Canada’s Algoma Central Corporation has decided to retire five domestic dry-bulk vessels and a product tanker that had reached the end of their economic life.
“Our decision to retire the dry-bulk vessels reflects our view that the current domestic market capacity exceeds customer demand and certain of our older vessels are no longer economic to operate in these market conditions,” the shipping company said.
As a result of taking these vessels out of service Algoma has accelerated depreciation on them and recorded an additional depreciation charge in the domestic dry-bulk segment in the fourth quarter of $3.3 million.
For the year, Algoma’s consolidated revenues were $413.5 million compared to $473.4 million in 2014. The balance of the decrease in revenues results from a drop in rates earned due to stiff competition in the domestic dry-bulk business and to a drop in volumes carried in the company’s product tanker and ocean dry-bulk business units.
Net earnings for the year were $21,069 compared to $48,977 for the prior year period. The decrease in earnings year-over-year was driven primarily by the drop in revenues and partially offset by a gain resulting from the cancellation of shipbuilding contracts earlier in 2015.
During 2015, Algoma introduced its new strategic growth vision beyond the traditional domestic markets followed by investment in the acquisition of two vessels in the International Pool and the purchase of a 50% interest in a third vessel. This transaction closed in January 2016 and these vessels will contribute to Algoma earnings for all of 2016.
Shortly after year-end, the company launched a second initiative with the purchase of a 50% interest in an existing operator of pneumatic cement carriers. This transaction also closed in January and will contribute to earnings beginning in the first quarter.