The Corporation reported a net loss for the three months ended March 31, 2013 of $28.6 million compared to a loss of $32.0 million for the same period in 2012. Revenues declined to $50.8 million from $57.0 million in 2012.
The reduction in the net loss for the quarter reflects a reduced loss in the Domestic Dry-‐Bulk segment and improved earnings from the Product tanker segment, partially offset with lower earnings from the Ocean Shipping and Real Estate segments. In addition, the Corporation experienced a gain in the 2013 quarter on certain currency contracts related to the Corporation’s Equinox Class vessel construction contracts compared to a loss for the same period in 2012. 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 first quarter of 2013, the Canadian dollar weakened by 2011 basis points resulting in a gain and for the first quarter in 2012, the Canadian dollar strengthened by 236 basis points resulting in a loss.
The Domestic Dry-‐Bulk segment operating loss, net of income tax, decreased from $34.9 million in 2012 to $31.9 million in 2013. The decrease was due primarily to lower repair costs, depreciation and insurance expense. Partially offsetting these improvements was a reduction in revenue due to fewer operating days in the 2013 first quarter compared to the prior year as a result of a return to more normal winter conditions and a slower start to the regular shipping season.
The Product Tanker segment operating earnings, net of income tax, increased from $443,000 to $1.4 million. The main factors contributing to the increase in earnings were additional operating days for the domestic tankers due to increased customer demand and fewer days spent in regulatory dry-‐docking combined with a decrease in repair costs.
Operating earnings, net of income tax, for the Ocean Shipping segment for the three months ended March 31, 2013 were $3.5 million compared to $4.5 million for the same period in 2012. The decrease was due primarily to a reduction in earnings capacity due to the sale of the Ambassador in late 2012 and poor operating conditions during the month of February 2013.
The Real Estate segment operating earnings net of income tax decreased from $863,000 for the three months ended March 31, 2012 to $417,000 for the 2013 period. The decrease was due primarily to lower earnings from the hotel operations in Sault Ste. Marie.
The Corporation announced on April 30, 2013 that the London, UK Arbitration Tribunal hearing a shipbuilding contract dispute involving the Corporation, has found in favour of Algoma. In 2007 the Corporation entered into contracts to build three 16,500 -‐ deadweight tonne product tankers in China. Each contract contained provisions that permitted cancellation under certain conditions. These conditions were met in 2010 and the Corporation accordingly issued notices of rescission to the shipyard seeking to cancel the contracts, and demanding reimbursement of the U.S. $35.4 million instalments that had been advanced. The matter was taken to arbitration by the shipyard and hearings were conducted before the Tribunal in London in September, 2012.
The nature of the Corporation’s business is such that the earnings in the first quarter of each year are not indicative of the results for the other three quarters in a year. Due to the closing of the canal system and the winter weather conditions in the Great Lakes-‐St. Lawrence Waterway, the majority of the domestic dry-‐bulk fleet does not -‐operate for much of the first quarter. In addition, significant repair and maintenance costs are incurred in the first quarter to prepare the domestic dry-‐bulk fleet for the upcoming navigation season. As a result, the first -‐quarter revenues and earnings are significantly lower than the remaining quarters in the year.