Strong market demand and solid operating performance
positions Algoma to exceed expectations in 2022
Algoma Central Corporation (TSX: ALC) ("Algoma", the "Company")
today reported its results for the three and nine months ended
September 30, 2022. Revenues increased 14% during the 2022 third
quarter to $199,327 compared to $174,734 for the same period in
2021 while net earnings increased 6% in the same period. The
Company reported 2022 third quarter EBITDA(1) of $73,604 compared
to $69,415 for the same period in 2021. All amounts reported below
are in thousands of Canadian dollars, except for per share data and
where the context dictates otherwise.
"Our strategic approach to maintain disciplined growth and a
strong vessel portfolio continues to serve us well," said Gregg
Ruhl, President and CEO of Algoma. "Driving our plan forward are
our hard working seafarers and shoreside support teams who continue
to deliver exceptional service to our customers and long-term value
for our shareholders. We had another busy quarter and I am pleased
to see the significant recovery of our tanker business and
continued strength in our international segments, particularly in
our joint ventures. As we are well into the fourth quarter, I am
confident Algoma will deliver full-year results beyond our earlier
expectations as we expect steady market demand and strong operating
performance across all business units to continue through to the
end of the year," concluded Mr. Ruhl.
Financial Highlights: Third Quarter 2022 Compared to
2021
- Net earnings increased 6% to $42,533 compared to $39,984 last
year. Basic earnings per share were $1.13 compared to $1.06.
- Global Short Sea Shipping segment equity earnings increased 60%
to $12,103 compared to $7,541 for the prior year driven by
increased earnings in the cement and handy-size fleets as well as
significant freight rate increases in the mini-bulker fleet that
nearly offset the reduced revenue from three less vessels in that
fleet. Earnings for the quarter include a $2,922 gain on the sale
of two vessels in 2022 compared to a gain of $2,720 on the sale of
two vessels in the same quarter in 2021.
- Revenue for Product Tankers increased 55% to $32,749 compared
to $21,186. This was mainly driven by higher fuel cost recoveries
and improved customer demand. The increase was also attributable to
the addition of one vessel to the fleet during the second quarter
that operates internationally under bareboat charter. Despite
higher operating costs, operating earnings increased 48% to $5,888
compared to $3,969 driven by a 32% increase in revenue days
primarily due to the increased demand.
- Ocean Self-Unloader segment revenue increased 21% to $49,927
compared to $41,221 driven by higher freight rates, fuel cost
recoveries and a 10% increase in Pool volumes. Operating earnings
decreased 24% to $7,856 compared to $10,366 in 2021 due to higher
operating costs and increased dry-dock expenditures.
- Domestic Dry-Bulk segment revenue increased 6% to $115,996
compared to $109,591, reflecting increased fuel recoveries and
improved overall base freight rates. Despite lower revenue days
during the 2022 third quarter, overall volumes were slightly higher
offsetting the impact of lower vessel utilization on two vessels.
Operating earnings decreased 7% to $30,453 compared to $32,795
driven primarily by higher layup and repair spending to activate
idled vessels in preparation for the fall grain harvest in
Canada.
