Algoma Central Corporation - Operating Results
Aug 10, 2012
TORONTO, Aug. 10, 2012 /CNW/ -
For the Three and Six Months Ended June 30, 2012 and 2011
(In thousand of dollars except per share data)
|Three Months Ended||Six Months Ended|
|June 30||June 30|
|Net earnings (loss)||$||20,518||$||17,496||$||(10,622)||$||483|
|Basic earnings (loss) per common share||$||5.27||$||4.50||$||(2.73)||$||0.12|
|Diluted earnings (loss) per common share||$||4.97||$||4.20||$||(2.73)||$||0.12|
|Dividends paid per common share||$||0.50||$||0.50||$||1.00||$||0.95|
Second Quarter Results
The Corporation is reporting net earnings for the three months ended June 30, 2012 of
$20,518 compared to net earnings of $17,496 for the same period in 2011.
The increase in earnings was due primarily to improved operating earnings of the Domestic Dry-Bulk segment and reduced financial expense, partially offset by an increase in the loss on the translation of foreign-denominated assets and liabilities and higher income tax expense including $2,290 relating to the recent Ontario announcement that it will defer indefinitely planned reductions to the provincial corporate tax rate.
The Domestic Dry-Bulk segment operating earnings net of income tax increased from $10,603 in 2011 to $20,460 in 2012. The increase was due primarily to the following factors:
- Improved mix of business resulting in more operating days for the self-unloaders.
- strong export ore volumes in the 2012 second quarter
- lower repairs expense during the winter layup season
- reduction in absorptions related to vessels incidents, and
- reduced general and administrative costs.
The Product Tanker segment operating earnings net of income tax decreased from $3,640 to $3,345. The earnings from additional operating days were more than offset by an increase in direct costs mostly due to two regulatory dry-dockings in 2012 compared to none in the prior year and an increase in professional fees incurred in connection with the arbitration process related to the refund of deposits on rescinded contracts to build three product tankers for international service.
The operating earnings net of income tax for the Ocean Shipping segment for the three months ended June 30, 2012 were $1,969 compared to $4,117 for the same period in 2011. The decrease was due primarily to the reduction in operating days and the repair costs associated with regulatory dry-dockings. There were no regulatory dry-dockings in the same period in 2011.
The Real Estate segment operating earnings net of income tax decreased from $758 to $709 due primarily to an increase in general and administrative expenses.
Financial expense for the 2012 second quarter was $993 compared to $4,912 for 2011. The decrease was due largely to a reduction of $3,051 in the mark- to- market adjustment, recognizing the change in the period in the fair value of certain forward foreign exchange contracts, and an increase in interest capitalized as a result of additional installments on the Equinox Class vessels.
Income tax expense for the 2012 quarter was $11,463 compared to $4,194 for the previous year. In addition to the expected higher income tax expense on the increase in earnings, the Corporation also recognized $2,290 in income tax expense relating to the Province of Ontario 2012 announcement that it will defer indefinitely planned reductions to the corporate tax rate.
The Corporation is reporting a net loss for the six months ended June 30, 2012 of $10,622 compared to net earnings of $483 for the same period in 2011.
The Domestic Dry-Bulk segment's operating loss net of income tax increased from $12,524 in 2011 to $13,650 in 2012. The increase in the loss was primarily due to the ULG Transaction, resulting in the Corporation recognizing 100% in 2012 versus 59% in 2011 of the first quarter loss on the domestic dry-bulk fleet. Had the ULG Transaction occurred on January 1, 2011, the loss for the domestic dry-bulk segment for the first six months of 2011 would have been $27,591, an increase of $15,067 compared to the reported figure. Taking this adjustment into account, the operating loss for the segment was reduced significantly in 2012 as a result of increased revenues, and reductions in repair, vessel incident and general and administrative costs.
The Product Tanker segment operating earnings net of income tax decreased from $4,994 to $3,788 mainly as a result of fewer operating days due to two regulatory dry-dockings in 2012 versus none in the same 2011 period.
