Westshore Terminals Investment Corporation

First Quarter Report

For the three months ended March 31, 2021

The Corporation was incorporated under the Business Corporations Act (British Columbia) on September 28, 2010 and is domiciled in Canada. The registered and head office of the Corporation is located at Suite 1800, 1067 West Cordova Street, Vancouver, British Columbia V6C 1C7. The Corporation owns all of the limited partnership units of Westshore Terminals Limited Partnership ("Westshore"), a limited partnership established under the laws of British Columbia.

The Corporation derives its cash inflows from its investment in Westshore by way of distributions on Westshore's limited partnership units. Westshore operates a coal storage and loading terminal at Roberts Bank, British Columbia (the "Terminal"). Westshore's operating revenues are derived from rates charged for loading coal onto seagoing vessels.

Westshore's results are affected by various factors, including the volume of coal shipped by each customer, and their contracted rate per tonne, as well as Westshore's operating costs.

Caution Concerning Forward-Looking Statements

This MD&A contains certain forward-looking statements, which reflect the current expectations of the Corporation and Westshore with respect to future events and performance. Forward-looking statements are based on information available at the time they are made, assumptions by management, and management's good faith belief with respect to future events. They speak only as of the date of this MD&A, and are subject to inherent risks and uncertainties, including those risk factors outlined in the Annual Information Form of the Corporation filed on www.sedar.com, that could cause actual performance or results to differ materially from those reflected in the forward-looking statements, historical results or current expectations.

Forward-looking information included in this document includes statements with respect to future revenues, expected loading rates, strength of markets for metallurgical and thermal coal, expected throughput volumes, the possible impacts of the COVID-19 pandemic, the effect of the Canadian/US dollar exchange rate, the future cost of post-retirement benefits, adoption and impact of new accounting standards and the anticipated level of dividends and share repurchases.

Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at which, such performance or results will be achieved. There is significant risk that estimates, predictions, forecasts, conclusions and projections will not prove to be accurate, that assumptions may not be correct and that actual results may differ materially from such estimates, predictions, forecasts, conclusions or projections. Readers of this MD&A should not place undue reliance on forward-looking statements as a number of risk factors could cause actual results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. Specific risk factors include global demand and competition in the supply of seaborne coal, the ability of customers to maintain or increase sales or deliver coal to the Terminal, fluctuations in exchange rates, and the Corporation's ability to renegotiate key customer contracts in the future on favourable terms or at all. See the risk factors outlined in the Annual Information Form referred to above.

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Westshore Terminals Investment Corporation

Management's Discussion & Analysis of

Financial Condition and Results of Operations

Management's Discussion & Analysis of

Financial Condition and Results of Operations

The unaudited financial results along with management's discussion and analysis contained in this report should be read in conjunction with the annual audited financial statements and management's discussion and analysis included in the Corporation's Annual Report for the year ended December 31, 2020. The date of this management's discussion and analysis and results of operations is May 7, 2021.

As of May 7, 2021, the Corporation has 63,257,835 (December 31, 2020 - 63,391,535) issued and outstanding shares. The Corporation renewed its normal course issuer bid ("NCIB") effective April 13, 2021 which allows the Corporation to purchase for cancellation up to 3,162,891 Common shares (approximately 5% of its issued and outstanding shares as of April 7, 2021) in the following 12 months. 117,000 common shares have been purchased during 2021 up to and including May 7, 2021 for a total of $1,817,000. In 2020, a total of 3,009,912 Common shares were repurchased for a total of $46,744,000.

The following table sets out selected consolidated financial information of the Corporation for the three months ended March 31, 2021.

(In thousands of Canadian dollars except per share amounts and where noted)

Three Months Ended

March 31, 2021

March 31, 2020

$

$

Tonnage (000 tonnes)

8,033

7,711

Revenue

91,329

92,372

Profit before taxes

40,483

39,842

Profit for the period

29,553

29,074

Profit for the period per share(1)

0.47

0.44

Dividends declared

44,280

10,441

Dividends declared per share

0.70

0.16

Share volume repurchased (000 shares)

117

1,220

Cost of shares repurchased

1,817

19,523

(1) Weighted average shares outstanding for the period ended March 31, 2021 was 63,271,416 (March 31, 2020 - 65,680,810).

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Westshore Terminals Investment Corporation

Management's Discussion & Analysis of

Financial Condition and Results of Operations

The following tables set out selected consolidated financial information for the Corporation on a quarterly basis for the last eight quarters.

(In thousands of Canadian dollars except per share amounts and

Three Months Ended

where noted)

Mar 31, 2021

Dec 31, 2020

Sep 30, 2020

Jun 30, 2020

$

$

$

$

Tonnage (000 tonnes)

8,033

7,087

6,786

7,683

Revenue

91,329

89,773

89,449

96,816

Profit before taxes

40,483

42,335

44,266

47,484

Profit for the period

29,553

30,884

32,305

34,653

Profit for the period per share

0.47

0.49

0.50

0.53

Dividends declared

44,280

10,142

10,237

10,378

Dividends declared per share

0.70

0.16

0.16

0.16

Shares repurchased (000 shares)

117

541

947

301

Cost of shares repurchased

1,817

7,980

15,216

4,025

(In thousands of Canadian dollars except per share amounts and

Three Months Ended

where noted)

