Algoma Central Corporation Reports Financial Performance for the 2022 First Quarter

International segments drive solid performance offsetting impact of winter season on domestic dry-bulk business

Algoma Central Corporation (TSX: ALC) today reported its results for the three months ended March 31, 2022. Revenues increased 10% to $85,103, compared to $77,599 in 2021. The Company reported a 13% improvement in net loss and a 68% improvement in EBITDA(1). Due to the closing of the canal system and the winter weather conditions on the Great Lakes - St. Lawrence Seaway, the majority of the Domestic Dry-Bulk fleet does not operate for most of the first quarter. All amounts reported below are in thousands of Canadian dollars, except for per share data and where the context dictates otherwise.

"Our first quarter results confirms the strength of our diversified business portfolio and the benefits of our growth in international markets," said Gregg Ruhl, President and CEO of Algoma Central Corporation. "Our Ocean Self-Unloader and Global Short Sea fleets generated strong results this quarter. Both segments are continuing to experience steady freight rates and we are seeing improved customer demand in most sectors. Although the majority of our domestic fleet was laid-up during the first quarter, our teams were busy conducting our winter maintenance program and preparing our fleet for the season. We also had some of our domestic vessels running in parts of the system during the first quarter and a shout out to those who weathered the elements to ensure that essential cargo, like road salt, was delivered," concluded Mr. Ruhl.

Financial Highlights: First Quarter 2022 Compared to 2021

• Net loss improved 13% to $19,571 compared to $22,416. Basic and diluted loss per share were $0.52 compared to $0.59.
• Global Short Sea Shipping segment equity earnings increased 73% to $2,500 compared to $1,444. The earnings improvement was driven by very strong charter rates realized in the mini-bulker sector.
• The Ocean Self-Unloader segment revenue increased 24% to $40,321 compared to $32,496 driven by higher fuel cost recoveries and a 14% increase in revenue days due to fewer dry-dockings compared to the first quarter of 2021. Operating earnings increased 40% to $6,108 compared to $4,369.
• Domestic Dry-Bulk segment revenue was essentially flat at $24,588 compared to $24,552, reflecting similar year-over-year revenue days. Operating loss improved 8% to $27,220 compared to $29,686 driven by lower operating costs.
• Revenue for Product Tankers decreased 1% to $18,036 compared to $18,217. This was due to the reduction in customer demand from our major customer, offset by higher fuel cost recoveries. Operating earnings decreased to a loss of $1,559 compared to earnings of $224 driven by a 7.5% reduction in revenue days and higher fuel prices.

Consolidated Statement of Earnings

For the years ended December 31

2022

2021

Revenue

$

85,103

 

$

77,599

 

Operating expenses

 

(86,558

)

 

(81,289

)

Selling, general and administrative

 

(8,411

)

 

(8,510

)

Other operating item

 

—

 

 

300

 

Depreciation and amortization

 

(16,745

)

 

(17,493

)

Operating loss

 

(26,611

)

 

(29,393

)

 

 

 

Interest expense

 

(4,985

)

 

(5,317

)

Interest income

 

11

 

 

27

 

Foreign currency (loss) gain

 

(607

)

 

53

 

 

 

(32,192

)

 

(34,630

)

 

 

 

Income tax recovery

 

10,157

 

 

10,742

 

Net earnings from investments in joint ventures

 

2,464

 

 

1,472

 

Net Loss

$

(19,571

)

$

(22,416

)

Basic loss per share

$

(0.52

)

$

(0.59

)

Diluted loss per share

$

(0.52

)

$

(0.59

)

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 months ended March 31, 2022 and 2021 and presented herein:

EBITDA(1)

 

 

 

Three Months Ended

For the periods ended March 31

2022

2021

Net loss

$

(19,571

)

$

(22,416

)

Depreciation and amortization

 

21,554

 

 

21,270

 

Interest and taxes

 

(4,627

)

 

(4,787

)

Foreign exchange loss (gain)

 

522

 

 

(210

)

Other operating item

 

—

 

 

(300

)