The operating earnings net of income tax of the Ocean Shipping segment were $6,473 compared to $7,041 for the same period in 2011. The decrease was due primarily to the reduction in operating days and to repair costs associated with regulatory dry-dockings in 2012 (no regulatory dry-dockings in 2011) which was partly offset by the settlement and collection of revenue relating to contract periods prior to 2012 which had not previously met the Corporation's revenue recognition criteria.
The Real Estate segment operating earnings net of income tax decreased from $1,617 to $1,572. Increases in the occupancy and rates from rental properties were more than offset by an increase in depreciation and general and administrative expenses.
Other factors affecting the comparability of the six-month results include a decrease in the gain on the translation of foreign-denominated assets and liabilities and a reversal recorded in the 2011 first quarter of an impairment charge taken in prior years. These were partially offset with a reduction in financial expense.
During the first quarter of 2011, the Corporation negotiated a conditional conversion of an international product tanker construction contract to a self-unloader construction contract and entered into an agreement with the shipyard to apply the instalments paid to date to fund instalments due on the new contract. As a result of this pending cancellation, the accumulated impairment provision recorded in prior periods was re-measured, resulting in a reduction of the accumulated impairment provision of $5,066, which has been disclosed in the statement of earnings for the six months ended June 30, 2011 as a separate line.
Financial expense for 2012 was $5,317compared to $9,698 for 2011. The decrease was due to a reduction of $4,958 in the mark- to- market adjustment recognizing the change in the period in the fair value of certain forward foreign exchange contracts, and an increase in interest capitalized on additional installments made on the Equinox Class vessels that are currently under construction.
The income tax recovery for 2012 was $1,381 compared to recovery of $3,681 for the previous year, primarily due to the reasons mentioned above in the discussion of the three month results.
As previously announced, on July 24, 2012, the Board of Directors authorized payment of a quarterly dividend to shareholders of $0.60 per common share. The dividend is payable on September 4, 2012 to shareholders of record on August 21, 2012. This dividend represents an increase of $0.10 per share to the quartertly dividend paid by the Corporation.
Algoma will hold a conference call on Monday, August 13, 2012 at 9:00 am EST to discuss the results for the three and six months ended June 30, 2012.
This call will be webcast live at http://www.newswire.ca/en/webcast/detail/1014047/1095705, following which it will be available in archived format.
About Algoma Central Corporation
Algoma Central Corporation owns and operates the largest Canadian flag fleet of dry and liquid bulk carriers operating on the Great Lakes - St. Lawrence Waterway, including 19 self-unloading dry-bulk carriers, seven gearless dry bulk carriers and seven product tankers. Algoma also has interests in ocean dry-bulk and product tanker vessels operating in international markets. Algoma owns a diversified ship repair and steel fabricating facility active in the Great Lakes and St. Lawrence regions of Canada. In addition, Algoma owns and manages commercial real estate properties in Sault Ste. Marie, St. Catharines and Waterloo, Ontario.
This press release may include forward-looking information within the meaning of applicable securities laws including information concerning the business and future results of Algoma. Forward-looking statements in this press release include statements about the purchase of vessels by Algoma. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by this information. The statements in this press release are made as of the date of this release and are based on current expectations. Algoma undertakes no obligation to update forward-looking information, other than as required by law, or to comment on analyses, expectations or statements made by third-parties in respect of Algoma, its financial or operating results or its securities. Algoma cautions that all forward-looking information is inherently uncertain and actual results may differ materially from the assumptions, estimates or expectations reflected or contained in the forward-looking information, and that actual future results could be affected by a number of factors, many of which are beyond Algoma's control, including economic circumstances, technological changes, weather conditions and the material risks and uncertainties identified by Algoma and discussed on pages 13 to 17 of Algoma's Annual Information Form for the year ended December 31, 2011, which is available on SEDAR at www.sedar.com.
SOURCE: Algoma Central Corporation