Consolidated Statement of
Earnings
Three Months Ended
Nine Months Ended
For the periods ended September 30
2022
2021
2022
2021
(unaudited, in thousands of dollars,
except per share data)
Revenue
$
199,327
$
174,734
$
467,893
$
420,020
Operating expenses
(133,439
)
(106,449
)
(345,612
)
(289,050
)
Selling, general and administrative
(7,764
)
(7,374
)
(24,942
)
(23,190
)
Other operating items
—
402
—
(2,081
)
Depreciation and amortization
(17,361
)
(16,675
)
(51,106
)
(51,160
)
Operating earnings
40,763
44,638
46,233
54,539
Interest expense
(5,031
)
(5,299
)
(15,064
)
(15,547
)
Interest income
498
23
537
65
Gain on sale of property
147
10
14,519
1,596
Foreign currency gain
2,172
1,065
3,662
1,645
38,549
40,437
49,887
42,298
Income tax expense
(8,776
)
(7,953
)
(7,566
)
(5,963
)
Net earnings from investments in joint
ventures
12,760
7,500
27,686
13,547
Net earnings
$
42,533
$
39,984
$
70,007
$
49,882
Basic earnings per share
$
1.13
$
1.06
$
1.85
$
1.32
Diluted earnings per share
$
1.01
$
0.96
$
1.70
$
1.23
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, 2022 and 2021 and presented herein:
EBITDA(1)
Three Months Ended
Nine Months Ended
For the periods ended September 30
2022
2021
2022
2021
Net earnings
$
42,533
$
39,984
$
70,007
$
49,882
Depreciation and amortization
21,872
20,009
66,419
62,396
Impairment
139
—
(2,643
)
—
Interest and taxes
14,504
13,697
25,002
23,399
Foreign exchange loss (gain)
(1,738
)
(1,080
)
(3,032
)
(1,897
)
Other operating item
—
(465
)
—
(3,495
)
Investment gain on distribution
(637
)
—
(637
)
—
Gain on sale of properties
(147
)
(10
)
(14,519
)
(1,596
)
Gain on sale of vessels
(2,922
)
(2,720
)
(7,702
)
(4,066
)
EBITDA
$
73,604
$
69,415
$
132,895
$
124,623
Select Financial Performance by
Business Segment
Three Months Ended
Nine Months Ended
For the periods ended September 30
2022
2021
2022
2021
Domestic Dry-Bulk
Revenue
$
115,996
$
109,591
$
239,872
$
230,999
Operating earnings
30,453
32,795
24,738
36,662
Product Tankers
Revenue
32,749
21,186
82,708
68,091
Operating earnings
5,888
3,969
8,012
9,014
Ocean Self-Unloaders
Revenue
49,927
41,221
140,540
113,722
Operating earnings
7,856
10,366
25,102
18,599
Corporate and Other
Revenue
655
2,736
4,773
7,208
Operating loss
(3,434
)
(2,492
)
(11,619
)
(9,736
)
The MD&A for the three and nine months ended September 30,
2022 and 2021 includes further details. Full results for the three
and nine months ended September 30, 2022 and 2021 can be found on
the Company’s website at www.algonet.com/investor-relations and on
SEDAR at www.sedar.com.
2022 Business Outlook(2)
Domestic dry-bulk cargo volumes are expected to be strong across
all commodities, driving full fleet utilization for the balance of
the year. The Western Canada grain crop size has returned to trend
line level which, combined with continued demand for Eastern export
capacity due to the Ukraine conflict, has allowed any open capacity
to be filled at prices reflecting the strong market conditions.
Product Tanker demand is expected to remain steady and we expect
the fleet will continue to be well utilized in the fourth
quarter.
Customer demand and vessel supply for the Ocean segment is
fairly well balanced for the remainder of the year. Aggregate
volumes are expected to be impacted by a facility closure in Mexico
and the US residential market is expected to slow down but overall
construction sector demand remains strong as infrastructure
investments are picking up. We are expecting costs to continue to
be impacted by inflation and global fuel prices will likely remain
higher than normal.
The solid charter rates earned by the mini-bulker fleet over the
first three quarters of 2022 are expected to continue throughout
the calendar year based on the joint venture's existing vessel
commitments and on our market outlook. This outlook could change if
global markets slow appreciably. The cement sector is expected to
remain steady for the remainder of the 2022 season and the two
additional handy-size bulk carriers, which entered the handy-size
fleet in May 2022, are expected to continue to make strong
contributions in the fourth quarter.
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”). Under the current NCIB, no common shares have been
purchased or cancelled for the period ended September 30, 2022.
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 December 1, 2022 to shareholders of record
on November 17, 2022.
Director Resignation
Paul Gurtler has resigned from the Company's Board of Directors,
effective September 30, 2022. Mr. Gurtler also served as a member
of the Environmental Health and Safety Committee and the Investment
Committee.
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, 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 Seaway,
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 two 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 the
world's largest fleet of pneumatic cement carriers and a global
fleet of mini-bulk vessels serving regional markets. 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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version on businesswire.com: https://www.businesswire.com/news/home/20221107005265/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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