Westshore Terminals Investment Corporation (WTE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the virtual 2020 Annual General Meeting of Westshore Terminals Investment Corp., which I now call to order. My name is Bill Stinson. I am Chairman and CEO of the company. Also participating with me at the meeting today is Glenn Dudar, Vice President and General Manager of Westshore Terminals, and Nick Desmarais, the Secretary and Vice President of Corporate Development of the company. Because of the COVID-19 pandemic, we're holding the AGM this year in virtual format by web and conference call. This format complies with government health requirements. We welcome all of you who have joined us today. All registered shareholders who wanted to exercise their right to vote have been provided that opportunity by casting their proxies, and their votes will be cast in accordance with our instructions today. We will conduct all the regular business we normally do with the AGM with the exception of the question period. As we are not set up to have back and forth discussions with you today, we have provided registered shareholders the opportunity to submit questions in advance of the meeting. Shareholders were notified in this process in the information circular, which was mailed out on May 15, 2020, and the deadline for questions was June 12, 2020. No questions were received, not in the order of the business of the meeting. All of the directors standing for election are participating at this meeting by web and conference call, with the exception of Brian Canfield, who couldn't be with us today. The directors standing for election are Dallas Ross, Brian Canfield, Glen Clark, Clark Hollands, Steve Akazawa, Dianne Watts, Nick Desmarais and myself. I will introduce each item of business to be conducted at the meeting as we go along. That matter will then be dealt with appropriately, and we will move on to the next item. The first item is the appointment of the scrutineer. I now appoint Marissa Beintema of Computershare to act as scrutineer. I'm advised by the scrutineer that there are 61 shareholders present or represented by proxy, representing 50,363,846 common shares, which is 77.6% of the total issued and outstanding common shares. I have been appointed proxyholder for 58 shareholders, representing approximately 48 million shares. And as such, I will be moving, seconding and approving all items requiring a vote today. Nick Desmarais and Glenn Dudar have also been appointed proxyholders and represent additional shares. The notice of meeting was mailed to all registered shareholders of record as of May 6, 2020. The secretary will now report on the quorum.

Mr. Chairman, Article 11.3 of the Articles of the Corporation provides that a quorum for this meeting is the presence of 2 or more individuals present in person, either holding personally or representing as proxies, not less in aggregate than 10% of the issued and outstanding shares entitled to vote at the meeting. The scrutineers' report and attendance shows that we have a quorum.

Thank you, Nick. I therefore declare this meeting to be properly constituted to the transaction of business brought be forward. Moving to Item 3. The minutes of last year's Annual General Meeting held on June 18, 2019, have been verified by the signatures of the chairman and secretary of that meeting, and I will dispense with reading them. Moving to Item 4. I would now like to ask Glenn Dudar to make his presentation on operations at the port. Glenn?

