Algoma Central Corporation (TSX: ALC) ("Algoma", the "Company") today reported its results for the three and nine months ended September 30, 2024. Algoma reported third quarter revenues of $204,644, compared to revenues of $205,888 in 2023. Net earnings for the 2024 third quarter were $39,914 compared to net earnings of $35,745 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.
"Following a challenging second quarter, it's encouraging to see stability in demand this quarter, along with promising signs of continued improvement as we approach year-end," said Gregg Ruhl, President and CEO of Algoma Central Corporation. "Our Product Tanker segment is performing well, with the fleet at full utilization, including one vessel added to the domestic fleet this year. Our Ocean Self-Unloader segment has also seen stronger earnings, driven by increased on-hire days in the Pool and stable rates. In the Domestic Dry-Bulk segment, securing additional iron ore cargoes with a new customer helped offset the continuation of lower construction and salt volumes. Looking ahead to the end of 2024, customer demand remains stable although some weak spots persist. With a larger grain crop this year, grain volumes in the fourth quarter are expected to be very strong. As we move into the winter months, we remain optimistic that salt cargo demand will improve from our key customer in this sector," continued Mr. Ruhl.
Financial Highlights: Third Quarter 2024 Compared to Third Quarter 2023
- Ocean Self-Unloaders segment revenue increased 8% to $45,803 compared to $42,469, as revenue days increased 10% as a result of having one vessel on dry-dock during the third quarter compared to two in 2023 and improved Pool performance. Operating earnings increased to $11,558 from $4,773 in 2023, driven by a 9% increase in operating days.
- Revenue for Product Tankers increased 13% to $38,706 compared to $34,134 in 2023, mainly driven by higher rates on new vessels and a 12% increase in revenue days. The segment had operating earnings of $3,198 compared to earnings of $1,759 in 2023, reflecting fewer dry-dockings and an additional vessel operating within the domestic fleet compared to the prior year period.
- Domestic Dry-Bulk segment revenue decreased 7% to $119,522 compared to $128,449 in 2023, as lower volumes drove a 12% decrease in revenue days. Operating earnings decreased 7% to $32,879 compared to $35,341 in 2023 primarily as a result of the decreased demand.
- Global Short Sea Shipping segment equity earnings decreased 26% to $5,961 compared to $8,071 for the prior year period. Lower earnings were mainly attributable to lower rates in the mini-bulker fleet as well as higher operating costs and depreciation in the cement carrier fleet resulting from the larger fleet size this year.
- The $966 gain on sale of vessel during the 2024 third quarter relates to the sale of the Liv Knutsen to FureBear's joint venture, where it has been renamed the Fure Spear. 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 | Nine Months Ended | |||||||||||
For the periods ended September 30 | 2024 | 2023 | 2024 | 2023 | ||||||||
(unaudited, in thousands of dollars, except per share data) | ||||||||||||
Revenue | $ | 204,644 | $ | 205,888 | $ | 494,826 | $ | 519,898 | ||||
Operating expenses | (133,657 | ) | (142,606 | ) | (379,395 | ) | (399,163 | ) | ||||
Selling, general and administrative expenses | (9,609 | ) | (8,312 | ) | (31,432 | ) | (29,414 | ) | ||||
Depreciation and amortization | (18,206 | ) | (16,268 | ) | (53,456 | ) | (48,759 | ) | ||||
Operating earnings | 43,172 | 38,702 | 30,543 | 42,562 | ||||||||
Interest expense | (5,291 | ) | (4,789 | ) | (15,177 | ) | (15,037 | ) | ||||
Interest income | 297 | 797 | 1,786 | 2,335 | ||||||||
Gain on sale of vessels | 983 | 169 | 1,404 | 4,782 | ||||||||
Foreign exchange gain (loss) | 317 | (971 | ) | 149 | 3,018 | |||||||
39,478 | 33,908 | 18,705 | 37,660 | |||||||||
Income tax recovery (expense) | (6,420 | ) | (6,892 | ) | 3,987 | (5,175 | ) | |||||
Net earnings from investments in joint ventures | 6,856 | 8,729 | 17,433 | 16,764 | ||||||||
Net earnings | $ | 39,914 | $ | 35,745 | $ | 40,125 | $ | 49,249 | ||||
