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

Good morning, ladies and gentlemen. Welcome to the virtual 2021 Annual General Meeting of Westshore Terminals Investment Corporation, 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. As you are aware, because of the COVID-19 pandemic, we are holding the AGM in this virtual-only format by online web to comply with government health requirements. We welcome all of you who have joined us today. All participants who wanted to attend the meeting were required to register online by 2 pm on Friday, June 11. All registered shareholders and [indiscernible] proxyholders, other than management proxyholders, who wanted to exercise their right to vote today were required to register online by 2:00 p.m. on Friday, June 11th to be confirmed as such for today's meeting and to allow their vote to be counted. To vote when the time comes, please follow the instructions in the information circular mailed out on May 14 of this year. All of the shareholders will find the management proxy holders, such as myself, Glenn Dudar, or Nick Desmarais [indiscernible] voted in accordance with the instructions set in the specific proxy. The vast majority of the shares represented today will be voted in this manner. This isn't very common for all our AGMs. We've provided the register of shareholders and proxy holders the opportunity to submit questions to us in advance in the meeting and none were submitted. Now the order of business of the meeting. All the directors standing for election are participating in this meeting by online web today. The directors standing for election are Diane -- 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 on. 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 55 shareholders present or represented by proxy, representing 45,393,828 common shares, which is 71.76% of the total issued and outstanding common shares. I've been appointed proxyholder for 49 shareholders representing 45,391,000 shares. As such, I propose to move, second and approve all items requiring a vote today. Nick Desmarais and Glenn Dudar have been also been appointed proxyholders and represent additional shares. The notice of meeting was mailed to all registered shareholders of record as of May 6th, 2021. The Secretary will now report on the quorum.

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

Thank you, Nick. I, therefore, declare this meeting to be properly constituted for the transaction of business brought before it. Moving to item 3, the minutes of last year's Annual General Meeting held on June 16, 2020, has been verified by the signatures of the Chairman and Secretary of that meeting, and I will dispense with reading it. Moving to Item 4. I would now like to ask Glenn Dudar to make his presentation on the operations report. Glenn?

Good morning. 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 Terminals' Annual General Meeting. Thank you for joining us today. 2020 was a solid year for Westshore Terminals. We are pleased with our overall performance and I'll share some highlights with you today. Undoubtedly, due to the pandemic, 2020 was a year of unparalleled disruption around the world. Although our operations at Westshore were designated as essential service, we were not immune to the challenges of COVID-19. With our large workforce and interaction with international vessel crews, many of our employees have had to self isolate and some employees have tested positive for COVID-19. However, even with these disruptions, we were able to continue operating uninterrupted. Very early on, we adopted new safe work practices to ensure the safety of our workforce. I would like to thank everyone at Westshore for their continued efforts in this regard. Now let me share some highlights. In 2020, steelmaking and thermal coal shipments from Canada and the U.S. went to 18 different nations around the world and the highest volumes were once again shipped to South Korea and Japan. Unlike previous years, where South Korea led the way, 2020 saw slightly more shipments going to Japan. This is attributable to an increase in thermal coal shipments in Japan. We saw a return of uptick in shipments of metallurgical coal to China over previous years with the Chinese sanctions on Australian coal. And we saw sustained shipments to India. This is a relatively new market for Canada and the U.S., but one where there are now well-established trade relationships that we anticipate our customers will continue in for the years ahead. Despite the operational challenges of COVID-19, it was a strong year for our terminal. We put all of our equipment into good use receiving 1,951 unit trains from Class 1 railways, including CN, CP and BNSF, and loading 327 bulk cargo vessels throughout the year. We handled 29.3 million tons of coal, 2/3 of which was steel-making coal and the balance thermal coal, consistent with previous years. For 2021, our coal [indiscernible] will be different, primarily due to reduced metallurgical coal shipments for Teck Resources. We expect the composition will be more balanced between net coal and thermal coal despite the slightly larger overall shipments of Canadian thermal coal. We anticipate annual throughput volume of 28 million metric tons for 2021. In addition to operational throughput performance, our top line numbers continue to be driven by our customer handling rates. The handling rates are unique for each customer as part of their specific agreement with Westshore. Our average handling rate peaked in 2019 and were down slightly in 2020. We anticipate average rates to be in the range of $10.65 for 2021, primarily due to the current Canadian U.S. exchange rates and the increased thermal shipments. While 2020 was a steady year with our customers, in 2021 our customer composition is changing. Our approach is to continue to build on the established relationships with our existing customers and to further grow our business with new customers. Starting in Q2 of this year, a new contract with Teck Resources came into effect. While previously, we handled 19 million tons per year for them, this year will be a transitional year, and we expect to handle approximately 13 million to 13.5 million tons. Going into 2022, these volumes will adjust further and will stabilize at 5 million to 7 million tons. Our approach is to continue to build on the established relationships with our existing customers and to further grow our business with new customers. Our business is evolving, and we are confident, we'll continue to generate strong returns for our shareholders going forward. We had revenues of $368 million and profit before taxes of $174 million in 2020, off from the peak in 2019, but robust nonetheless. With the Terminal improvement project now fully behind us, we were in an extremely favorable cash position by the end of 2020. Cash generated in 2020 was used to fund our operating expenses, dividends, share buyback as well as ongoing infrastructure capital requirements. In 2020, we maintained our dividend of $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 $2.17 billion. As our shareholders know, in Q1 2021, we increased the dividend to $0.20 per share per quarter and also provided a onetime nonrecurring dividend of $0.50 per share, reflecting our large cash balance and anticipated future cash needs. So what is the future outlook for Westshore Terminals? Our priority is strengthening our relationships with our existing customers, gaining new customers as well as evaluating the handling of other bulk commodities. While this continues, we will focus on having a safe workplace for everyone, ensuring responsible environment, rental management practices and maintaining close operational cost controls. Our goal is to continue to be an efficient and low-cost Terminal of choice. Thank you for joining us today. I'll now pass it back to Bill.

Thank you, Glenn. I just -- on behalf of the Board and the shareholders, I would like to congratulate Glenn and Becky and, and his entire team for producing such excellent results in a COVID challenge year and indeed an impressive performance. This is normally the time for a question period. As there are no questions, we will move on to the next item of business. Moving to Item 6. I place before the meeting the report of the Directors, the consolidated financial statements for the Corporation for the year ended December 31, 2020, 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 and the persons listed in the information circular, all of whom 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 the Directors of the Corporation for the ensuing year. The next item of business is item 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've completed all of the business of the meeting, I move, second and declare the motion approved that the meeting is now concluded. Thank you all for joining us.