By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Arawak Port Development Company (APD) has effectively delivered a profits warning to shareholders, projecting that net income for its 2016 financial year is likely to fall almost 48 per cent year-over-year.

THe BISX-listed operator of the Nassau Container Port said it was projecting a more than $3.2 million net income decline for the 12 months to end-June 2016, due to lower revenues and container throughput volumes.

Michael Maura, APD’s chief executive, warned in the company’s 2015 annual report that it is now forecasting a 9 per cent year-over-year decline in twenty-foot equivalent unit (TEU) volumes due to the Baha Mar “standstill” and related economic fall-out.

Tribune Business revealed last month that the Arawak Cay port had suffered double (from 5 per cent to 10 per cent) the anticipated drop in container throughput volumes for its 2016 financial year to-date due to Baha Mar’s woes, with Mr Maura predicting then that its 2016 financial year will be “more challenging”.

Just how challenging was revealed in APD’s newly-released annual report, with the company projecting an 11.61 per cent year-over-year dip in revenue to $26.224 million.

On the basis of that decline, the company’s management warned: “Net income is projected to be $3.526 million or $3.227 million under the 2015 actual net income of $6.753 million...

“Our TEU volumes are currently on budget as at August 31, 2015. However, we are doubtful of any project cargo volumes this year. The main project, Baha Mar, is at a standstill and the Hilton and Albany projects are in the very early stages.

“Due to this, we do not foresee any significant project volumes during financial year 2016. With the current Baha Mar situation, we feel that total market volumes will be around 61,500 TEUs for 2016 or 6,880 under the 2015 TEU volumes of 68,380 TEUs. Our total revenues as at August 31, 2015, are ahead of budget by $360,000 or 55 per cent.”

While the latter figures provide some optimism that APD will again outperform its budget targets, a trend it has established throughout its relatively short existence, the projections allow for a 10 per cent drop in TEU throughput volume.

Mr Maura provided more details in his message to shareholders, saying: “The greatest revenue-related challenge facing APD during the year ahead relates to the remobilisation of the Baha Mar project, the subsequent timing of the opening of the hotel property and indirectly to what extent local Baha Mar creditors will be paid.

“Prior to the suspension of all construction activities at Baha Mar, APD had anticipated approximately a 5 per cent drop in import container TEUs as the resort property transitioned from construction to hotel operations. While we are confident that construction will resume and the resort property will be completed, great uncertainty surrounds the timing of this effort.

“The current standstill and associated impact on the local economy necessitated that APD budget a 9 per cent decline in import TEU volumes for the 2015-2016 fiscal period. This dramatic decline in business required that APD take an aggressive step to reduce costs and, on September 5, in an effort to align operations with market demand, APD suspended the Saturday operations.”

The APD annual report added that TEU volumes were matching projections for the first two months of the 2016 financial year, while operating expenses were 4 per cent or $121,500 higher than anticipated.

But, helping to partially offset the decline in cargo/TEU volumes is APD’s securing of the auto import business, which has been switched from Prince George’s Wharf to Arawak Cay.

“A bright spot on the horizon, however, relates to the import of automobiles via the bulk auto carriers. As previously noted, Nassau Container Port received 5,485 vehicles between December 2014 and June 2015,” Mr Maura told investors.

“During the first three months of the new fiscal year, the Nassau Container Port has already handled 2,994 vehicles, which will help to offset the decline in container volumes.”

The APD chief executive added that the port’s imports had also provided evidence of a sluggish construction industry. “Bulk aggregate volumes for the period were 369,121 tons, 108,358 or 23 per cent under prior period, and break bulk cargo volumes were 9,761 tons, 3,976 tons or 29 per cent under as well,” he said of 2015.

“The significant decline in bulk aggregate volumes is indicative of the present slowdown in the construction sector. Bulk aggregate volumes are a good indicator of future container volumes as aggregates precede the import of other containerised construction materials such as drywall, steel studs, lumber, fixtures, furniture and landscaping.

“A significant spike in aggregate imports in one year often leads to both a future increase in construction-related container volumes, and a subsequent decline in bulk aggregate imports. The decline in break bulk volume was primarily attributable to this cargo type shifting to container transport.”

Elsewhere, Mr Maura said the implementation of APD’s new N4 NAVIS terminal operating system had reduced the time truckers spent on the port by 50 per cent, dropping turnaround time for container pick-up to around 23 minutes.

“Providing the trucker with the exact location of the container, while simultaneously sending electronic work instructions to the CHE (container handling equipment), has reduced the time the trucker spends in the port by 50 per cent, resulting in an average turn time of less than 25 minutes,” the APD chief executive said.

He disclosed that he and other Arawak port executives had visited Cuba’s Mariel cargo port in 2015, and suggested that the island’s long-awaited ‘US opening’ may not have an immediate impact on the Bahamas.

“It is our opinion that, while Cuba will undoubtedly have an impact on the Bahamas, its influence on our tourism sector and economy will not be as dramatic or sudden as some may think,” Mr Maura said.

“Cuba is a rough diamond which will require polishing for some time. We also left with a view that Cuba may one day become a regular trading partner with the Bahamas, but this will only materialise after Cuba determines it can afford to export valuable commodities like cement, which is presently in high demand within Cuba.”