Algoma Central Corp. profits slashed in half

Blaming a change in Ontario's corporate income tax rate and a decision to defer needed repairs to its self-unloader Algobay, Algoma Central Corp. reported 2003 profit of $11.7 million, compared to $22.2 million last year.

The Algobay (shown) needs extensive steelwork and equipment upgrades and did not run in 2003.

"We have elected to defer these major expenditures and not operate this vessel until we have a clearer and more certain long-term outlook," President and CEO Tim Dool told the annual meeting on May 7 of last year.

"Fleet replacement of ships in our tanker, self-unloader and bulker fleets may provide the corporation with opportunities in the future to improve our fleet’s competitiveness, longevity, and environmental improvement over other modes of transportation, while growing the earnings of our corporation," Dool said.

"Whether fleet replacement opportunities occur will depend on improving economic and market conditions and a more favourable support for Canadian-flag shipping."

The company reported a lacklustre fourth quarter, with profit of just $36,000 (a penny a share), down from $11,712,000 ($3.01 a share) during the same period last year.

The following is from a company news release:

***************************** Net income for the twelve months ended December 31, 2003 decreased from $22,235,000 or $5.71 per share in 2002 to $11,739,000 or $3.02 per share in 2003.

Included in both years are adjustments to income tax expense primarily relating to announcements by the Ontario governments concerning changes in the corporate income tax rates.

In 2003 and 2002, we had charges of $5,800,000 and $646,000 respectively.

The 2003 adjustment related to the announcement made by The Government of Ontario to increase the provincial corporate income tax rate from 12.5% to 14% effective January 1, 2004 and to defer future corporate tax rate decreases that were previously announced by the former Ontario government.

The 2002 adjustment related to the one-year deferral of a tax rate decrease that was to commence in 2003.

The above adjustments largely reverse the amounts we included in our results in 2001 that reflected the announcements by the former Ontario government's plan to reduce corporate income tax rates.

Excluding the income tax adjustments mentioned above for 2003 and 2002, net income in 2003 would have been $17,539,000 or $4.51 per share and 2002 net income would have been $22,881,000 or $5.88 per share.

The decrease in results in 2003 when compared to 2002 of $5,342,000 or $1.37 per share was primarily a result of:

- A reduction in the operating results of the domestic dry-bulk fleet due mainly to fewer operating days as a result of a weak grain market in the first half of the year and the vessel Algobay not operating during 2003. - An unrealized foreign exchange loss incurred on foreign-denominated long-term receivables due to the strengthening of the Canadian dollar during 2003.

Net income for the quarter ended December 31, 2003 was $36,000 or $0.01 per share, a decrease of $11,712,000 or $3.01 per share over the same period last year.

Of this decrease, $5,800,000 was due to the income tax adjustment explained above and $1,239,000 was due to income tax expense on an unrealized foreign exchange gain not included in income.

The balance of $4,673,000 was primarily a result of a reduction in the 2003 fourth quarter operating results of the domestic dry-bulk and tanker fleets due to reduced operating days and increased operating costs. On January 14, 2004, the Board of Directors declared a dividend of $0.25 per common share payable on Monday, March 1, 2004 to shareholders of record on Monday, February 16, 2004.

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