C ORPORATION Algoma Central Corporation D ECEMBER 2015 Board Of - - PowerPoint PPT Presentation

Double Double in Ten

A Strategic Review

Algoma Central Corporation

Board Of Directors Sept 9th, 2015

ALGOMA CENTRAL CORPORATION DECEMBER 2015

2

Ken Soere rensen Pre reside ident nt & Chief Executive cutive Offi fice cer Pet eter er Winkl kley Vice Pre reside ident, nt, Fi Fina nanc nce & & Chief Fi Financial ncial Offic ficer

Short Sea Shipping is OUR BUSINESS

3

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 December 8, 2015.

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

For

• rward

ard Lo Look

• kin

ing g Sta Statements ements

Short Sea Shipping is OUR BUSINESS

4

• The

e largest est own wner er and oper erat ator

• r of Canadian

adian flagged ged vessel sels

• A C

A Canad adian an sh shipo powne ner si since ce 1900 00

• Cur

urrently rently: :

− Owns s and operates es 18 18 self-un unloading

• ading and 6 gearless

ess Lakers − Owns s and operates es 6 Product ct Tankers − Manages ages 4 vess ssel els s for ot

• ther

er owners

− One owned by G3 (former CWB) is part of Algoma’s commercial fleet

− Ac Acti tive e new buildin ing g program am for fleet t renewal al

Alg lgom

• ma

a Central ntral Corpora

• rporation

tion

Short Sea Shipping is OUR BUSINESS

5

• Listed

ed on TSX X – AL ALC and d AL ALC. C.DB

• Cur

urrent rent divide idend nd of 7¢ qua uarter erly ly

• Shares

res out utsta tand nding ng – 38,913,7 3,733 33

• Ap

Approximat ximately ely 75% contr trolled led by the Jackman kman Fami mily ly

Alg lgom

• ma

a Central ntral Corpora

• rporation

tion

Short Sea Shipping is OUR BUSINESS

6

Why Invest in Domestic Shipping?

Alg lgom

• ma

a Central ntral Corpora

• rporation

tion

Short Sea Shipping is OUR BUSINESS

7

Gr Great at La Lakes es – St St. . Lawren Lawrence ce

7 For over 200 years the 100 ports on the Waterway have linked domestic suppliers and markets, connecting with 40 highways and 30 rail systems and ultimately with world markets

Short Sea Shipping is OUR BUSINESS

8

In In Chal allenging lenging Con

• nditi

ditions

• ns

8

Short Sea Shipping is OUR BUSINESS

9

Mar arine ine Con

• nnects

nects

9

100 Gr Great Lakes s Ports s and Docks

Short Sea Shipping is OUR BUSINESS

10 10

• Grains from Western Canada and US for export
• Iron ore and coal from US for export
• Import ore to center of the country
• Aggregates, potash, limestone, cement, coal, and salt within the system
• Petroleum products within the system between refiners and distribution networks

And Mar arine ine Deliv liver ers

The he System m moves es 164 4 mill llion ion tonn nnes es of cargo

• ever

ery y year

Short Sea Shipping is OUR BUSINESS

11 11

And Mar arine ine is is Mor

• re

e Ef Effic icien ient

11

Short Sea Shipping is OUR BUSINESS

12 12

Alg lgom

• ma

a Central ntral Corpora

• rporation

tion

Growi wing ng our ur po posit itio ion n as as t the e car arrie rier r of choice

• ice for

r bulk k commodit mmoditie ies in in the e Grea eat Lakes 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. Wh Why ?

The int nter ernational national markets ts offers s some me compell ellin ing g

• ppor
• rtuniti

tunities es to leverage rage our core stren rengt gths

VISION

Short Sea Shipping is OUR BUSINESS

13 13

World Trade – Global Marine Trends 2030

Setting ting the e Scen cene

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

Short Sea Shipping is OUR BUSINESS

14 14

From rom Fra ragme gmentatio ntation n to Globa bal Collabo boration ration

• Meeting

ing fut uture ure infras astructure tructure need eds

− Impr mproved ed connecti ectivit ity − Clear ar & consis sistent nt regulat ation ion global ally

• Financin

ancing g growth wth

− Ac Access cess to finan ance ce − New money − Creati tion

• n of larger and more transpa

sparen ent t shippi ping ng entiti ties es

• En

Ensure ure steady ady sup upply y of com

• mpe

petent ent and wel ell trained ned staff f (at sea and ashore)

