Algoma Central Corporation reported revenues for the three months ended September 30 of $173.4 million, compared with revenues of $184.2 million during the year-ago period. Net earnings of $29.9 million were reported, compared with net earnings of $35.0 million during the same period of 2011. For the nine months ended September 30, 2012, Algoma reported net earnings of $19.3 million, compared with $35.5 million for the nine months ended September 30, 2011.
The decrease in earnings was due entirely to the non-cash mark-to-market adjustment on certain currency contracts related to the Corporation’s Equinox Class vessel construction contracts. The cost of this adjustment 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 moderately in the third quarter of 2012 compared to 2011, as follows:
Domestic Dry-Bulk: 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.
Product Tanker: 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increase in professional fees incurred in connection with the arbitration process related to the refund of deposits on rescinded contracts to build three product tankers for international service.
Ocean Shipping: 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.
Real Estate: 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.
The principal reason for the decline in nine-month net earnings related to the Domestic Dry Bulk business unit. 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.
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.