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 provided guidance for its fiscal
second quarter 2023.
Fiscal second quarter 2023 Adjusted EBITDA is
expected to be in a range of $75 million to $80 million.
Michael Garcia, the Company’s Chief Executive
Officer, commented, “Our projected fiscal second-quarter results
largely reflect previously disclosed operational challenges, as
well as the continued decline in prices for our finished products,
both of which had a negative impact on overall profitability.”
Mr. Garcia continued, “In the quarter we
experienced a production shortfall due to various operational
challenges, resulting in a decline in shipments to an estimated
415,000 to 425,000 tons for the quarter. The most significant of
these challenges was the previously disclosed plate mill
modernization commissioning delay. Additionally, volume through our
direct strip production complex (DSPC) was negatively affected by
production shortfalls mainly due to temporary workforce
availability events. We are implementing various measures to
address these issues. We believe most plate mill issues are behind
us and we are now operating above 80% capacity. We continue to work
with our vendor on mill automation software to reach our full
product lineup and capacity. With respect to the coal conveyor that
was damaged by fire in the quarter resulting in higher costs,
repair work is expected to be completed in early October, allowing
internal coke production to return to 100% capacity.”
“Amid the challenges faced in the quarter, we
continue to see steady demand for our products and are advancing
the development and construction of our transformative Electric Arc
Furnace project, which remains on time and on budget for a mid-year
2024 start-up. Additionally, we are pleased to have reached a
labour agreement with our unionized workforce that provides labour
security for the next five years. With a robust balance sheet, a
continued strong cash generating outlook, and a prudent capital
return program, we believe we are well positioned to address these
near-term obstacles and deliver long-term value creation for all of
our stakeholders,” Mr. Garcia concluded.
About Algoma Steel Inc.
Based in Sault Ste. Marie, Ontario, Canada,
Algoma is a fully integrated producer of hot and cold rolled steel
products including sheet and plate. With a current raw steel
production capacity of an estimated 2.8 million tons per year,
Algoma’s size and diverse capabilities enable it to deliver
responsive, customer-driven product solutions straight from the
ladle to direct applications in the automotive, construction,
energy, defense, and manufacturing sectors. Algoma is a key
supplier of steel products to customers in Canada and Midwest USA
and is the only producer of plate steel products in Canada. The
Company’s mill is one of the lowest cost producers of hot rolled
sheet steel (HRC) in North America owing in part to its
state-of-the-art Direct Strip Production Complex (“DSPC”), which is
the newest thin slab caster in North America with direct coupling
to a basic oxygen furnace (BOF) melt shop.
Algoma has achieved several meaningful
improvements over the last several years that are expected to
result in enhanced long-term profitability for the business. Algoma
has upgraded its DSPC facility and recently installed its No. 2
Ladle Metallurgy Furnace. Additionally, the Company has cost
cutting initiatives underway and is in the process of modernizing
its plate mill facilities.
Today Algoma is on a transformation journey,
investing in its people and processes, optimizing and modernizing
to secure a sustainable future. Our customer focus, growing
capability and courage to meet the industry’s challenges head-on,
position us firmly as your partner in steel.
Cautionary Statement Regarding
Forward-Looking Statements
This news release contains “forward-looking
information” under applicable Canadian securities legislation and
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 (collectively, “forward
looking statements”), including statements regarding Algoma’s
Adjusted EBITDA guidance, estimated shipments for the second
quarter of fiscal 2023, expectations regarding the timing to return
the facility hosting the coal conveyor to full production and
expectations of enhanced long-term profitability for the business,
Algoma’s ability to deliver long-term value creation for all of its
stakeholders and the timeline for completion of the transformation
to Electric Arc Furnace steelmaking. These forward-looking
statements generally are identified by the words “believe,”
“project,” “expect,” “anticipate,” “estimate,” “intend,”
“strategy,” “future,” “opportunity,” “plan,” “pipeline,” “may,”
“should,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions. Forward-looking statements are
predictions, projections and other statements about future events
that are based on current expectations and assumptions. Many
factors could cause actual future events to differ materially from
the forward-looking statements in this document, including but not
limited to: the risks that Algoma will be unable to realize its
business plans and strategic objectives, including its investment
in and transition to electric arc steelmaking; risks relating to
short-term absenteeism affecting production due to reduced
available operations workforce, as well as challenges of
commissioning new technology in an operating mill which, through
delays and other challenges, may impact volumes; the risks
associated with the steel industry generally; and changes in
general economic conditions, including as a result of the COVID-19
pandemic, inflation and the ongoing conflict in Ukraine. The
foregoing list of factors is not exhaustive and readers should also
consider the other risks and uncertainties set forth in the section
entitled “Risk Factors” and “Cautionary Note Regarding
Forward-Looking Statements” in Algoma’s Annual Report on Form 20-F
filed with the SEC (available at www.sec.gov), and the Ontario
Securities Commission (“OSC”) (available under Algoma’s SEDAR
profile at www.sedar.com), and in Algoma’s other public filings
with the SEC and the OSC. Forward-looking statements speak only as
of the date they are made. Readers are cautioned not to put undue
reliance on forward-looking statements, and Algoma assumes no
obligation and does not intend to update or revise these
forward-looking statements, whether as a result of new information,
future events, or otherwise.
Non-IFRS Financial
Measures
To supplement our financial statements, which
are prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board
(“IFRS”), we use certain non-IFRS measures to evaluate
the performance of Algoma. These terms do not have any standardized
meaning prescribed within IFRS and, therefore, may not be
comparable to similar measures presented by other companies.
Rather, these measures are provided as additional information to
complement those IFRS measures by providing a further understanding
of our financial performance from management’s perspective.
Accordingly, they should not be considered in isolation nor as a
substitute for analysis of our financial information reported under
IFRS.
Adjusted EBITDA, as we define it, refers to net
(loss) income before amortization of property, plant, equipment and
amortization of intangible assets, finance costs, interest on
pension and other post-employment benefit obligations, income
taxes, foreign exchange loss (gain), finance income, carbon tax,
changes in fair value of warrant, earnout and share-based
compensation liabilities, transaction costs and share based
compensation related to performance share units. Adjusted EBITDA is
not intended to represent cash flow from operations, as defined by
IFRS, and should not be considered as alternatives to net earnings,
cash flow from operations, or any other measure of performance
prescribed by IFRS. Adjusted EBITDA, as we define and use it, may
not be comparable to Adjusted EBITDA as defined and used by other
companies. We consider Adjusted EBITDA to be a meaningful measure
to assess our operating performance in addition to IFRS measures.
It is included because we believe it can be useful in measuring our
operating performance and our ability to expand our business and
provide management and investors with additional information for
comparison of our operating results across different time periods
and to the operating results of other companies. Adjusted EBITDA is
also used by analysts and our lenders as a measure of our financial
performance. However, Adjusted EBITDA has limitations as an
analytical tool and should not be considered in isolation from, or
as an alternative to, net income, cash flow from operations or
other data prepared in accordance with IFRS. Because of these
limitations, Adjusted EBITDA should not be considered as a measure
of discretionary cash available to invest in business growth or to
reduce indebtedness. We compensate for these limitations by relying
primarily on our IFRS results using Adjusted EBITDA only as a
supplement to such results.
For more information, please
contact:
Michael MoracaTreasurer &
Investor Relations OfficerAlgoma Steel Group Inc.Phone:
705.945.3300E-mail: IR@algoma.com
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