Algoma Steel Group Reports Fiscal First Quarter 2025 Financial Results
First Quarter Results In-Line with Previously Announced Outlook
Completed Plate Mill Upgrade, Ramping Production Towards Expected Annual Run Rate Capacity of Over 650,000 NT
Continued to Significantly De-risk Transformative Electric Arc Furnace Project as Construction Continues on Schedule
Announces Intention to Relaunch Normal Course Issuer Bid
SAULT STE. MARIE, Ontario, Aug. 13, 2024 (GLOBE NEWSWIRE) -- Algoma Steel Group Inc. (NASDAQ: ASTL; TSX: ASTL) ("Algoma" or "the Company"), a leading Canadian producer of hot and cold rolled steel sheet and plate products, today announced results for its fiscal first quarter ended June 30, 2024.
Unless otherwise specified, all amounts are in Canadian dollars.
Business Highlights and Fiscal 2025 to Fiscal 2024 First Quarter Comparisons
-- Consolidated revenue of $650.5 million, compared to $827.2 million in the
prior-year quarter, mainly attributable to lower steel shipments and
realized prices.
-- Consolidated loss from operations of $12.5 million, compared to income of
$164.3 million in the prior-year quarter.
-- Net income of $6.1 million, compared to $130.9 million in the prior-year
quarter.
-- Adjusted EBITDA of $37.7 million and Adjusted EBITDA margin of 5.8%,
compared to $191.2 million and 23.1% in the prior-year quarter (see
"Non-IFRS Measures" below).
-- Cash flows generated from operations of $12.5 million, compared to $163.9
million in the prior-year quarter.
-- Shipments of 503,152 tons, compared to 569,433 tons in the prior-year
quarter.
-- Paid quarterly dividend of US$0.05/share.
Michael Garcia, the Company's Chief Executive Officer, commented, "Our operations performed well in the quarter, delivering results that were in-line with our previously disclosed outlook. This summer has represented a period of challenging near-term steel pricing and uncertain macroeconomic conditions, but we have stayed focused on the business drivers within our control, namely the safe operation of our facilities, exceptional service to customers and the successful advancement of our capital programs."
Mr. Garcia continued, "We have made significant progress on our two key capital projects: completing the second phase of our Plate Mill Modernization and advancing our transformative EAF project. We remain on pace to start EAF commissioning activities by calendar year-end, with steel production expected by the end of calendar Q1 2025. As our construction activities on the EAF project are in the home stretch, we remain on schedule and on budget. We are on the cusp of a new chapter for Algoma and believe that we are on track to deliver strong shareholder value as we transition to becoming one of North America's greenest steel producers."
First Quarter Fiscal 2025 Financial Results
First quarter revenue totaled $650.5 million, compared to $827.2 million in the prior year quarter. As compared with the prior year quarter, steel revenue was $597.4 million, compared to $754.5 million, and revenue per ton of steel sold was $1,293, compared to $1,453.
Loss from operations was $12.5 million, compared to income from operations of $164.3 million in the prior-year quarter. The decrease was primarily due to lower steel shipments, due in part to an outage at the plate mill supporting the final stages of the modernization, greater consumption of purchased coke and natural gas, and weakening market conditions, which was partially offset by improvements in value-add products as a percentage of sales mix.
Net income in the first quarter was $6.1 million, compared to net income of $130.9 million in the prior-year quarter. The decrease was driven primarily by the factors described above under loss from operations. Net income in the quarter benefitted from foreign exchange gains, changes in fair value of warranty liability, and income tax recovery.
Adjusted EBITDA in the first quarter was $37.7 million, compared with $191.2 million for the prior-year quarter. This resulted in an Adjusted EBITDA margin of 5.8%. Average realized price of steel net of freight and non-steel revenue was $1,187 per ton, compared to $1,325 per ton in the prior-year quarter. Cost per ton of steel products sold was $1,069, compared to $950 in the prior-year quarter. Shipments for the first quarter decreased by 11.6% to 503,152 tons, compared to 569,433 tons in the prior-year quarter. See "Non-IFRS Measures" below for an explanation of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA.
