Changing environments across key industrial sectors
contributes to challenging quarter but outlook remains
positive
Algoma Central Corporation (TSX: ALC) ("Algoma", the "Company")
today reported its results for the three and six months ended June
30, 2024. Algoma reported second quarter revenues of $180,968, an
11% decrease compared to the same period in 2023. Net earnings for
the 2024 second quarter were $17,464 compared to net earnings of
$33,144 for the same period in 2023. All amounts reported below are
in thousands of Canadian dollars, except for per share data and
where the context dictates otherwise.
"Algoma encountered a challenging second quarter, but there are
encouraging indications that volumes and margins will improve in
the second half of the year," said Gregg Ruhl, President and CEO of
Algoma Central Corporation. "The Domestic Dry-Bulk segment is
facing lowered salt volumes due to a string of mild winters, and a
reduction in demand for construction materials. Looking ahead, we
see potential for a large grain crop in 2024, and domestic iron ore
volumes are expected to increase, leading to the deployment of
three additional vessels that are currently in temporary lay-up.
Our international fleets, including our ocean self-unloaders, have
been performing well with rates holding steady. As we approach our
125th anniversary on August 11th, I am reminded of the strength,
resiliency, and longevity of this company. Through the peaks and
valleys, Algoma consistently succeeds and maintains its reputation
as the marine carrier of choice," concluded Mr. Ruhl.
Financial Highlights: Second Quarter 2024 Compared to Second
Quarter 2023
- Domestic Dry-Bulk segment revenue decreased 18% to $103,931
compared to $126,584 in 2023, as lower volumes drove a 21% decrease
in revenue days. Operating earnings decreased 51% to $15,924
compared to $32,806 in 2023.
- Revenue for Product Tankers increased 20% to $33,600 compared
to $28,046 in 2023, driven by higher rates on new vessels and an 8%
increase in revenue days. The segment had an operating loss of
$1,604 compared to earnings of $1,078 in 2023, reflecting higher
costs to prepare the fleet for full deployment in the second half
of 2024, including increased costs to bring one vessel into
Canadian service and additional crew onboarding and training.
- Ocean Self-Unloaders segment revenue decreased 9% to $42,818
compared to $47,120. Revenue for 2024 has returned to normal levels
after 2023 revenues reflected a higher pro-rata share of the Pool
as a result of unplanned outages affecting non-Algoma-owned
vessels. Operating earnings decreased 21% to $6,361 compared to
$8,003 in 2023.
- Global Short Sea Shipping segment equity earnings increased 19%
to $6,156 compared to $5,155 for the prior year. Higher earnings
were driven by steady rates and an increase in vessels in the
cement fleet. Earnings for 2024 include a $812 gain on the sale of
a vessel.
- During the first quarter of 2023, the Algoma Hansa and the
Algonorth were sold, resulting in a $4,588 gain that is reflected
in the 2023 year-to-date earnings.
Consolidated Statement of Earnings
Three Months Ended
Six Months Ended
For the periods ended June 30
2024
2023
2024
2023
(unaudited, in thousands of dollars,
except per share data)
Revenue
$
180,968
$
202,406
$
290,182
$
314,010
Operating expenses
(136,740
)
(138,997
)
(245,738
)
(256,557
)
Selling, general and administrative
expenses
(10,182
)
(10,715
)
(21,823
)
(21,102
)
Depreciation and amortization
(18,122
)
(16,495
)
(35,250
)
(32,491
)
Operating earnings (loss)
15,924
36,199
(12,629
)
3,860
Interest expense
(5,227
)
(5,123
)
(9,886
)
(10,248
)
Interest income
581
573
1,489
1,538
Gain (loss) on sale of assets
57
(123
)
421
4,613
Foreign exchange gain (loss)
(291
)
3,619
(168
)
3,989
11,044
35,145
(20,773
)
3,752
Income tax recovery (expense)
(606
)
(7,747
)
10,407
1,717
Net earnings from investments in joint
ventures
7,026
5,746
10,577
8,035
Net earnings
$
17,464
$
33,144
$
211
$
13,504
Basic earnings per share
$
0.44
$
0.86
$
0.01
$
0.35
Diluted earnings per share
$
0.44
$
0.79
$
0.01
$
0.35
EBITDA
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 six months ended June 30,
2024 and 2023 and presented herein:
Three Months Ended
Six Months Ended
For the periods ended June 30
2024
2023
