Double Double in Ten I NVESTOR P RESENTATION A Strategic Review - - PowerPoint PPT Presentation

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A LGOMA C ENTRAL C ORPORATION Double Double in Ten I NVESTOR P RESENTATION A Strategic Review Algoma Central Corporation M ARCH 2018 Board Of Directors Sept 9th, 2015 For orward rd Lo Look oking ng St Statem ements ents Certain

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Double Double in Ten

A Strategic Review

Algoma Central Corporation

Board Of Directors Sept 9th, 2015

ALGOMA CENTRAL CORPORATION INVESTOR PRESENTATION MARCH 2018

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Short Sea Shipping is OUR BUSINESS

2

Certain statements in this document about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. Forward-looking statements are based on estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Company's financial performance and may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements made herein, recognizing that all such forward looking information is based on assumptions about the future that may not ultimately be born out and are subject to many risks and uncertainties, including those listed above. Furthermore, unless otherwise stated, the forward-looking statements contained in this document are made as of the date of hereof (unless stated to be as of an earlier date), and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement. Management approved the forward looking financial information as of February 22, 2018. Certain figures included herein are non-GAAP measures. Please see our MD&A for further discussion of Non-GAAP disclosures.

ALL AMOUN OUNTS IN C$ MILLION IONS EXC XCEPT EPT PER R SHARE RE AMOUN OUNTS, , UNLES ESS NOTED ED

For

  • rward

rd Lo Look

  • king

ng St Statem ements ents

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SLIDE 3

Short Sea Shipping is OUR BUSINESS

3

  • The largest owner and operator of dry and liquid bulk carriers on the Lakes
  • A Canadian shipowner since 1900 – Interests in 66 vessels globally plus 9

construction/conversions

  • 2,000 employees
  • Fiscal 2017 Results:
  • Revenue
  • $451million
  • EBITDA - $102million
  • Listed on TSX – ALC
  • Current quarters dividend – 9¢
  • Shares outstanding – 38,552,315
  • Insider interest – ~78%

Algom

  • ma

a Cent ntral ral Corpo

  • rpora

ration tion

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Short Sea Shipping is OUR BUSINESS

4

Inves vestme tment nt The hesis

Leader in Our Markets – This is Sustainable History of Performance in a Variety of Markets Diversified, Dependable Customer Base Well Capitalized to Pursue Growth Strong History of Dividends Investing in Future Opportunities Internationally

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Short Sea Shipping is OUR BUSINESS

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Growi wing g our po posit itio ion as t the e carri rier er of choice

  • ice for

r bul ulk k commo mmodi diti ties es in in the e Grea eat Lak akes es – St. Lawren ence ce Water erway y to bec ecom

  • me

e a lea eade der in in short t sea ea ship ippi ping ng gl global ally ly.

  • We are already a dominant participant in Lakes

business and the market is unlikely to grow at a pace that is faster than GDP

  • Global businesses include “asset-light” options not

available domestically

Our r Vision

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Short Sea Shipping is OUR BUSINESS

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  • Cost Leadership

– Reduce age of fleet

  • 19 when completed compared to 45 without

renewal

– Securing lowest capital cost per tonne of capacity

  • Longer lives and higher capacity = 50% lower cost

than our last round of new vessels

– Targeting lowest operating cost per tonne carried

  • Equinox class is 45% more cost effective on a

tonne/kilometre basis RESULT: EBITDA ↑$4M per ship and ↑ ROE on fleet

Impl plementing nting Our r St Strat rategy gy

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Short Sea Shipping is OUR BUSINESS

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  • Expanding into global markets

– Building a strong business in fragmented global short-sea shipping

  • Revenues in 2017 of $223M

– Becoming “big enough to matter” in these markets

  • Already second largest cement carrier

– More than just a “tonnage provider”

  • Focus is controlling the commercial book of business so no

vessels are bought on spec

Impl plementing nting Our r St Strat rategy gy

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Short Sea Shipping is OUR BUSINESS

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  • Cyclicality is lower

– Contracts are long-term; barriers to entry domestically

  • Domestic markets provides stability

– Diversity of commodities, steady cash flow – Tankers and Ocean Pool have secure market positions

  • Regional and market diversification

– Cement – Asia and Europe – Short-Sea – Mediterranean, Western Europe, Caribbean

Not Not Just t Anot

  • ther

r Shipp pping g Compa pany

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SLIDE 9

Short Sea Shipping is OUR BUSINESS

9 Source: Marine Money Annual Ratings

Returns Compared to Industry

Algoma has been in the top quintile of Marine Money’s Financial Strength Rankings for the last 6 years

