By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Nassau Container Port's (NCP) operator is aiming "to save every penny we can" following a financial year where its predictions of a near-$3m profit decline proved spot-on.

Dion Bethell, chief financial officer for BISX-listed Arawak Port Development Company (APD), told Tribune Business yesterday that it "tightened our belt" on cost controls to ensure its bottom line for the year to end-June 2018 came in around $350,000 above expectations.

Although APD's profits slumped 20.8 percent year-over-year, falling from $11.171m to $8.858m, the company had been up against tough prior year comparatives due to a double Baha Mar boost - the resumption of construction to complete the project, and recovery of $1.1m in rent and storage fees owed when it went into Chapter 11 bankruptcy.

Michael Maura, APD's chief executive, said the anticipated fall-off in Baha Mar-related construction imports produced a 5.5 percent year-over-year decline in twenty-foot equivalent unit (TEU) shipping containers moving through the Arawak Cay-based port.

In the absence of significant construction sector pick-up elsewhere, he revealed that dry bulk aggregate volumes fell by 17.23 percent compared to 2017, although continued Bahamian demand for used vehicles saw import levels in this category grow 4.3 percent year-over-year.

With revenues for the 2018 financial year down by just over $1m, or 3.1 percent, Mr Bethell said APD's cost management focus had resulted in it electing to pay-off its $3m-plus Royal Bank of Canada (RBC) loan early to save around $100,000 in debt servicing (interest) costs.

And, while he and Mr Maura both forecast a 2019 financial performance that will be flat compared to last year on revenue and profits, APD has gently increased staff numbers in preparation for what both believe will be improved economic growth thereafter.

"We were just about $350,000 over what we budgeted in terms of net earnings," Mr Bethell told Tribune Business of the 2018n financial performance. "While we had been slightly under-budget in our volumes, we concentrated on reduced costs to right-size given the circumstances we found ourselves in.

"We had to tighten our belt to manage costs as best we could, notwithstanding utility costs were relatively high. We're looking at the entire operation closely to make sure we save every penny where we can."

APD's total costs jumped by 9.6 percent or just over $1.5m year-over-year, with the major increases coming in the categories of employee salaries/benefits; utilities; and maintenance.

Mr Bethell explained that staffing costs rose as a result of increased hiring, as APD expanded its workforce back to "slightly over 100 employees" - a number consistent with 2015 levels - ahead of an anticipated economic rebound post-2019.

"We are expecting a rebound in our economy, and this is just in preparation for an expansion in the economy in the years ahead," he added, explaining that the $350,000 year-over-year spike in employee costs also related to increased participation in APD's health insurance and company pension programmes.

Mr Maura, meanwhile, said maintenance associated with the "overhaul" of APD's cranes added another $300,000 in extra costs during the company's 2018 financial year. Utilities expenses also rose, by 34 percent to $1.153m, which Mr Bethell attributed to one-off "water leaks" that will not recur and APD having to increasingly burn fuel to run its generators amid BPL outages.

He added that the benefits from installation of energy-saving LED lights and solar panels were expected to materialise during APD's current financial year, reversing the rise in utilities costs.

As for APD's income streams, Mr Maura told Tribune Business: "Our TEU volumes were down 5.5 percent against prior year. We continue to see a positive trend on vehicle imports, which climbed 4.3 percent but, again, because we experienced a relatively soft construction sector we saw dry bulk aggregate volumes falling by 17 percent."

The APD chief executive added that the TEU drop-off translated into a 3,879 container "shortfall" year-over-year, but vehicle imports were up by 732 at around the 17,600 mark.

Mr Bethel said the shipping companies using the Nassau Container Port had become much more efficient in "turning" and managing their empty containers, leaving fewer on Arawak Cay and for shorter periods. As a result, APD's storage income stream came in "$450,000 under" during the 2018 financial year.

The APD financial chief then revealed that, following the 2018 year-end, the port operator elected to pay-off the RBC loan - due for repayment at the close of the calendar year - some six months early to reduce interest costs.

"We had a long-term debt with RBC and, post year-end, paid the principal," Mr Bethell said. "That was $3m and change paid on July 1, and it's to better manage our financing costs. We paid off RBC given that we had the cash to manage the financing costs. We probably saved around $100,000 by paying that off early."

That has been replaced by a $3m Inter-American Development Bank (IDB) loan to finance APD's installation of energy efficient lighting and renewable energy systems, some $1.5m or 50 percent of which has now been drawn down.

Looking ahead to the current financial year, Mr Bethell said APD expected container throughput volumes and revenues to be flat against 2018. He added that a slight increase in "anticipated" vehicle imports was anticipated to be offset by increased costs associated with cost of living rises.

Mr Maura said APD's "conservative budget" had also been influenced by the VAT rate increase to 12 percent, with a number of businesses - including major importers - informing the port that trading conditions had been slow since the hike's introduction.

And, while construction activities were ongoing at The Pointe, Albany and Atlantis's renovations, with Sterling's Hurricane Hole redevelopment yet to start, Mr Maura said there was nothing in the immediate term to replace the scale of Baha Mar's completion.

He suggested the "two big projects" on the drawing board for New Providence are Shell North America's proposed power plant at Clifton Pier and the redevelopment of Nassau's cruise port at Prince George Wharf, neither of which may come to fruition this financial year.

"Once these projects get going we will see some benefits from those, but I don't expect that to happen this financial year," Mr Maura said.