Basic earnings per share | $ | 0.98 | $ | 0.93 | $ | 1.01 | $ | 1.28 | ||||
Diluted earnings per share | $ | 0.98 | $ | 0.85 | $ | 1.01 | $ | 1.20 | ||||
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 nine months ended September 30, 2024 and 2023 and presented herein:
Three Months Ended | Nine Months Ended | |||||||||||
For the periods ended September 30 | 2024 | 2023 | 2024 | 2023 | ||||||||
Net earnings | $ | 39,914 | $ | 35,745 | $ | 40,125 | $ | 49,249 | ||||
Depreciation and amortization | 23,796 | 19,965 | 68,942 | 61,802 | ||||||||
Net interest and tax expense (recovery) | 13,340 | 11,282 | 15,857 | 21,513 | ||||||||
Foreign exchange (gain) loss | (446 | ) | 1,090 | 36 | (2,955 | ) | ||||||
Net gain on sale of assets | (908 | ) | (169 | ) | (2,127 | ) | (4,782 | ) | ||||
EBITDA(1) | $ | 75,696 | $ | 67,913 | $ | 122,833 | $ | 124,827 | ||||
Select Financial Performance by Business Segment
Three Months Ended | Nine Months Ended | |||||||||||
For the periods ended September 30 | 2024 | 2023 | 2024 | 2023 | ||||||||
Domestic Dry-Bulk | ||||||||||||
Revenue | $ | 119,522 | $ | 128,449 | $ | 254,527 | $ | 289,532 | ||||
Operating earnings | 32,879 | 35,341 | 13,188 | 34,502 | ||||||||
Product Tankers | ||||||||||||
Revenue | 38,706 | 34,134 | 106,352 | 94,262 | ||||||||
Operating earnings | 3,198 | 1,759 | 5,571 | 3,982 | ||||||||
Ocean Self-Unloaders | ||||||||||||
Revenue | 45,803 | 42,469 | 131,821 | 133,974 | ||||||||
Operating earnings | 11,558 | 4,773 | 26,275 | 17,729 | ||||||||
Corporate and Other | ||||||||||||
Revenue | 613 | 836 | 2,126 | 2,130 | ||||||||
Operating loss | (4,463 | ) | (3,171 | ) | (14,491 | ) | (13,651 | ) | ||||
The MD&A for the three and nine months ended September 30, 2024 and 2023 includes further details. Full results for the three and nine months ended September 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)
In the Domestic Dry-Bulk segment, a large grain crop is expected to lead to improved utilization for the balance of the year, with spot business expected to fill any available domestic dry-bulk capacity for the balance of the current navigation season. Looking ahead to the first quarter of 2025, typical winter cargo volumes are expected for both salt and iron ore, assuming a return to normal winter conditions around the Great Lakes region.
We expect customer demand In the Product Tanker segment to remain steady in the fourth quarter and for fuel distribution patterns within Canada to support strong vessel utilization for the vessels trading under Canadian flag. The fleet is expected to be in full deployment through the remainder of the year, with all eight vessels in operations. We continue to expect delivery of the first newbuild for the new Irving Oil contract in February, 2024 with the second ship to follow a month later. Eight new tankers remain on order for our FureBear joint venture, with deliveries expected between late 2024 and 2026. In late October, we took delivery of the Fure Viskär and expect delivery of one more newbuild FureBear tanker in November, 2024.
In the Ocean Self-Unloaders segment, we are expecting vessel utilization to continue to improve with no dry-dock days scheduled until the end of the year. Volumes in the gypsum and coal industry are expected to be steady for the balance of the year, while volumes in the aggregate sector are expected to slow down. Progress continues on the Ocean new build project, with the first new vessel expected to join the Pool in the third quarter of 2025.
We anticipate steady earnings from the cement fleet, with the majority of assets committed to long-term time charter contracts. The handy-size segment is expected to remain stable, based on the current outlook for market conditions.
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 September 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 December 2, 2024 to shareholders of record on November 18, 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 nine months ended September 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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