• re)
• Raise

se profil ile e and image ge of the e industry, , in Canada da and globa ball lly

Short Sea Shipping is OUR BUSINESS

15 15

The Gre reat t Lakes short-se sea a shipp pping g compa pany

• Tri

rip times es

− Shorter r than n int ntern rnati tiona nal trips ps with h less s time me in open wat water ers

• Load / Un

Unload ad

− More material rial to overall voya yage − Port delays s can have signi nifi fica cant nt impact mpact on voya yage P&L − Integ egrati ration n with h cust stomer ers' ' supply pply chains ns

• Feeder

er service ice for export t – bound nd products cts

• Trans-ship

ippi ping ng

Alg lgom

• ma

a Central ntral Corpora

• rporation

tion

But the Great Lakes industry faces challenges: slow growth and old ships

Short Sea Shipping is OUR BUSINESS

16 16

The Age gein ing g Gr Great at La Lakes es Flee leet

Barge - Self- Unloading Barge - Dry- Bulk Barge - Tanker Self- Unloader Bulker Self- Unloading Crane Vessel Product Tanker

• Avg. Age

42.6 41.9 34.6 40.6 38.9 22.1 21.6

5 10 15 20 25 30 35 40 45

Short Sea Shipping is OUR BUSINESS

17 17

A Substantial Investment …

Algoma a has invest sted d $450 million ion to date and has contracts acts for 7 more vessels

Fle leet t Rene newal al Prio iorit rity

Short Sea Shipping is OUR BUSINESS

18 18

… leads to a very different age profile

Fle leet t Rene newal al

Short Sea Shipping is OUR BUSINESS

19 19

Why?

• Profita

tabilit ility − New ships ps carry more yet et cost t less s to operate − Mainten enan ance ce is a major expen ense se for older er ships ps

Investment estment of $60 million llion for an Equino uinox x Class ass ship p can generat erate after er-tax tax return eturns s of 10% or more

Fle leet t Rene newal al in in Im Impor

• rtant

ant

Short Sea Shipping is OUR BUSINESS

20 20

Other factors

• Safet

ety − Newer ships s are safer er ships ps

• Regulat

ulator

• ry

− Older r ships ps canno not t be adapt pted ed to meet et new envi viron

• nme

ment ntal regulat ation ions s and the rules s will only get et strict cter er

• Desirabil

irabilit ity − To attract act crew the indust stry must t provide de a modern ern work envir ironme nment nt − Cust stomer

• mers

s feel age of ships ps ultim imatel ely imp mpact acts s service ice

Fle leet t Rene newal al is is Im Impor

• rtan

ant

Short Sea Shipping is OUR BUSINESS

21 21

Important to Algoma’s Sustainable Future

• Gre

reene ner − 45% more fuel efficient icient per ton/km /km − 45% less s GHG per ton/km /km − 97% less s SOx and the first st certif ifie ied mari rine e exhaust ust gas scrubbe rubber r

• n the Lakes

es

• More Profit

itable able − Larger capaci acity ty − Fuel econo nomy − Fewer crew − Lower maint nten enan ance ce

Alg lgom

• ma

a Eq Equin inox x Cla lass ss

Short Sea Shipping is OUR BUSINESS

22 22

Fleet Renewal has been delayed

• Bankrupt

kruptcy cy of Mingde gde shipyard d has cost t us time − Three e ships ps deliv ivered ed out of eight ht ordered ed − Qualit ity y has been n good d but t shipya yard financi ncial als s were not

• t strong

ng enough gh − Our deposits

• sits are bank

k guarant nteed eed and we are working ng on collect ecting ng them

• We have

e replaced ced these se ships s with new orders − Five e ships s on order from Croati tia − Two ships ps on order from a different erent yar yard in China na

Algoma’s China Experience

Short Sea Shipping is OUR BUSINESS

23 23

Dry-Bul Bulk k on

• n the Wat

ater erway

Trades by Fleet

Short Sea Shipping is OUR BUSINESS

24 24

Algoma’s Domestic Trades

Agriculture 16.1% Construction 12.7% Iron / Steel 36.0% Power Generation 1.7% Salt 13.1% PETROLEUM 20.5%

