Algoma Central Corporation · TSX:ALC
Algoma Central — Shareholder Meeting (May 2006)
41 slides from Algoma Central's shareholder meeting presentation, May 9, 2006
Slide 1: 2006 Annual Meeting
2006 Annual Meeting Tuesday, May 9, 2006 1
Slide 2: Earnings Per Share
Earnings Per Share 8.21 8.11 • Earnings of $31.5 million 9.00 or $8.11 per share 8.00 7.00 6.15 • Increase of 32% over 5.71 6.00 2004 5.00 4.00 3.02 3.00 2.00 1.00 0.00 2001 2002 2003 2004 2005 2
Slide 3: Segmented Information
Segmented Information 2005 2004 Earnings Domestic Dry-Bulk $ 6,363 $ 9,394 Product Tankers 14,244 8,832 Ocean Shipping 14,690 9,423 Real Estate 7,512 6,976 $ 42,809 $ 34,625 3
Slide 4: Revenue
Revenue • Revenue increased by 600,000 510,480 9.4% over 2004 466,550 500,000 412,150 401,713 402,248 • Revenue exceeded one- half billion for the first 400,000 time 300,000 200,000 100,000 0 2001 2002 2003 2004 2005 4
Slide 5: Segmented Information
Segmented Information 2005 2004 Revenues Domestic Dry-Bulk $ 372,176 $ 353,046 Product Tankers 63,954 53,594 Ocean Shipping 51,973 39,881 Real Estate 22,377 20,029 $ 510,480 $ 466,550 5
Slide 6: Return on Capital Employed
Return on Capital Employed • Return on Capital Employed exceeded double digits at 10.04%, an improvement of 16% 10.04% 12.00% 8.61% 8.64% 7.79% 10.00% 6.98% 8.00% 6.00% 4.00% 2.00% 0.00% 2001 2002 2003 2004 2005 6
Slide 7: Cash Flow
Cash Flow Financial Strength 25.00 20.05 • Cash flow from 20.00 17.91 operations of $69.7 15.46 million or $17.91 per 15.00 11.66 share 10.73 • Cash on hand increased 10.00 to $51.2 million and long term debt reduced to 5.00 $36.1 million 0.00 2001 2002 2003 2004 2005 7
Slide 8: Capital Expenditures
Capital Expenditures 89,265 Financial Strength 90,000 80,000 • Capital Expenditures totalled $39.4 million in 70,000 2005 and have totalled 60,000 $128.7 million over the 50,000 39,414 last two years 40,000 • Notwithstanding this level 30,000 22,263 of capital expenditures, 20,000 12,592 cash on han
Slide 9: Significant Events
Significant Events • Product Tankers continued to expand • Purchase of the Algosea • Canadian flagging of the Algosar (ex. Gemini) 9
Slide 10: Significant Events
Significant Events • Ocean pool continued its strong performance and total pool is growing from 22 to 27 self-unloaders 10
Slide 11: Significant Events
Significant Events • Real Estate completed the development of the Waterloo Technology Campus with the completion of a 27,000 square foot office building. 11
Slide 12: Significant Events – 2006
Significant Events – 2006 • On April 21st the purchase of the Amalienborg, sister ship to the Algosea, was completed at a cost of $30.5 million. • Vessel now trading under Danish flag in Europe / Mediterranean area 12
Slide 13: Domestic Dry-Bulk
Domestic Dry-Bulk Domestic Dry-Bulk 400,000 372,176 353,046 • Includes the activities of 350,000 302,761 294,810 296,754 the Corporations 300,000 Canadian dry-bulk vessels, tug barges and 250,000 our ship repair business. 200,000 • In 2005, new records for 150,000 freight revenue and 100,000 vessel
Slide 14: Domestic Dry-Bulk
Domestic Dry-Bulk • Unfortunately, operating earnings decreased by $3.0 million from 2004 due to: • Rapidly rising fuel prices • Operational problems • Higher than expected operating costs • Adverse weather conditions in November • Encouraged by the improved results at FMI 14
Slide 15: Product Tankers
Product Tankers • Now owns and operates six liquid petroleum product tankers • Achieved a remarkable 100% utilization in 2005 as all available vessels were fully employed 15
Slide 16: Product Tankers
Product Tankers • Revenue grew to $63.9 million, an increase of 19% 63,954 70,000 54,925 53,594 50,024 48,161 60,000 50,000 40,000 30,000 20,000 10,000 0 2001 2002 2003 2004 2005 16
Slide 17: Product Tankers
Product Tankers • Operating earnings increased by $5.4 million from 2004 due to: • Continued diligence on cost containment • Continued strong quality performance • Incremental earnings generated from new additions to the fleet in 2004 and 2005 17
Slide 18: Ocean Shipping
Ocean Shipping • Consists of 100% ownership of one ocean-going self- unloader and 50% ownership of five ocean going self-unloading vessels 18
Slide 19: Ocean Shipping
Ocean Shipping • Revenue increased from 60,000 51,973 $39.9 million to $52.0 50,000 million, an increase of 30% 41,209 39,881 37,457 37,232 due to: 40,000 • Continued strong results from CSL International Pool 30,000 • Continued improvement in vessel availability through 20,000 reduced off-hire • Fu
Slide 20: Ocean Shipping
Ocean Shipping • Operating earnings increased to $14.7 million from $9.4 million in 2004 20
Slide 21: Real Estate
Real Estate 25,000 22,377 • Includes investment 20,029 properties located in the 18,238 cities of Sault Ste. Marie, 20,000 17,007 17,503 St. Catharines and Waterloo 15,000 • Revenue for 2005 10,000 increased by 12% to $22.4 million 5,000 0 2001 2002 2003 2004 2005 21
Slide 22: Real Estate
Real Estate • Operating earnings increase by 8% to $7.5 million due to: • First full year of operating for the two Waterloo properties • Improved leasing in St. Catharines 22
Slide 23: Outlook for 2006