Thank you, Bill. Before I get underway, please note the standard caution about forward-looking statements. It is a pleasure to welcome all of you to the Westshore Terminal's Annual General Meeting. Thank you for joining us virtually today. While much of my presentation will focus on our performance in 2019, we must acknowledge the unique circumstances that we are in today. We have seen unparalleled disruption around the world as a result of COVID-19. At Westshore, we take the pandemic seriously, ensuring we are doing all we can to protect our workforce. Without a doubt, COVID-19 has impacted what will happen globally for the balance of 2020. Our business has been marginally impacted to date. However, our planned volumes remain steady, and we do not foresee significant impact to our terminal. Our management team have reacted quickly and decisively to this unforeseen situation, and we are confident that we are well positioned for what lies ahead. Now let me share some highlights from 2019. In 2019, our Westshore Terminals handled 31 million metric tons of coal. This is a new record for our terminal and one we're proud of. To reach this volume, we put our recently-installed new equipment to good use, handling 2,100 unit trains from Class 1 railways, including CN, CP and BNSF and loading 362 vessels throughout the year. We handled both steelmaking and thermal coal, and the ratios have each remained fairly consistent with prior years. While the coal shipments went to 15 different nations around the world, the highest volumes were shipped to South Korea and Japan. We also saw a significant increase in shipments to India as our customers diversified their markets. Looking to the year ahead, the majority of the shipments will continue to be destined for Asian markets, and we expect 2020 to be another solid year with target volumes of 30.5 million tons shipped. In addition to our long-term customers, we handled new Canadian customers, steelmaking and thermal coal product in 2019. Even in challenging times, Canadian steelmaking coal producers continue to be strong competitors in a global market. Our thermal coal customers are ranked as the top exporters in North America, but are more susceptible to market fluctuations. In 2019, Cloud Peak Energy was purchased by Navajo Transitional Energy corporation, and we now have a new contract with Entech in place. 2019's operational performance contributed to robust financial results. The terminal achieved revenues of $395 million, up from $363 million in 2018. Profit before tax reached $204 million compared to $177 million in the prior year. In addition to operational throughput performance, our top line numbers are driven by customer handling rates. The handling rates are unique for each customer as part of their specific agreement with Westshore. Our handling rates have increased over the years, and we have also benefited from strong U.S. exchange rates as our U.S. customers pay in U.S. bonds. Our cash position increased significantly in 2019. Cash generated in 2019 was used to fund our operating expenses, dividends, our share buyback as well as completing our terminal project and maintenance and business capital. We maintained our dividend at $0.16 per quarter or $0.64 for the year. Since the dividend was put in place in 2007, the cash returned to shareholders has totaled $2.13 billion. As previously noted, our 5-year terminal project was completed last year. The project budget was $270 million, and we completed the projects $30 million under budget for a total spend of $240 million. Over the last 5 years, significant production interruptions were needed as old equipment was demolished and new equipment was put into production. Each of these shutdowns required close coordination to allow continued operations at minimal impact to our customers. The fact is, during the 5-year project, we achieved some of the highest throughputs the terminal has seen. It was a complex and challenging project for the Westshore management team, and we are proud of the end result. The completion of the major capital project does not mean that our work is done. Operating an export terminal of our size is a capital-intense business. Going forward, we will continue to allocate capital appropriately to maintain our first-class infrastructure. Being a good neighbor; a focus on safety; sustained environmental performance; and being at peak productivity. These are the cornerstones of our operation that guide our thinking and decision-making, and we require all 4 aspects to be a success. First, it is about being a good neighbor, supporting local delta community initiatives that matter to us and to our neighbors. It is about a strong focus on safety. This means continuously developing and enhancing our safety systems to reduce risks and keep our teams safe all day, every day. We are proud of our commitment to the environment. It requires sustained ongoing focus to not only look at how we care for the environment but how we can improve going forward. This, of course, includes being Green Marine certified. And finally, working to always be at peak productivity without compromising community, safety or environment. It is about maximizing the return to our investors in a dynamic and ever-changing business environment. Without question, the customer landscape for Westshore is changing going forward. Westshore contracted with some new Canadian producers in 2019. We also have agreements in place with producers that intend to be in production in 2023 or beyond. Our largest customer, Teck Resources, will be shifting a large portion or potentially all of their throughput volume from Westshore to alternate terminals, and we are preparing for that. The Alberta government's recent announcement of renewed regulations to support the responsible development of coal mines in Alberta is also very encouraging. We have seen new Canadian steelmaking coal producers enter the market with others in development. Westshore will demonstrate with existing and new customers alike the value we bring as their terminal partner. While we are currently exclusively a coal terminal, Westshore is well positioned to handle a range of bulk commodities in addition to coal. We continue to attract the interest of producers of other products, and we will evaluate the feasibility of these opportunities as they arise. We know with certainty that Westshore will continue to adapt our business to meet the changing customer landscape. While 2019 was a good year for Westshore, we constantly have our eye on the future and what lies ahead. I would like to thank you for your continued support, and thank you for joining us today.

Great. Thank you very much, Glenn. On behalf of the Board and the shareholders, I'd like to give a vote of appreciation to Glenn, his talented management team and the dedicated workforce at Westshore for their performance over the last year. And particularly, they steered us in a very fine manner through these challenging times in the first 6 months of this year with the COVID-19 situation. So thank you, Glenn. As mentioned earlier, there were no questions submitted. We will now move on to the next item of business. Moving to item 6. I place before the meeting report of the directors, the consolidated financial statements for the corporation ending December 31, 2019, and the auditors report. This report was mailed to all registered shareholders. The next item of business is item 7, namely the election of 8 directors to serve until the next annual meeting. The nominations for election of directors are the persons listed in the information circular. All of them are qualified and have consented to serve. They are Dallas Ross, William Stinson, Glen Clark, Brian Canfield, Clark Hollands, Steve Akazawa, Dianne Watts and Nick Desmarais. There were no other nominations and nominations are closed. I move, second and declare the motion approved to elect those persons just nominated as directors of the corporation for the ensuing year. The next item of business is item 8, being the appointment of KPMG as the auditor of the corporation to hold office until the close of the next annual meeting. I move, second and declare the motion approved that KPMG be appointed the auditor of the corporation to hold office until the close of the next annual meeting. As we have completed all the business of the meeting, I move, second and declare the motion approved that the meeting be concluded. Thank you all for joining us today, and please stay safe.