Loss (gain) on sale of vessels

 

2

 

 

(208

)

EBITDA

$

(2,120

)

$

(6,651

)

Select Financial Performance by Business Segment

For the periods ended March 31

2022

 

2021

Domestic Dry-Bulk

 

 

Revenue

$

24,588

 

$

24,552

 

Operating loss

 

(27,220

)

 

(29,686

)

Product Tankers

 

 

Revenue

 

18,036

 

 

18,217

 

Operating (loss) earnings

 

(1,559

)

 

224

 

Ocean Self-Unloaders

 

 

Revenue

 

40,321

 

 

32,496

 

Operating earnings

 

6,108

 

 

4,369

 

Corporate and Other

 

 

Revenue

 

2,158

 

 

2,334

 

Operating loss

 

(3,940

)

 

(4,300

)

The MD&A for the three months ended March 31, 2022 and 2021 includes further details. Full results for the three months ended March 31, 2022 and 2021 can be found on the Company’s website at www.algonet.com/investor-relations or on SEDAR at www.sedar.com.

2022 Business Outlook(2)

In the Domestic Dry-Bulk segment, the impact of the drought in Western Canada is a significant factor in 2022. We currently expect reduced grain volumes, at least until the 2022 fall harvest. Reduced grain volumes will impact the efficiency of some of our trade routes in the spring and summer and we have adjusted the pace of our vessel fit-out schedule to match vessel capacity to customer demand. In the near term, other commodities may also be affected by changing global trading patterns, resulting primarily from the war in Ukraine, and may cause some incremental demand from our customers. We are preparing to be as nimble as possible to respond to shifting customer requirements.

We expect Product Tanker utilization in 2022 to be similar to 2021 as our customers continue to recover from the impact that COVID-19 has had on the demand for wholesale petroleum products.

Vessel supply at the Pool level is fairly well balanced for the remainder of the year. We are not currently expecting much impact from the war in Ukraine on the Pool business, aside from the effect of oil prices. Two Algoma vessels have significant dry-dockings later in the year. We remain optimistic that cargo volumes will grow gradually.

We are anticipating solid charter rates for the next quarter, building on a very strong first quarter market for the mini-bulker fleet, followed by gradual normalization over for the remainder of 2022. This outlook could change rapidly if global markets slow considerably. The cement sector is expected to remain steady for the 2022 season and we are expecting the third of three newly acquired cement carriers to be delivered in late June. Two handy-size bulk carriers will also join the handy-size fleet later this year.

Normal Course Issuer Bid

Effective March 21, 2022, the Company renewed its normal course issuer bid with the intention to purchase, through the facilities of the TSX, up to 1,890,457 of its Common Shares ("Shares") representing approximately 5% of the 37,800,943 Shares which were issued and outstanding as at the close of business on March 9, 2022 (the “NCIB”). No shares have been purchased to date under this NCIB.

Cash Dividends

The Company's Board of Directors have authorized payment of a quarterly dividend to shareholders of $0.17 per common share. The dividend will be paid on June 1, 2022 to shareholders of record on May 18, 2022.

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 months ended March 31, 2022.

(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 owns and operates the largest fleet of dry and liquid bulk carriers operating on the Great Lakes - St. Lawrence Waterway, including self-unloading dry-bulk carriers, gearless dry-bulk carriers and product tankers. Since 2010 we have introduced 10 new build vessels to our domestic dry-bulk fleet, with one under construction and expected to arrive in 2024, making us the youngest, most efficient and environmentally sustainable fleet on the Great Lakes. Each new vessel reduces carbon emissions on average by 40% versus the ship replaced. Algoma also owns ocean self-unloading dry-bulk vessels operating in international markets and a 50% interest in NovaAlgoma, which owns and operates a diversified portfolio of dry-bulk fleets serving customers internationally. Algoma truly is Your Marine Carrier of Choice™. For more information about Algoma, visit the Company's website at www.algonet.com.

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Gregg A. Ruhl President & CEO 905-687-7890

Peter D. Winkley Chief Financial Officer 905-687-7897