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Short Sea Shipping is OUR BUSINESS

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The Shipp pping g Continuum nuum

Ton Tonna nage ge Pr Prov

  • vide

ider Indust ndustrial ial Shi hipp ppin ing Shipp hippin ing g Platfo tform Ship M hip Man anager ager

Chief Tr Chief Trait it Owns 100% of tonnage Owns or bare-boats all tonnage Owns a portion of the tonnage Owns no tonnage Co Contr trol of fl

  • l of fleet

eet ass assets ets Permanent but delegated Permanent Permanent for

  • wned portion

Limited to and by contract terms Ca Capital ital High High Variable None Co Comm mmer ercial ial relati elations

  • nship

hip None Direct to customer Direct to customer None Co Contr tract terms t terms N/A Typically longer term Balanced longer term and short term N/A Ec Economi

  • nomic as

asset set Tonnage Tonnage and book

  • f business

Book of business and some tonnage Management know- how, systems, and reputation EBITD EBITDA m A margin in on

  • n

sales sales (befor (before G e G&A) &A) 5% to 10% 20% to 30% 3% to 5% 10% to 15% Purchas hasing ing an and d Selli elling Typically yes Typically no Yes N/A Al Algoma

  • ma’s

s Bus Busines inesses ses International Pool DDB, Tankers, NACC NASC Algoma Ship Tech

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Short Sea Shipping is OUR BUSINESS

11 11

  • Domestic Dry-Bulk

– Freight volumes and rates per tonne – Direct operating expenses per day – Trade-off of new vessel capex versus maintenance on

  • lder vessels
  • Product Tankers

– Fleet availability and customer demand – Direct operating expenses per day

Dri river vers of Ret eturns rns

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Short Sea Shipping is OUR BUSINESS

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  • Ocean Self-Unloaders

– Days available to the Pool – Overall commercial margin of the Pool – Direct operating expense per day

Dri river vers of Ret eturns rns

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Short Sea Shipping is OUR BUSINESS

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  • NovaAlgoma Cement Carriers (NACC)

– Contract charter rates – Direct operating expense per day – Cost of funds

  • NovaAlgoma Short-Sea Carriers (NASC)

– Freight rates and volumes – Cost of non-owned capacity – Operating and financing costs of owned ships

Dri river vers of Ret eturns rns

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Short Sea Shipping is OUR BUSINESS

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  • 7 new vess

ssels s added d to domesti estic c fleet t with h anoth

  • ther

er to come e in early 2018 18

  • Growth

th in NovaA aAlgoma goma Cemen ent t Carrier ers s – 13 13 vess ssel els s and now #2 in the world in this s market

  • Created

ed NovaA aAlgoma goma Short-Sea ea Carrier ers s (NASC SC) ) to focus cus on short-sea sea mini-bul ulker ers

  • Comple

pleted ed sale of real estat ate e with h proceeds eeds > $100M

  • Divid

iden end d increa eased sed twice ce during g year to 9¢ for Decemb ember er 1st

st

payme ment nt – Dividends dends have e been en paid qua quarterly erly since e 1995

Hi Highl hligh ghts ts of

  • f 2017
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Short Sea Shipping is OUR BUSINESS

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Gro rowing wing Cash h Fl Flow w and nd Earnings rnings

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Short Sea Shipping is OUR BUSINESS

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Inc ncreasingl reasingly y Diver versif ified ied Reven venues es

Managed Revenues: 2015: $465M 2016: $434M 2017: $575M

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Short Sea Shipping is OUR BUSINESS

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Dri riving ing Impro proved ved EBITD TDA

EBITDA: 2015: $79M 2016: $89M 2017: $102M

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Short Sea Shipping is OUR BUSINESS

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Gro rowing wing from rom a St Strong rong Fi Fina nancial ncial Base

Current Yield - 2.4%

2015 2016 2017 Cash 210,562 130,039 68,860 Net Working Capital (excl. debt) 304,916 162,947 81,679 Total Assets 988,805 1,036,013 1,100,290 Net Debt 33,434 110,516 223,144 Total Equity 618,610 641,550 660,460 Book Value Per Share 15.90 $ 16.49 $ 17.13 $ Dividends Per Share 0.28 $ 0.28 $ 0.32 $

Balance Sheet Highlights

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Short Sea Shipping is OUR BUSINESS

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Grow w into

  • interna

ernati tion

  • nal

al shor

  • rt-se

sea mark rkets ts where ere we can add value. ue.

