Algoma Central Corporation - Operating Results

ALC-T

TORONTO, Feb. 16, 2012 /CNW/ -

For the Three and Twelve Months Ended December 31, 2011 and 2010
(Reported under International Financial Reporting Standards)
(In thousands of dollars except per share data)

				Three Months Ended		Twelve Months Ended
				December 31		December 31
				2011	2010	2011	2010
Revenue				$ 185,050	$  122,974	$ 582,690	$ 393,702
Net earnings				$ 33,358	$ 7,693	$ 68,844	$ 18,556
Basic earnings per common share				$ 8.57	$ 1.98	$ 17.69	$ 4.77
Fully diluted earnings per common share				$ 8.25	$ 1.98	$ 16.79	$ 4.77
Dividends paid per common share				$ 0.45	$ 0.45	$ 1.80	$ 1.80

 

Algoma Central Corporation (the "Corporation") is reporting net earnings for fiscal 2011 of $68,844 and basic earnings per common share ("EPS") of $17.69, increases of $50,288 and $12.92 respectively compared to 2010. In addition to improved operating results from both domestic and ocean shipping businesses, the earnings for the year reflect the impact of the acquistion of the non-controlling interest in Seaway Marine Transport ("SMT") and related vessels (the "ULG Transaction"). Net earnings and EPS for the full year reflect the inclusion of 100% of the domestic dry-bulk business from April 14, 2011 and therefore includes only our 59% share of the operating loss of the domestic dry-bulk segment incurred in the first quarter. If the acquistion had been effective January 1, 2011, after-tax earnings and EPS would have been lower by $16,843 and $4.33, respectively.

Three-Month Results

The Corporation is reporting net earnings for the three months ended December 31, 2011 of $33,358 compared to net earnings of $7,693 for the same period in 2010. The improvement was due primarily to the ULG Transaction and better operating results from business units. In addition, the 2010 fourth quarter included asset impairment charges on certain international tanker construction contracts and our foreign-flagged tanker of $11,019 due to a declining outlook for that industry. These increases were partially offset with higher financial expense and an increase in the loss on the translation of foreign-denominated assets and liabilities.

The Domestic Dry-Bulk segment's operating earnings net of income tax improved from $8,913 in 2010 to earnings of $23,791 in 2011. The increase in earnings resulted from the ULG Transaction and improved overall fleet performance.

The Product Tanker segment operating earnings net of income tax decreased from $6,036 to $3,779 due primarily to increased direct costs.

The operating earnings net of income tax of the Ocean Shipping segment increased to $6,089 in 2011 compared to $4,860 for the same period in 2010 due primarily to the timing of regulatory dry-dockings and strong revenues in the international pool in 2011.

The Real Estate segment operating earnings net of income tax increased from $606 to $648 due primarily to additional earnings realized from the hotel.

The decrease in earnings due to the loss on the translation of foreign-denominated monetary assets and liabilities was a result of the weakening of the Canadian dollar against the U.S. dollar.

Financial expense decreased from $4,803 in 2010 to $3,724 in 2011. The decrease was due primarily to additional interest capitalized on vessel construction as our progress payments on the Equinox Class vessels increase and a decrease in the mark-to-market adjustment of the fair value of certain foreign exchange contracts. These decreases were partially offset with additional interest on our new long-term debt.

Twelve-Month Results

The Corporation is reporting net earnings for 2011 of $68,844 compared to net earnings of $18,556 for 2010.

The increase was due primarily to the ULG Transaction, improved overall operating results from all business units and a positive impact of the mark-to-market adjustment to recognize the fair value of certain foreign exchange forward contracts. In addition, the Corporation's results were improved in the year due to an impairment reversal for certain property, plant and equipment compared to an impairment charge in 2010.  Partially offsetting these improvements were the adverse impact of higher financing costs and an increase in foreign exchange losses.

The Domestic Dry-Bulk segment's operating earnings net of income tax increased from $3,438 to $36,573. The improvement was due to the increase in the Corporation's share of earnings in SMT and an overall improvement in domestic dry-bulk operating results.  Effective April 14, 2011, the Corporation acquired the Upper Lakes Group Inc. ("ULG") fleet of domestic dry-bulk vessels and its partnership interest in SMT and related entities resulting in all of the earnings of SMT post acquisition being attributable to the Corporation compared to approximately 59% of the earnings prior to the acquisition. Operating results also improved due to an increase in operating days and an improved mix of cargoes for the fleet. Higher operating costs on certain vessels partially offset these improvements.

The domestic dry-bulk business is subject to significant seasonality due to the closure of the St Lawrence Seaway and Welland Canal during the winter months. As a result, the Corporation completes essentially all of its major planned repairs and vessel enhancements on its dry-bulk fleet during this period of inactivity. Under IFRS, the substantial loss incurred during the first quarter of 2011 was shared by the Corporation and its then-partner in SMT. Had the after-tax value of the partner's interest in SMT's loss been reported by the Corporation (i.e.: had the acquisition occurred effective January 1, 2011 instead of April 14, 2011) operating earnings net of tax for the segment would have been reduced by $16,843. In fiscal 2012, Algoma will report 100% of the operating loss that the domestic dry-bulk segment normally incurs during this period and as a result, an amount approximating the operating loss shared by our partner in 2011 will be included in our reported income for 2012.

The Product Tanker segment operating earnings net of income tax increased from $11,694 to $13,695, mainly as a result of more operating days due to an increase in market demand which was partially offset by an increase in direct operating expenses.

The operating earnings net of income tax of the Ocean Shipping segment for the 2011 was $15,476 compared to $14,186 for the same period in 2010. The earnings for 2011 included the impact of two regulatory dry-dockings, resulting in reduced revenue and higher operating expenses for the cost of the dry-dockings not eligible to be capitalized. Earnings and costs in 2010 were lower as a result of regulatory dry-dockings of three dry-bulk vessels in preparation for the transfer to Great Lakes dry-bulk service.

The Real Estate segment operating earnings net of income tax increased from $3,123 to $3,383.

A loss for the year on the translation of foreign-denominated monetary assets and liabilities resulted largely from translating U.S. dollar-denominated long-term debt net of cash on hand to Canadian dollars for reporting purposes.

Financial expense for 2011 decreased to $8,567 from $9,503 in 2010.  Net interest expense for 2011 was $9,935 compared to $6,139 in 2010. The increase reflects higher debt levels due primarily to the ULG Transaction and additional amortization of costs related to financings. Financial expense also includes the change in both years of the fair value of certain forward exchange contracts. In 2011, the mark-to-market adjustment was a gain of $1,367 versus a loss of $3,364 in 2010.

Dividends

As previously announced, on January 19, 2012, the Board of Directors authorized payment of a quarterly dividend to shareholders of $0.50 per common share. The dividend is payable on March 1, 2012 to shareholders of record on February 16, 2012. This dividend represents an increase of $0.05 per share to the quarterly dividend paid by the Corporation.

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, nine 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.

Cautionary Statements

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 11 to 15 of Algoma's Annual Information Form for the year ended December 31, 2010, which is available on SEDAR at www.sedar.com.

Greg D. Wight, FCA
President and Chief Executive Officer
905-687-7850      

Peter D. Winkley, CA
Vice President, Finance and Chief Financial Officer
905-687-7897