Algoma Central Corporation - Operating Results
Oct 31, 2012
TORONTO, Oct. 31, 2012 /CNW/ -
For the Three and Nine Months Ended September 30, 2012 and 2011
(In thousand of dollars except per share data)
|Three Months Ended||Nine Months Ended|
|Basic earnings per common share||$||7.69||$||9.00||$||4.96||$||9.12|
|Diluted earnings per common share||$||7.14||$||8.26||$||4.96||$||8.54|
|Dividends paid per common share||$||0.60||$||0.50||$||1.60||$||1.45|
Third Quarter Results
The Corporation is reporting net earnings for the three months ended September 30, 2012 of $29,914 compared to net earnings of $35,003 for the same period in 2011.
The decrease in earnings was due entirely to the change non-cash mark to market adjustment on certain currency contracts related to the Corporation's Equinox Class vessel construction contracts. This cost is included in financial expense for the period. The 2012 third quarter includes financial expense of $5,346 versus a recovery of $4,855 for the 2011 third quarter, an increase of $10,201. The mark to market gain or loss is dictated by the change in the value of the Canadian dollar compared to U.S. dollar. In the third quarter of 2012, the Canadian dollar strengthened by 350 basis points resulting in a loss and for the third quarter in 2011, the Canadian dollar weakened by 837 basis points resulting in a gain.
Consolidated operating earnings of the business units increased marginally in the third quarter of 2012 compared to 2011.
The Domestic Dry-Bulk segment operating earnings net of income tax increased from $23,619 in 2011 to $25,018 in 2012. The increase was due primarily to the following factors:
- A decrease in operating days due to a reduction in shipments compared to the same quarter last year was more than offset by an improved mix of business for the self-unloader fleet.
- lower repairs expense, and
- a reduction in depreciation expense resulting from the disposal of demised vessels earlier this year.
The Product Tanker segment operating earnings net of income tax decreased from $4,922 to $3,581. The main factors contributing to the reduced earnings were reduced operating days due to lower volumes 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increase in professional fees incurred in connection with the arbitration process related to the refund of deposits on rescinded contracts to build three product tankers for international service.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 September 30, 2012 were $4,974 compared to $2,346 for the same period in 2011. The increase was due primarily to the settlement of a commercial claim relating to annual tonnage commitments and the increase in revenue and lower repair costs related to regulatory dry-dockings. There was one regulatory dry-docking in the 2012 third quarter and two in the 2011 third quarter.
The Real Estate segment operating earnings net of income tax decreased from $1,118 to $726. Overall occupancy had risen in the Sault Ste. Marie, Ontario properties, however the decrease in segment operating earnings were mainly due to an increase in amortization on the Station Mall redevelopment completed in late 2011, an increase in unrecoverable amounts as well as reduced occupancy in properties in Waterloo, Ontario. The Station Mall Wal-Mart location in Sault Ste. Marie opened in early October.
An additional factor affecting the comparability of the 2012 three-month results to 2011 was a decrease in the loss on the translation of foreign currency denominated assets and liabilities due to the fluctuation of the value of the Canadian dollar compared to the U.S. dollar.
The Corporation is reporting net earnings for the nine months ended September 30, 2012 of $19,292 compared to net earnings of $35,486 for the same period in 2011.
The Domestic Dry-Bulk segment's operating earnings net of income tax increased from $11,095 in 2011 to $11,368 in 2012. The comparability of the results for 2012 to 2011 for the Domestic Dry Bulk segment has been affected by the April 2011 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 Domestic Dry-Bulk segment would have reported a loss for the first nine months of 2011 of $3,972, a decrease of $15,067 compared to the reported figure. Taking this adjustment into account, the operating earnings for the segment have increased significantly in 2012 as a result of an improved mix of business and reductions in repair costs.
The Product Tanker segment operating earnings net of income tax decreased from $9,916 to $7,369 mainly as a result of fewer operating days due to two regulatory dry-dockings in 2012 versus none in the same 2011 period and increased 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 of the Ocean Shipping segment for the 2012 nine- month period were $11,447 compared to $9,387 for the same period in 2011. The increase resulted from the additional operating days and lower repair costs related to three regulatory dry-dockings in 2011 versus one in the current year. In addition, earnings increased due to 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 $2,735 to $2,298 due primarily to decreases in the occupancy and rates from rental properties and an increase in depreciation and general and administrative expenses.
Financial expense for 2012 was $10,663 compared to $4,843 for 2011. The increase of $5,820 was due to the mark- to- market adjustment recognizing the change in the period in the fair value of certain currency contracts. Partially offsetting this increase was a decrease in the amortization of financing costs and an increase in interest capitalized on additional installments made on the Equinox Class vessels that are currently under construction.
Other factors affecting the comparability of the 2012 nine-month results include an increase in the loss on the translation of foreign-denominated assets and liabilities, a revaluation gain on an asset held for sale and a reversal recorded in the 2011 first quarter of an impairment charge taken in prior years.
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 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 nine months ended September 30, 2011 as a separate line.
Income tax expense for 2012 was $7,902 compared to $5,577 for the previous year. Included in 2012 tax expense is $2,290 relating to the Province of Ontario 2012 announcement that it will indefinitely defer planned reductions to the corporate tax rate.
Algoma will hold a conference call on Thursday, November 1, 2012 at 2:30 pm EST to discuss the results for the three and nine months ended September 30 ,2012.
This call will be webcast live at http://www.newswire.ca/en/webcast/detail/1058555/1150757, 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.
A recently published economic impact study, commissioned by Marine Delivers, demonstrates the significant role that the Great Lakes / Seaway system plays in supporting the Canadian and U.S. economies. Some 227,000 jobs and $35 billion in economic activity are supported by the movement of goods within the Great Lakes / Seaway waterway. For more information, including access to the full text of the economic impact study, please consult the www.marinedelivers.com website.
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