2024
2023
Net earnings
$
17,464
$
33,144
$
211
$
13,504
Depreciation and amortization
23,616
21,201
45,946
42,148
Interest and tax recovery
8,434
14,289
2,676
10,232
Foreign exchange (gain) loss
322
(3,553
)
489
(3,906
)
Net (gain) loss on sale of assets
(869
)
123
(1,218
)
(4,613
)
EBITDA(1)
$
48,967
$
65,204
$
48,104
$
57,365
Select Financial Performance by Business Segment
Three Months Ended
Six Months Ended
For the periods ended June 30
2024
2023
2024
2023
Domestic Dry-Bulk
Revenue
$
103,931
$
126,584
$
135,005
$
161,083
Operating loss
15,924
32,806
(19,692
)
(838
)
Product Tankers
Revenue
33,600
28,046
67,646
60,128
Operating earnings
(1,604
)
1,078
2,373
2,223
Ocean Self-Unloaders
Revenue
42,818
47,120
86,018
91,505
Operating earnings
6,361
8,003
14,717
12,956
Corporate and Other
Revenue
619
656
1,513
1,294
Operating loss
(4,757
)
(5,688
)
(10,027
)
(10,481
)
The MD&A for the three and six months ended June 30, 2024
and 2023 includes further details. Full results for the three and
six months ended June 30, 2024 and 2023 can be found on the
Company’s website at www.algonet.com/investor-relations and on
SEDAR at www.sedarplus.ca.
2024 Business Outlook(2)
Looking ahead in the Domestic Dry-Bulk segment, we expect a
continued soft demand for de-icing salt for the balance of the
year. Weaker prices for export iron ore and construction raw
materials are also expected to continue to constrain cargo volumes.
There are positive indicators that domestic iron ore volumes will
improve and a strong seasonal increase in grain shipments is
expected due to improved soil moisture levels creating the
potential for a large 2024 grain crop, leading to the deployment of
three additional vessels that are currently in temporary
lay-up.
In the Product Tanker segment, we expect steady customer demand
in 2024, supporting strong vessel utilization for those vessels
trading under Canadian flag. In January, the Company acquired two
2009-built, 16,600 dwt product tankers from Norway’s Knutsen OAS
Shipping. After completing its bareboat charter, the first vessel
has finished a dry-docking and is expected to join the Company's
Canadian fleet as the Algosolis by the end of July. The second
vessel will enter dry-dock in August and once concluded, will be
deployed in Europe in the FureBear joint venture, where it will be
renamed Fure Spear, expanding that fleet to three vessels. We are
scheduled to take delivery of our second FureBear newbuild in
August and are anticipating a continued strong rate environment for
these tankers.
In the Ocean Self-Unloaders segment, vessel utilization is
expected to improve for the second half of 2024 with substantially
fewer dry-dockings compared to 2023. Volumes are expected to
improve modestly for the remainder of the year. Two out of the
three newbuild kamsarmax-based ocean self-unloader orders are
scheduled to begin construction this year.
In our Global Short Sea Shipping segment, we anticipate
continued steady earnings from the cement fleet, as these assets
are primarily employed on longer-term time charter contracts. The
handy-size and mini-bulker fleets are expected to perform well for
the remainder of the year and we do not foresee any negative impact
on volumes and utilization from ongoing global economic and
geopolitical issues.
Normal Course Issuer Bid
Effective March 21, 2024, the Company renewed its normal course
issuer bid (the "NCIB") with the intention to purchase, through the
facilities of the TSX, up to 1,975,857 of its Common Shares
("Shares") representing approximately 5% of the 39,517,144 Shares
which were issued and outstanding as at the close of business on
March 7, 2024. Under the 2024 NCIB, no Shares were purchased and
cancelled in the period ended June 30, 2024.
Cash Dividends
The Company's Board of Directors authorized payment of a
quarterly dividend to shareholders of $0.19 per common share. The
dividend will be paid on September 3, 2024 to shareholders of
record on August 20, 2024.
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
six months ended June 30, 2024 and 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 2024 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/20240802906731/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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