Delivering steady results: meeting customer demand while
maintaining operational efficiency in changing markets
Algoma Central Corporation (TSX: ALC) ("Algoma", the "Company")
today reported its results for the three and nine months ended
September 30, 2023. Algoma reported revenues during the 2023 third
quarter of $205,888, a 3% increase compared to the same period in
2022. Net earnings for the 2023 third quarter were $35,745 compared
to $42,533 for the same period in 2022. The Company reported 2023
third quarter EBITDA of $68,242 compared to $73,604 for the same
period in 2022. All amounts reported below are in thousands of
Canadian dollars, except for per share data and where the context
dictates otherwise.
"Strong customer demand and our focus on operational excellence
continued to drive our steady results in the third quarter," said
Gregg Ruhl, President and CEO of Algoma. "As cargo demand varies,
we are committed to continually enhancing our fleet operations to
provide the best possible service for our customers. The raw
materials we transport on behalf of our customers are essential to
North American and global markets, serving as a cornerstone in
sustaining economic growth across the vital industries these
markets support," concluded Mr. Ruhl.
Financial Highlights: Third Quarter 2023 Compared to
2022
- Domestic Dry-Bulk segment revenue increased 11% to $128,449
compared to $115,996 in 2022, reflecting higher base freight rates
and 4% higher volumes, which drove a 12% increase in revenue days.
Operating earnings increased 16% to $35,341 compared to $30,453 for
the prior year, mainly reflecting additional customer demand this
quarter, partially offset by higher operating costs.
- Revenue for Product Tankers increased 4% to $34,134 compared to
$32,749 in 2022. This was mainly driven by higher freight rates and
increased revenue generated by one vessel that entered domestic
operations during the quarter. These items were partially offset by
4% fewer revenue days. Despite the higher revenue, segment
operating earnings decreased to $1,759 compared to $5,888 in 2022,
reflecting more vessels on dry-dock in the current year and
increased operating costs.
- Ocean Self-Unloaders segment revenue decreased 15% to $42,469
compared to $49,927 and operating earnings decreased 39% to $4,773
compared to $7,856 in 2022, mainly as a result of a higher number
of dry-dockings falling in the current year period.
- Global Short Sea Shipping segment equity earnings were $8,071
compared to $12,103 for the prior year; 2022 equity earnings
include a $2,922 gain on the sale of two vessels; excluding this
gain, earnings decreased 12%. Earnings were driven by increased
earnings in the cement fleet and reduced mini-bulker and handy-size
fleet earnings as a result of a softening of freight rates compared
to the prior year period.
Consolidated Statement of Earnings
Three Months Ended
Nine Months Ended
For the periods ended September 30
2023
2022
2023
2022
(unaudited, in thousands of dollars,
except per share data)
Revenue
$
205,888
$
199,327
$
519,898
$
467,893
Operating expenses
(142,606
)
(133,439
)
(399,163
)
(345,612
)
Selling, general and administrative
(8,312
)
(7,764
)
(29,414
)
(24,942
)
Depreciation and amortization
(16,268
)
(17,361
)
(48,759
)
(51,106
)
Operating earnings
38,702
40,763
42,562
46,233
Interest expense
(4,789
)
(5,031
)
(15,037
)
(15,064
)
Interest income
797
498
2,335
537
Gain on sale of assets
169
147
4,782
14,519
Foreign currency gain (loss)
(971
)
2,172
3,018
3,662
33,908
38,549
37,660
49,887
Income tax expense
(6,892
)
(8,776
)
(5,175
)
(7,566
)
Net earnings from investments in joint
ventures
8,729
12,760
16,764
27,686
Net earnings
$
35,745
$
42,533
$
49,249
$
70,007
Basic earnings per share
$
0.93
$
1.13
$
1.28
$
1.85
Diluted earnings per share
$
0.85
$
1.01
$
1.20
$
1.70
EBITDA(1)
The Company uses EBITDA as a measure of the cash generating
capacity of its businesses. The following table provides a
reconciliation of net earnings in accordance with GAAP to the
non-GAAP EBITDA measure for the three and nine months ended
September 30, 2023 and 2022 and presented herein:
Three Months Ended
Nine Months Ended
For the periods ended September 30
2023
2022
2023
2022
Net earnings
$
35,745
$
42,533
$
49,249
$
70,007
Depreciation and amortization
20,175
21,872
62,322
66,419
Impairment provision (reversal)
—
139
—
(2,643
)
Interest and taxes
11,301
14,504
21,532
25,002
Foreign exchange loss (gain)
1,202
(1,738
)
(2,705
)
(3,032
)
Gain on sale of assets
(181
)
(3,069
)
(4,794
)
(22,221
)
EBITDA
$
68,242
$
73,604
$
125,604
$
132,895
Select Financial Performance by Business Segment
Three Months Ended
Nine Months Ended
For the periods ended September 30
2023
2022
2023
2022
Domestic Dry-Bulk
Revenue
$
128,449
$
115,996
$
289,532
$
239,872
Operating earnings
35,341
30,453
34,502
24,738
Product Tankers
Revenue
34,134
32,749
94,262
82,708
Operating earnings
1,759
5,888
3,982
8,012
Ocean Self-Unloaders
Revenue
42,469
49,927
133,974
140,540
Operating earnings
4,773
7,856
17,729
25,102
Corporate and Other
Revenue
836
655
2,130
4,773
Operating loss
(3,171
)
(3,434
)
(13,651
)
(11,619
)
The MD&A for the three and nine months ended September 30,
2023 and 2022 includes further details. Full results for the three
and nine months ended September 30, 2023 and 2022 can be found on
the Company’s website at www.algonet.com/investor-relations and on
SEDAR at www.sedarplus.ca.