Outlook for 2006 • Expect demand for domestic dry bulk vessel (both self- unloaders and bulkers) to continue to be strong • Anticipate improvements in operational performance • FMI, our ship repair facility, has had a busy and productive winter repair period • We expect operating earnings from the d
Slide 24: Outlook for 2006
Outlook for 2006 • Continued strong demand for Product Tankers and the purchase of the Amalienborg in April 2006 should lead to increased operating earnings for this sector. 24
Slide 25: Outlook for 2006
Outlook for 2006 • Expect Real Estate segment to continue its consistent increase in operating earnings due to combined improvements in revenue and occupancy rates and the first full year of operation of 412 Albert Street 25
Slide 26: Outlook for 2006
Outlook for 2006 • The expected improved results from Domestic Shipping, Product Tankers and Real Estate should help to offset Ocean Shipping’s expected decline in earnings due to the planned dry-dockings of three vessels. 26
Slide 27: Q1 2006 Accounting Changes
Q1 2006 Accounting Changes • The CICA issued an exposure draft in December 2005 which essentially eliminates the traditional principle of matching expenditures to revenue • As a result we have undertaken a review of our accounting polices that would be impacted by this change 27
Slide 28: Q1 2006 Accounting Changes
Q1 2006 Accounting Changes • We have decide to change the way we recognize winter lay-up costs for the domestic dry-bulk and product tanker fleets as well as the amortization of the domestic dry-bulk fleet. • Traditionally the repairs and maintenance expenditures incurred during the winter lay-up pe
Slide 29: Q1 2006 Accounting Changes
Q1 2006 Accounting Changes • Effective for Q1 2006 the winter lay-up expenditures will be expensed as the liabilities are incurred and the annual amortization expense will be spread evenly over the year • The effect of these accounting changes will be to recognize a significantly higher level of exp
Slide 30: Impact on Q1 2006 and 2005
Impact on Q1 2006 and 2005 Three Months Ended March 31 2006 2005 Restated Net earnings before changes in accounting policies $ 7,233 $ 4,179 Effect of change in accounting for: Repairs and maintenance $ (17,656) $ (16,740) Amortization $ (2,466) $ (2,423) Total $ (20,122) $ (19,163) Net (loss) earni
Slide 31: Highlights Q1 2006
Highlights Q1 2006 • Excluding these accounting changes we earned $7.2 million or $1.86 per share compared to $4.2 million or $1.14 per share in Q1 2005 • Increased operating days for Domestic dry-bulk fleet • Improved earnings at FMI due to busy and productive winter repair period • Improved Produc
Slide 32: Algoma Central Corporation's Strengths
Algoma Central Corporation’s Strengths • Human resources – Employees adaptable to change, focused on continuous improvement, skilled and dedicated • Market leaders • Environmental advantages of marine transportation • Four diversified business units 32
Slide 33: Diversification Strategy
Diversification Strategy 1997 Operating Earnings Real estate Ocean Shipping 0% 15% • In 1997 the Corporation consisted of the Product Tankers domestic dry bulk fleet 0% and our real estate Domestic properties in Sault Ste. Dry-Bulk 85% Marie. 1997 Capital Assets Real estate Ocean Shipping 19% 0% Pro
Slide 34: Diversification Strategy
Diversification Strategy 2005 Operating Earnings • We now have four Real estate Domestic Dry- Bulk 18% 15% diversified business segments. Product Tankers Ocean Shipping 33% 34% 2005 Capital Assets Domestic Real estate Dry-Bulk 21% 34% Ocean Shipping 18% Product Tankers 27% 34
Slide 35: Diversification Strategy
Diversification Strategy • Each business segment operates in diverse geographic and economic markets. • This mitigates the risk that individual market segments may be declining. 35
Slide 36: Growth Strategy
Growth Strategy • Corporation has a strong balance sheet and is well positioned to take advantage of potential investment opportunities. • We continue to pursue investments in each business segment that yield acceptable returns on capital for our shareholders. 36
Slide 37: Growth Opportunities
Growth Opportunities • Domestic dry-bulk – Fleet renewal • Ocean Shipping – ACC has next opportunity for expansion • Product Tankers – International • Real Estate – Southern Ontario 37
Slide 38: Outlook for 2006 and Beyond
Outlook for 2006 and Beyond • Strive for sustainable profitable growth by improving our businesses and the value we provide our customers. • Achieve acceptable returns on capital for our share holders. • Provide exciting and rewarding careers for our employees. 38
Slide 39: Shareholders' Equity
Shareholders’ Equity 100.00 • Shareholders’ equity grew by 10% • Share price grew by 25% 90.00 89.00 80.00 75.57 70.00 71.00 68.76 60.00 63.55 64.44 62.50 58.79 50.00 51.33 45.00 40.00 30.00 28.50 20.00 23.75 10.00 0.00 2000 2001 2002 2003 2004 2005 Equity per share Closing price per share
Slide 40: Conclusion
Conclusion • In summary, our plan is straightforward; improve shareholder value by continuing to improve our existing businesses, rationalize uneconomic assets, investigate competitive fleet replacement options and expand real estate in Southern Ontario. • We look forward to improving shareholder va
Slide 41: Thank you
Thank you 41