Algoma Central Corporation Reports Financial Results for the 2024 Second Quarter

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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Gregg A. Ruhl President & CEO 905-687-7890 Peter D. Winkley E.V.P. & Chief Financial Officer 905-687-7897