Algoma Steel Group revenue declines in its fiscal Q2, posts consolidated loss

Ontario-based Algoma Steel Group Inc., a producer of hot- and cold-rolled steel sheet and plate products, has announced results for its fiscal second quarter, ended Sept. 30, that include consolidated revenue of CA$600.3 million ($431.9 million) less than the CA$732.6 million ($527.1 million) the company reported for the prior-year quarter, mainly attributable to lower steel shipments (520,443 tons versus 548,998 tons) and realized prices. The company also posted a consolidated loss from operations of CA$83.6 million ($60.15 million) compared with income of CA$36.8 million ($26.48 million) in the prior-year quarter and a net loss of CA$106.6 million ($76.7 million) compared with net income of CA$31.1 million ($22.38 million) year over year.

Algoma also reported on the progress of its transformation to EAF steelmaking.

The company will begin commissioning its electric arc furnace (EAF) project, which involved replacing its existing blast furnace and basic oxygen steelmaking operations with two new EAFs, in the fourth quarter of the 2024 calendar year. Steel production is expected by the end of the first quarter of 2025.

“Our project team has worked tirelessly alongside our vendors, including equipment providers and subcontractors, to secure substantially all remaining budgeted items, significantly reducing remaining project budget risk,” CEO Michael Garcia says. “Our contracted commitments now total approximately CA$870 million ($625.9 million) and, as we move closer to completion of both EAFs, we anticipate the completion of the remaining contracts, including those structured as time and materials, within 5 percent of the upper end of our previously announced budget range.”

Garcia says Algoma’s EAF project is eligible for Ontario’s Ministry of the Environment, Conservation and Parks Emissions Performance Program. “Under this program, Algoma has applied for, and expects to receive, reimbursement for carbon taxes paid since 2022, driving down the net cash costs of the EAF project.”

He adds, “We remain on target to achieve steel production at the first EAF by the end of the first quarter 2025, positioning us among North America’s greenest steel producers as we seek to deliver enhanced long-term shareholder value.”

Following the transformation to EAF steelmaking, Algoma anticipates it will have annual raw steel production capacity of approximately 3.7 million tons, matching its downstream finishing capacity of more than 3 million tons, which is expected to reduce its annual carbon emissions by approximately 70 percent.

“Our fiscal second quarter results reflect solid operational performance in the face of persistent market headwinds, allowing us to deliver shipments and adjusted EBITDA within our previous guidance ranges,” Garcia says. “Despite challenging market conditions, our planned ramp up in plate production following completion of our plate mill modernization project continued in the quarter, and the associated benefits from a greater mix of value-added products helped offset a steep decline in steel prices.”

The company’s average realized price of steel net of freight and nonsteel revenue was CA$1,036 ($745) per ton in the recently completed quarter compared with $1,213 ($873) per ton in the prior-year quarter. The cost per ton of steel products sold was CA$1,032 ($743) compared with CA$1,021 ($735) in the prior-year quarter.

Steel revenue was CA$539 million ($387.8 million) compared with CA$665.8 million ($479.02 million), and revenue per ton of steel sold was CA$1,153 ($830) compared with CA$1,334 ($960).

Algoma attributes its loss from operations to lower steel shipments, greater consumption of purchased coke and weakening market conditions, which were partially offset by improvements in value-add products as a percentage of sales mix.

Fiscal second-quarter adjusted EBITDA was positively affected by CA$28.1 million ($20.22 million) as a result of receipt of insurance proceeds of CA$32.1 million ($23.1 million) offset by costs of CA$4 million ($2.9 million) associated with the January 2024 outage resulting from the collapse of a utility corridor supporting the steelworks.

Algoma’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled CA$3.5 million ($2.52 million), with an adjusted EBITDA margin of 0.6 percent. Those figures compare with CA$81 million ($58.3 million) and 11.1 percent in the prior-year quarter.

The company’s cash flow generated from operations totaled CA$25.5 million ($18.3 million), less than half of the CA$57.2 million ($41.2 million) generated in the prior-year quarter.

Algoma will pay a quarterly dividend of 5 cents per share Dec. 27 to holders of record of the company’s common shares as of the close of business Nov. 27.

Algoma’s board of directors has approved a change in the company’s fiscal year end from March 31 to Dec. 31. This change is being made to better align Algoma’s reporting calendar with other companies in the industry. Algoma’s current fiscal year will end Dec. 31, 2024, resulting in a nine-month reporting period from April 1 to Dec. 31. The company says it plans to provide reclassified historical financial information in the first quarter of 2025 to assist investors in evaluating the impact the change in fiscal year will have on the reported annual operating results for the years ending Dec. 31, 2023, and 2024.