Mar 31, 2020

Dec 31, 2019

Sep 30, 2019

Jun 30, 2019

$

$

$

$

Tonnage (000 tonnes)

7,711

8,208

8,340

7,582

Revenue

92,372

102,991

104,918

98,714

Profit before taxes

39,842

49,994

55,774

47,923

Profit for the period

29,074

36,484

40,704

34,960

Profit for the period per share

0.44

0.55

0.61

0.52

Dividends declared

10,441

10,636

10,671

10,672

Dividends declared per share

0.16

0.16

0.16

0.16

Shares repurchased (000 shares)

1,220

312

-

-

Cost of shares repurchased

19,523

5,858

-

-

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Westshore Terminals Investment Corporation

Management's Discussion & Analysis of

Financial Condition and Results of Operations

Results of Operations

(In thousands of Canadian dollars)

Three Months Ended

March 31, 2021

March 31, 2020

$

$

Revenue:

Coal loading

89,431

89,808

Other

1,898

2,564

Expenses:

91,329

92,372

Operating

44,911

44,453

Administrative

3,595

3,848

Other:

48,506

48,301

Foreign exchange gain (loss)

286

(1,763)

Gain on disposal of property, plant and equipment

116

-

Net finance costs

(2,742)

(2,466)

Profit before income tax

40,483

39,842

Income tax expense

10,930

10,768

Profit for the period

29,553

29,074

Other comprehensive income, net of income tax:

24,246

4,341

Total comprehensive income for the period

53,799

33,415

Tonnage shipped for Q1 2021 was 8.0 million tonnes compared to 7.7 million tonnes for the same period in 2020. Of the tonnes shipped in Q1 2021, 64% was metallurgical coal and 36% was thermal coal, compared to 63% and 37% respectively for the same period in the prior year.

Coal loading revenue decreased by 0.4% to $89.4 million for Q1 2021 compared to $89.8 million for the same period in 2020. Volumes were up 4.2% for the quarter (year over year) while the average loading rate in Q1 2021 was $11.13 per tonne compared to $11.65 per tonne through the same period in 2020.

Operating and administrative expenses increased by 0.4% to $48.5 million for Q1 2021 compared to $48.3 million for the same period in 2020.

Foreign exchange gain of $0.3 million in Q1 2021 increased from a loss of $1.8 million in the same period of 2020.

Q1 2020 included a $2.5 million unrealized loss on the mark to market of foreign exchange hedging contracts.

Net finance costs increased to $2.7 million in Q1 2021 from $2.5 million during the same period of 2020. The slight increase is due to less interest income earned on cash due to the lower interest rate environment. The net interest cost components of the employee benefit plan expense, and the right-of-use capital lease interest costs are recorded in net finance costs.

4

Westshore Terminals Investment Corporation

Management's Discussion & Analysis of

Financial Condition and Results of Operations

Income tax expense increased to $10.9 million in Q1 2021 from $10.8 million in Q1 2020 due to higher profits before taxes in 2021.

Profit in the quarter increased slightly to $29.6 million in Q1 2021 from $29.1 million during the same period of 2020.

Other comprehensive income or loss includes actuarial gains and losses on the defined benefit post-retirement obligations which are primarily impacted by the discount rate used, membership assumptions and the plan asset performance (relative to actuarial expectations).

After-tax other comprehensive income for the first quarter increased to $24.2 million in 2021 from $4.3 million in 2020. The change in the first quarter of both 2021 and 2020 was caused by a 0.75% increase in the discount rate which decreased the post-retirement obligations. In addition to this, the plan assets performed better than actuarial expectations in the first quarter of 2021 but performed below actuarial expectations in the first quarter of 2020.

Cash Flows

Cash flows from operations are available to the Corporation to fund capital and other expenditures, establish reserves and pay dividends to and repurchase shares from shareholders.

(In thousands of Canadian dollars)

Three Months Ended

March 31, 2021

March 31, 2020

$

$

Operating cash flows before working capital changes, lease obligation

interest and income tax payments

54,963

53,283

Working capital changes

(19,922)

(15,730)

Lease obligation interest paid

(2,259)

(2,280)

Income tax paid

(13,769)

(6,399)

Cash flow provided by operations

19,013

28,874

Cash flows used in financing activities

(12,704)

(30,878)

Cash flows used in investing activities

(2,880)

(3,001)

Increase (decrease) in cash and cash equivalents

3,429

(5,005)

Operating cash flows before changes in working capital, lease obligation interest payments and income tax

payments for the first quarter increased by 3% to $55.0 million in 2021 from $53.3 million for the same period in 2020. Working capital changes in the first quarter resulted in a $19.9 million outflow in 2021 compared to a $15.7 million outflow for the same period in 2020, primarily due to change in accounts payable and deferred revenue which fluctuate depending on timing of payments. Lease obligation interest payments are marginally lower as the lease liability is paid down. Income tax payments in the first quarter increased to $13.8 million in 2021 from $6.4 million for the same period in 2020 due to the timing of tax payments. The 2020 tax payment is lower than normal due to tax instalment deferrals provided by the government in response to the COVID-19 pandemic (which ceased in the third quarter of 2020). Cash flow from operations in the first quarter decreased to $19.0 million in 2021 from $28.9 million for the same period in 2020.

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Westshore Terminals Investment Corporation published this content on 07 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2021 00:03:02 UTC.