Fall in stocks, zinc prices mean loss for NANA
NANA Regional Corp. will report a loss for its 2001 fiscal year, which ended Sept. 30, due in part to lower stock market earnings and falling zinc prices.
The amount of the loss is yet to be announced, but the red ink would have been worse had it not been for healthy profits of several of NANA’s operating companies, according to Helvi Sandvik, president of NANA Development Corp., NANA’s business subsidiary.
The Northwest Alaska Native regional corporation has operating companies and joint ventures in several fields, ranging from hotels to food and facility support, security, engineering and management services.
These companies contributed $3.2 million in net income last year, but it won’t be enough to offset losses and writedowns of two unsuccessful ventures, Sandvik said.
Despite the loss, NANA will still distribute about $2.5 million in dividends to its 10,000 shareholders this year, she said. Dividends are calculated, like the Alaska Permanent Fund dividends, on a five-year average of income, so that one bad year won’t result in dividends not being mailed.
The dividends are very important sources of supplemental income for NANA’s shareholders, who live mostly in small villages in Northwest Alaska, Sandvik said.
The biggest continuing concern for NANA is falling zinc prices, the main product of the Red Dog Mine. Teck-Cominco Corp. is the mine operator but NANA is the landowner, receiving royalty shares.
Zinc prices are at 17-year lows, reaching 37 cents per pound Nov. 15. The result of low prices is a royalty payment to NANA of $500,000 for the quarter ending Sept. 30 instead of the expected $1.5 million.
Because NANA shares about 50 percent of the royalty with other Native regional and village corporations, the effects will be felt across the state, particularly among small village corporations that have few other sources of income, Sandvik said.
The near-term outlook for zinc isn’t good, either. With an economic downturn looming in the United States, and European and Asian economies not doing much better, zinc consumption looks to remain down.
Two other unusual events clouded NANA’s financial picture last year. The corporation took a $1.2 million write-down for its share in Wave Wholesale, a retail joint venture with Calista Corp. and several village corporations that just went through bankruptcy reorganization.
NANA also wrote down a $2 million investment in Alaska Pride Bakery, a bread-making and distribution company in Anchorage. Alaska Pride has been restructured to still distribute bread under the Alaska Pride name, but the bread is made by another company, Sandvik said.
The picture is brighter for NANA’s operating companies. The hotel venture with Marriott Corp. in Anchorage is doing very well, Sandvik said. Three Anchorage hotels, the Marriott Courtyard near Ted Stevens Anchorage International Airport, the Residence Inn and Springhill Suites, both in Midtown, have enjoyed strong occupancy rates.
"We were lucky," Sandvik said. "We came into the market at the right time with properties that were in parts of Anchorage that were not served by other hotels of similar quality," she said.
Part of the success strategy was aiming at business travelers and Alaska families coming to Anchorage for shopping and other reasons, and not being dependent on tourism.
A new Fairbanks hotel, a joint venture with other Native corporations and private investors, experienced a slow first summer, but that was not surprising given that no real advance marketing is done with a hotel under construction, Sandvik said. The Fairbanks Springhill Suites opened last June.
Going through a shake-down first season isn’t all bad, though, Sandvik said. Next year will be the hotel’s first true test while using a marketing program designed to fit the Fairbanks market.
As in Anchorage, the Fairbanks hotel’s location may be a key asset. The facility is in downtown Fairbanks, where it can serve business travelers as well as tourists. Downtown Fairbanks is seeing a renaissance with new investments by Doyon Ltd. and a new state courthouse, Sandvik said.
Another good investment for NANA has been in DOWL LLC, which does civil engineering and construction support. Commercial construction, where DOWL is well positioned, has been strong.
NANA’s oil services companies are doing reasonably well, although margins are tighter with petroleum operators on the North Slope being more cost-conscious, Sandvik said.
NANA was once 80 percent dependent on its oil services companies for operating revenues, but as part of a diversification strategy that has now been reduced to less than 50 percent.
Like other regional corporations, NANA has made a big move into the 8-A minority business ventures and has recently formed several new companies. The 8-A firms get a bidding preference on federal contracts. Most are in early stages where they still require investment, but one, Akima Corp., now owned 80 percent by NANA and 20 percent by the Aleut Corp., is doing very well, Sandvik said.