Our r St Stra rategy egy for for Glob

  • bal Gro

rowth wth

Target t Mark rket t Fea eature tures: s:

  • Opportunities for self-unloader or specialized applications to serve as

feeder services between shallow draft ports and major seaports.

  • Opportunities to consolidate small regional operators.
  • Significant economic growth combined with growth in urbanization and

infrastructure development.

  • Acceptable legal, regulatory, financial and labour market frameworks for

local investments and foreign control.

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Short Sea Shipping is OUR BUSINESS

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World Trade – Global Marine Trends 2030 Set etting ing the he Sc Scene ne

10 10 Billion ion Tonnes es 20 20 Billion ion Tonnes es

Global Trade will at least double in the next 20 Years

2010 2030

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Short Sea Shipping is OUR BUSINESS

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Main n Drivers:

  • Demograph

aphy (Growing Population, Urbanization)

  • Rise

se of Trade de Blocks ks (EU, NAFTA, ASEAN, UNASUR)

  • Geograph

phy y (Europe, Oceania, S.E. Asia)

  • Lack of Infrastructur

frastructure (India, Indonesia, Philippines, S.America, Africa)

  • Envi

vironm

  • nment

ent (“Green” Transport) in Developed Economies

  • Techno

nology gy (unmanned ships, faster cargo handling, improved security)

Sho hort Sea Shi hippi pping ng Expe pected ed to Gro

  • Grow

Total

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Short Sea Shipping is OUR BUSINESS

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Gro rowing wing Thro hrough ugh Par Partner tnership hip

NovaAlgom Algoma Cement ment Carrier rriers s (NACC CC):

  • Pneumat

matic ic cemen ment t carriers s servicing cing glob

  • bal manuf

ufact acturers ers

  • Typicall

cally time e charter er based sed and under long term contracts tracts to suppo port t singl gle e market et

NovaAlgoma Algoma Shor

  • rt-Sea

ea Carrier rriers (NASC SC):

  • Leverage client relationships
  • Leverage existing business

contacts /partnerships

  • Leverage access to capital
  • Establish presence in growth

markets

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Short Sea Shipping is OUR BUSINESS

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  • Total cement carrier fleet (>2,000dwt): 320 vessel
  • Average fleet age: 25 year
  • Average age of scrapping: 33 years

Aging ng Globa bal Cement Fl Fleet et

Illustrative Vessel in Global Fleet NACC Star in Nice, France

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SLIDE 24

24 24

NA NACC is No Now # w #2 Globa ball lly

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25 25

Strong

  • ng Global

bal Footp tprin int

NACC QUEBEC NACC PANAREA NACC STAR NACC VIVARA NACC PROCIDA NACC VEGA NACC TORONTO NACC POROS NACC CAPRI NACC ITACA NACC ALICUDI NACC NAPOLI NACC VALBELLA

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Short Sea Shipping is OUR BUSINESS

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Gro rowing wing Throug rough Par Partner tnership ip

NovaAlgom Algoma Cement ment Carrier rriers s (NACC CC):

  • Pneumat

matic ic cemen ment t carriers s servicing cing glob

  • bal manuf

ufact acturers ers

  • Typicall

cally time e charter er based sed and under long term contracts tracts to suppo port t singl gle e market et

NovaAlgoma Algoma Shor

  • rt-Sea

ea Carrier rriers (NASC SC):

  • Leverage

age clien ent t relati tionshi

  • nships

ps

  • Leverage

age existin sting g busi sine ness ss conta tacts cts /partn tner ershi ships ps

  • Leverage

age access cess to capit ital al

  • Estab

ablish ish presen ence ce in growth th markets ts

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SLIDE 27

27 27

Growi wing ng Global bal Footpri tprint nt

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Short Sea Shipping is OUR BUSINESS

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  • Algoma and Nova Marine will focus attention on

growing the organizations’ strengths and capabilities

  • Establish dedicated staff and offices to lead market

development

  • Short-term, the focus for NASC is the Caribbean and

for NACC it is North and South America.

  • An Asian market plan is being developed jointly.

No NovaAlgo lgoma ma - The Ne Next Two Years

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Short Sea Shipping is OUR BUSINESS

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Ana nalyst lyst Cover verage age

  • David

d Tyerman, erman, Corma rmark k Securi riti ties es Inc. c.

  • Anoop Prihar, GMP Securities L.P.
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Double Double in Ten

A Strategic Review

Algoma Central Corporation

Board Of Directors Sept 9th, 2015

QUESTIONS?