Thursday, November 27, 2008

BC Ferries Financial Results



British Columbia Ferry Services Inc. (BC Ferries) today released its second quarter financial results with net earnings of $53.7 million and $62.1 million for the three- and six-month periods ended September 30, 2008, down from $61.0 million and $75.4 million for the three-and six-months ended September 30, 2007.

As BC Ferries continues to invest all of its retained earnings into its asset renewal program, amortization and financing costs will continue to increase. As a result, the company expects its future net earnings will continue to decrease in the near term before improving, which is consistent with the company’s long-term financial plan.

During the quarter, BC Ferries continued to experience a downtown in traffic. The high cost of gasoline and the global economic situation adversely impacted tourism from the United States and personal travel decisions locally. In response to the decline, BC Ferries has undertaken a number of cost-saving measures, including deferring filling staff vacancies and reducing or deferring corporate travel, consulting, advertising and other discretionary expenditures.

For the six months ended September 30, 2008, $246.1 million was invested in BC Ferries’ fleet, terminals and information systems. “Since the beginning of the fiscal year, we’ve invested more than $209 million in new ships and vessel upgrades and another $32 million in our terminals,” said BC Ferries President & CEO, David L. Hahn. “These investments ensure that our customers continue to receive a safe and reliable travel experience whenever they travel with BC Ferries.”

Total revenue for the three-month period ended September 30, 2008 increased from $220.2 million to $232.1 million while total operating expenses increased from $150.8 million to $165.9 million, compared to the same period last year. For the six-month period ended September 30, 2008, total revenue was $404.0 million compared to $379.9 million for the six months ended September 30, 2007. Operating expenses for the same six-month period were $319.4 million, up from $288.4 million for the six months ended September 2007. The principal reason for the growth in operating expenses was fuel.

In order to offset the company’s rising cost of fuel, a fuel surcharge was implemented August 1, 2008 on all BC Ferries routes, except the northern routes. As the price of fuel has subsequently declined, the British Columbia Ferries Commissioner agreed that BC Ferries could reduce the current fuel surcharges by 50 per cent. This reduction was implemented on November 4, 2008. On November 21, 2008, the Commissioner further authorized the elimination of the remaining surcharges. This will take effect during December 2008.

Notwithstanding the recent decrease in world fuel prices, the cost of fuel continues to be a concern. During the six months ended September 30, 2008, BC Ferries paid its suppliers $72.3 million for fuel compared to $47.9 million during the same period last year.

Other notable events during the quarter included the sale of the 48-year-old Queen of Tsawwassen and the launch of the Northern Expedition, a new vessel that will replace the Queen of Prince Rupert on the northern routes. The new 150-metre ship will have 55 staterooms and will accommodate 130 vehicles and 600 passengers. The Northern Expedition is expected to be in service in the spring of 2009.

The full financial statements, including notes and Management’s Discussion and Analysis, are filed on SEDAR and will be available at


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