Electric Arc Furnace
The Company has made substantial progress on the construction of two new state of the art electric arc furnaces ("EAF") to replace its existing blast furnace and basic oxygen steelmaking operations. The project timing and budget remain consistent with the outlook provided in the fiscal fourth quarter 2024 earnings release. As of June 30, 2024, the cumulative investment in the project was approximately $611 million, including approximately $48.4 million during the fiscal first quarter. The project continues to advance, with approximately $850 million of the budgeted project cost having been contracted and the remaining project commitments expected to be finalized over the next quarter. The Company expects to utilize the full project budget of up to $875 million. The completion of the EAF project is expected to be funded with cash-on-hand, cash generated through operations, and available borrowings under the Company's existing undrawn credit facility.
Following the transformation to EAF steelmaking, the Company is anticipated to have an annual raw steel production capacity of approximately 3.7 million tons, matching its downstream finishing capacity of over 3 million tons, which is expected to reduce the Company's annual carbon emissions by approximately 70%.
Balance Sheet and Liquidity
On April 5, 2024, the Company's indirect wholly-owned subsidiary and operating company, Algoma Steel Inc. ("ASI"), issued an aggregate of US$350.0 million of 9.125% Senior Secured Second Lien Notes due April 15, 2029 (the "Notes"). ASI intends to use the net proceeds from the offering of the Notes for general corporate purposes, adding strength and flexibility to its balance sheet. At quarter end, the Company had cash of $493.4 million and unused availability under its Revolving Credit Facility of $351.1 million.
Quarterly Dividend
The Board has declared a regular quarterly dividend in the amount of US$0.05 on each common share outstanding, payable on September 27, 2024 to holders of record of common shares of the Corporation as of the close of business on August 23, 2024. This dividend is designated as an "eligible dividend" for Canadian income tax purposes.
Normal Course Issuer Bid
The Company intends to file with the Toronto Stock Exchange ("TSX") a notice of intention to relaunch a normal course issuer bid ("NCIB"), as part of its overall capital allocation strategy.
If accepted by the TSX, the Company would be permitted under the NCIB to purchase for cancellation, through the facilities of the TSX, alternative Canadian trading systems or The NASDAQ Stock Market ("Nasdaq"), up to 5% of the Company's outstanding common shares and/or warrants as of the commencement of the NCIB during the 12 months following such TSX acceptance. The exact number of common shares and/or warrants subject to the NCIB will be determined on the date of acceptance of the notice of intention by the TSX.
The NCIB will be effected in accordance with the TSX's NCIB rules and applicable U.S. securities laws, which contain, among other things, restrictions on the number of common shares and/or warrants that may be purchased on a single day, subject to certain exceptions for block purchases, based on the average daily trading volumes of the Company's common shares and/or warrants on the applicable exchange.
All common shares and warrants purchased by the Company under the NCIB will be purchased at prevailing market prices. The actual number of common shares and warrants that may be purchased, and the timing of any such purchases, will be determined by the Company, subject to the applicable terms and limitations of the NCIB (including any automatic repurchase plan adopted in connection therewith). All common shares and warrants acquired by the Company under the NCIB will be cancelled.
The Company intends to commence the NCIB two trading days after TSX acceptance of the NCIB. The NCIB will terminate one year after its commencement, or earlier if the maximum number of common shares and/or warrants, as applicable, under the NCIB have been purchased. Although the Company has a present intention to acquire certain of its common shares and/or warrants pursuant to the NCIB, the Company will not be obligated to make any purchases and purchases may be suspended by the Company at any time. The Company reserves the right to terminate the NCIB at any time if it determines that it is appropriate to do so.
In connection with the NCIB program, the Company intends to enter into an automatic repurchase plan with its designated broker to allow for purchases of its common shares and warrants during certain pre-determined black-out periods, subject to certain parameters as to price and number of common shares and warrants. Outside of these pre- determined black-out periods, common shares and warrants may be repurchased in accordance with management's discretion, subject to applicable law.
The Company reviews all elements of its capital allocation strategy on an ongoing basis. The Company continues to focus on supporting its EAF project; however, the Company plans to commence the NCIB because it believes that the market price of its common shares and warrants may not, from time to time, fully reflect their value and accordingly the purchase of common shares and/or warrants would be in the best interests of the Company and an attractive use of available funds.
Conference Call and Webcast Details
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August 13, 2024 17:42 ET (21:42 GMT)
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