Short Sea Shipping is OUR BUSINESS

25 25

Revenu nues es are generally rally more re consist isten ent t compared ared with h broader der intern ernat ational ional markets ts

Alg lgom

• ma

a Central ntral Corpora

• rporation

tion

Short Sea Shipping is OUR BUSINESS

26 26

After er tax x earnings nings from m operating ating segmen gments ts are depend nden ent t on domest estic ic econom

• my and expor

port t markets ts

Algoma Central Corporation

Short Sea Shipping is OUR BUSINESS

27 27

Earnings per share including impact of non-operating items

Algoma Central Corporation

Short Sea Shipping is OUR BUSINESS

28 28

YTD 2015 Has Been Challenging

Short Sea Shipping is OUR BUSINESS

29 29

Cash sh for growt wth h comb mbined ined with h so solid d base se of operati erating ng ass sset ets

Algoma Central Corporation

Short Sea Shipping is OUR BUSINESS

30 30

Well capit italize alized d with h ability lity to fund promising mising

• ppor
• rtuniti

tunities es

Algoma Central Corporation

Capital ital Empl ployed d = $860 60 milli llion

Short Sea Shipping is OUR BUSINESS

31 31

Transf ansfer er Algoma’s expertise in Great Lakes shor

• rt

t - sea shippi pping g to areas as of high h growt wth globally bally.

Our r St Stra rategy egy Go Goin ing g For

• rward

ard

Objecti ective e One ne – Incre rease se our ur interes erest t in our ur cur urren ent t Ocean an-base sed d comm mmer ercia cial l Pool

• l
• Recently announced the acquisition of 2.5 existing Pool vessels that will result in a

doubling of our present share of the Pool

• Targeted return is in excess of 10% after-tax
• The Pool business is very similar to our Lakes business, sharing many of the same

attributes, including being based on long-term contacts

Short Sea Shipping is OUR BUSINESS

32 32

Objecti ective e Two

• – Grow

w into

• new

w interna ernati tion

• nal

al mark rkets ts where here we can add value ue.

Our r St Stra rategy egy Go Goin ing g For

• rward

ard

Target t Mark rket t Fea eature tures: s:

• Significant economic growth combined with growth in urbanization and

infrastructure development.

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

feeder services between shallow draft ports and major seaports.

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

local investments and foreign control.

• Opportunities to consolidate small regional operators.

Short Sea Shipping is OUR BUSINESS

33 33

Gl Glob

• bal

al Shor

• rt Sea

ea Shipping ipping

Mark rket:

• Driver

ers s of short t sea shippi pping ng are growth th in population, ation, GDP and urbani niza zati tion.

• n.
• SUL’s are feeders between shallow draft

and major seaports ts

• Largest

st pot

• tent

ntial is in developi ping ng economie mies; s; China na, , Indi dia, , SE Asia, Afri rica and SA SA

• More than

n 50% of global coal and cement t demand d is in China na and Indi dia.

Algoma

• ma Strat

rategy egy:

• Transf

nsfer er experti tise se to global growth th areas

• Mark

rkets ets to have acceptabl able e legal, regulator

• ry,

, fina nanci ncial and labour r frame meworks

• Lever exist

sting relati tions nships hips

• Algoma-led

d team on ground und to assess ess local mark rket et assum umpt ptions

• ns
• Identif

ntify y opportun tunities es for acqu quisiti tion n / invest estment ent

Short Sea Shipping is OUR BUSINESS

34 34

Other er Rela lated ed Oppor

• rtunities

tunities

Mark rket:

• Shipping

ping re related

• Synergi

gies es with h existin sting g busi siness ness

• Solidify

ify client ent relati tionsh

• nships

ps − Cargo

• handling

ng

• Arctic

ic

• Susta

tainab nable e Energy Logistics stics − Wind fa farms s off shore − Wave e Energy gy

Algoma

• ma Strat

rategy egy:

• Le

Leverage rage clien ent t re relationshi tionships 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

• Establish

ish pre resen ence ce in growth th markets ts

Short Sea Shipping is OUR BUSINESS

35 35

In Invest stmen ment Thesis sis

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

Double Double in Ten

A Strategic Review

Algoma Central Corporation

Board Of Directors Sept 9th, 2015

THANK YOU