2023 Business Outlook(2)
On October 22nd, subsequent to the quarter, St. Lawrence Seaway
workers, represented by UNIFOR, began a work stoppage that resulted
in a full closure of the Seaway system. The parties reached a
tentative contract deal on October 29th, and the Seaway re-opened
on October 30th. During the 72-hour strike notice received prior to
closure, and throughout the 8-day strike, the majority of the
Domestic Dry-Bulk fleet was at anchor, in standby berths or
arranging for changes to their course. Although the seaway has
re-opened, the backlog created by this closure caused further
delays before the fleet was able to fully resume trading. The full
impact of the closure is unknown as we are in the process of
assessing the repercussions of the delays. Our fleet was already
fully booked for the fourth quarter given seasonally high demand to
move the new grain harvest and build winter inventories of iron
ore, salt, and construction inputs. Given the capacity lost due to
the strike, although we will attempt to shift cargoes to next year,
some volumes will be lost.
We expect customer demand in the Product Tanker segment to
remain steady through the balance of the year, although energy
markets are expected to remain volatile. Vessel utilization is
expected to be strong; however, we do expect inflation to continue
to impact costs going forward. The Birgit Knutsen, soon to be
re-named the Algoluna, will enter service under Canadian flag
during the fourth quarter, replacing the Algosea when she retires
in November.
In our international businesses, vessel supply at the Ocean
Self-Unloader Pool level is tight for the remainder of the year,
with two additional Algoma vessels on dry-dock. Volumes in the
aggregate industry are under pressure, while volumes in the coal
and gypsum sectors are expected to remain steady. In our Global
Short Sea Shipping segment, we anticipate steady revenues from the
cement fleet, with strong fleet utilization. Rate pressure
resulting from ongoing global economic and geopolitical situations
is anticipated to continue to impact the segment going forward, as
mini-bulker and handy rates soften. Volumes and utilization are not
expected to be affected by the lower rates.
Normal Course Issuer Bid
Effective March 21, 2023, the Company renewed its normal course
issuer bid (the "NCIB") with the intention to purchase, through the
facilities of the TSX, up to 1,926,915 of its Common Shares
("Shares") representing approximately 5% of the 38,538,301 Shares
which were issued and outstanding as at the close of business on
March 7, 2023. Under the current NCIB, 442,395 Shares were
purchased and cancelled for a weighted average purchase price of
$15.25 for the nine months ending September 30, 2023.
Cash Dividends
The Company's Board of Directors authorized payment of a
quarterly dividend to shareholders of $0.18 per common share. The
dividend will be paid on December 1, 2023 to shareholders of record
on November 17, 2023.
Notes
(1) Use of Non-GAAP Measures
The Company uses several financial measures to assess its
performance including earnings before interest, income taxes,
depreciation, and amortization (EBITDA), free cash flow, return on
equity, and adjusted performance measures. Some of these measures
are not calculated in accordance with Generally Accepted Accounting
Principles (GAAP), which are based on International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), are not defined by GAAP, and do
not have standardized meanings that would ensure consistency and
comparability among companies using these measures. From
Management’s perspective, these non-GAAP measures are useful
measures of performance as they provide readers with a better
understanding of how management assesses performance. Further
information on Non-GAAP measures please refer to page 2 in the
Company's Management's Discussion and Analysis for the three and
nine months ended September 30, 2023.
(2) Forward Looking Statements
Algoma Central Corporation’s public communications often include
written or oral forward-looking statements. Statements of this type
are included in this document and may be included in other filings
with Canadian securities regulators or in other communications. All
such statements are made pursuant to the safe harbour provisions of
any applicable Canadian securities legislation. Forward-looking
statements may involve, but are not limited to, comments with
respect to our objectives and priorities for 2023 and beyond, our
strategies or future actions, our targets, expectations for our
financial condition or share price and the results of or outlook
for our operations or for the Canadian, U.S. and global economies.
The words "may", "will", "would", "should", "could", "expects",
"plans", "intends", "trends", "indications", "anticipates",
"believes", "estimates", "predicts", "likely" or "potential" or the
negative or other variations of these words or other comparable
words or phrases, are intended to identify forward-looking
statements.
By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties.
There is significant risk that predictions, forecasts, conclusions
or projections will not prove to be accurate, that our assumptions
may not be correct and that actual results may differ materially
from such predictions, forecasts, conclusions or projections. We
caution readers of this document not to place undue reliance on our
forward-looking statements as a number of factors could cause
actual future results, conditions, actions or events to differ
materially from the targets, expectations, estimates or intentions
expressed in the forward-looking statements.
Algoma Central Corporation is a global provider of marine
transportation that owns and operates dry and liquid bulk carriers,
serving markets throughout the Great Lakes St. Lawrence Seaway and
internationally. Algoma is aiming to reach a carbon emissions
reduction target of 40% by 2030 and net zero by 2050 across all
business units with fuel efficient vessels, innovative technology,
and alternate fuels. Algoma truly is Your Marine Carrier of
Choice™. Learn more at algonet.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20231103797938/en/
Gregg A. Ruhl President & CEO 905-687-7890
Peter D. Winkley E.V.P. & Chief Financial Officer
905-687-7897
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