plus year-over-year boost from landing fees.

The latter increased by 15.7 percent year-over-year, rising from $13.019m in 2022 to $15.064m as import volumes rose with the Bahamian economy completing its post-COVID reflation, but APD is remaining typically conservative with its 2024 forecast.

“When we look at 2023, actual total revenues versus budget, we’re about 17 percent over budget,” Mr Bethell explained. “The majority of the large contributor to the increase was not directly linked to volumes but was related to our storage of equipment that remained at the port beyond the three days allocated” to shipping carriers, trucking companies and the like.

“It is never our intent, and we see these anomalies from time to time, that persons have that much cargo remain here for an extended period of time to generate that much revenue,” he added. “We do not see those storage fees reoccurring at that level in 2024. This is just one of those years where we saw a large increase.

“The majority of that storage was empty containers going to where the shipping companies had allocated them remaining there beyond their allotted time. They were not imported containers. The majority were empty containers being exported.”

Mr Bethell said twenty-foot equivalent (TEU) container volumes for the 12 months to end-June 2023 were 4 percent above forecast for that year. “On [bulk] tonnage we were up by about 23 percent ahead of budget and on vehicles we were up 50 percent,” he added.

“The highest increase we have forecast for 2024 is on vehicles, where we’re forecasting a 15 percent increase. That’s not quite at pre-COVID volumes but we’re moving there consistently. When you look at the amount of vehicles new car dealers are bringing in or importing, it suggests that the fractures in the supply chain are being fixed. 

“We have a continual supply of vehicles coming in for new car dealers and are seeing a lot more individuals and used car dealers importing vehicles from Asia.” Despite this, APD is being “optimistic but vigilant” on its 2024 projections.

Noting that annual storage revenues had typically been in the $1.6m-$1.8m range, rather than last year’s $3.5m, Mr Bethell told Tribune Business: “Total revenue is forecast to be around $33.7m versus $35.8m. Our revenue is going to be down about -6 percent, but that also factor in increases in volumes.

“Our expenses we are forecasting to be about 1 percent less. We’re going to manage the business very vigilantly and prudently. We are forecasting expenses to be flat.” However, the earlier refinancing of more expensive preference shares with CIBC FirstCaribbean bank debt carrying just a 3.1 percent interest rate, of which $26.742m remains outstanding, has reduced APD’s financing costs.

And it now also has an interest, valued at $425,000, in the Bahamas Investment Fund that owns a 49 percent stake in Nassau Cruise Port, as well as having acquired $4.959m worth of government bonds at a discount to par or face value. The latter produced some $223,714 in interest income over the final six months of the 2023 financial year.

Mr Bethell said these investments and refinancing have helped to produce a “net impact” of 2.9 percent on APD’s overall net yield on financing costs, and added: “We continue to explore ways not to go up on tariffs by managing financing costs and operating expenses prudently.”

As for what this means for 2024, he told this newspaper: “We expect net income to be about $110.37m, which is about 7 percent over what we’ve done in the 2023 financial year. For our TEUs, we’re forecasting 144,000 TEUs, about 391,000 short tons of bulk material and 18,000 vehicles.

“Our TEUs last year were about 141,000. We’re predicting about 3,000 TEUs more than the prior year, which gives quite a significant increase. It may not seem a lot, but 3,000 extra containers is quite a bit.” One “short” ton is equal to 2,000 pounds, and Mr Bethell said this included all types of construction materials such as rock, sand and cement.