Algoma Steel Group Reports Fiscal 2023 First Quarter Results
Algoma Steel Group reported a first quarter fiscal 2023 revenue of $934.1 million, marking an 18.4% increase from $789.1 million year-over-year. Net income rose to $301.4 million or $1.49 per diluted share, although EPS decreased from $2.84 due to a higher share count post-merger. The company has advanced its electric arc furnace project, expected to reduce carbon emissions by 70%, and completed a $400 million share repurchase, securing 28% of its outstanding shares. Shipments decreased by 11.9% to 537,524 tons.
- Revenue increased by 18.4% to $934.1 million year-over-year.
- Net income rose to $301.4 million, reflecting strong operational performance.
- Adjusted EBITDA improved to $357.7 million, with a margin of 38.3%.
- Completed a $400 million substantial issuer bid, repurchasing approximately 28% of outstanding shares.
- Electric arc furnace project is on track for a 2024 startup, aiming for 70% reduction in carbon emissions.
- Net income per share decreased to $1.49, down from $2.84 due to increased share count.
- Shipments decreased by 11.9% to 537,524 tons compared to prior year.
Solid Revenue, Operational and Free Cash Flow Performance
Electric Arc Furnace Construction Advancing as Planned
Repurchased US
SAULT STE. MARIE, Ontario, Aug. 03, 2022 (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, 2022.
Unless otherwise specified, all amounts are in Canadian dollars.
Business Highlights and Fiscal 2023 to Fiscal 2022 First Quarter Comparisons
- Consolidated revenue of
$934.1 million , up18.4% from$789.1 million in the prior-year quarter. - Consolidated income from operations of
$328.9 million , compared to$252.2 million in the prior-year quarter. - Net income of
$301.4 million , or$1.49 per diluted share, compared to$203.6 million , or$2.84 per diluted share in the prior-year quarter. - Adjusted EBITDA of
$357.7 million and Adjusted EBITDA margin of38.3% , compared to$280.8 million and35.6% in the prior-year quarter (see “Non-IFRS Measures” below). - Cash flows generated from operations of
$276.6 million , compared to$121.1 million in the prior-year quarter. - Shipments of 537,524 tons, compared to 610,057 tons in the prior-year quarter.
- Paid quarterly dividend of US
$0.05 /share. - Completed US
$400 million Substantial Issuer Bid (“SIB”) in July, resulting in a repurchase of approximately27.9% of shares issued and outstanding at the time that the SIB was commenced. - In July, the Company and United Steelworkers Local 2724, the union representing Algoma’s technical, professional and front-line supervisory employees, successfully entered into a new labour agreement.
- In July, the Company and the Negotiating Committee of United Steelworkers Local 2251, the union representing Algoma’s hourly employees, agreed to a 15-day extension beyond the original July 31, 2022 expiry for the purposes of finalizing a new labour agreement.
Michael Garcia, the Company’s Chief Executive Officer, commented, “The momentum we established in fiscal 2022 continued with another quarter of strong results in what has been a volatile operational environment. We delivered year-over-year improvement in revenue and adjusted EBITDA even as we undertook a significant planned outage to upgrade our plate mill facility. Our results continue to reflect our differentiated execution, along with the hard work and dedication of the entire Algoma team.”
Mr. Garcia continued, “This summer has been a busy time for Algoma. The construction of our transformative electric arc furnace project continues on budget and on time towards a targeted startup in 2024. At the same time, the first of our two-phase plate mill modernization project was completed and is ramping up during the third calendar quarter of this year. In July we significantly advanced our capital allocation program by repurchasing approximately
“Our discussions with United Steelworkers Local 2251 regarding a new labour agreement are ongoing, and the recent 15-day extension of those talks demonstrates the willingness and desire of both sides to reach a fair and equitable agreement. We are operating the facilities normally while these talks continue and look forward to working together as we advance our collective strategy of becoming one of North America’s leading producers of green steel.”
First Quarter Fiscal 2023 Financial Results
First quarter revenue totaled
Average realized price of steel net of freight and non-steel revenue was
Income from operations was
Net income in the first quarter was
Adjusted EBITDA in the first quarter was
Substantial Issuer Bid (Share Repurchase)
On July 27, 2022, the Company completed a US
Normal Course Issuer Bid (Share Repurchase)
On March 3, 2022 the Company announced the commencement of a normal course issuer bid (“NCIB”) after receiving approval from the Toronto Stock Exchange, authorizing the Company to acquire up to a maximum of 7,397,889 shares, or
Electric Arc Furnace
In November 2021, the Board of Directors authorized the Company to construct two new state-of-the-art electric arc furnaces (“EAF”) to replace its existing blast furnace and basic oxygen steelmaking operations. The
Quarterly Dividend
The Company’s board of directors has declared a regular quarterly dividend in the amount of US
Conference Call and Webcast Details
A webcast and conference call will be held on Thursday, August 4, 2022 at 11:00 a.m. Eastern Time to review the Company’s fiscal first quarter results, discuss recent events, and conduct a question-and-answer session.
The live webcast and archived replay of the conference call can be accessed on the Investors section of the Company’s website at www.algoma.com. For those unable to access the webcast, the conference call will be accessible domestically or internationally by dialing 877-425-9470 or 201-389-0878, respectively. Upon dialing in, please request to join the Algoma Steel First Quarter Conference Call. To access the replay of the call, dial 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 13731533.
Consolidated Financial Statements and Management's Discussion and Analysis
The Company's unaudited condensed interim consolidated financial statements for the three months ended June 30, 2022, and Management's Discussion & Analysis thereon are available under the Company’s profile on the Securities and Exchange Commission’s (“SEC”) EDGAR website at www.sec.gov and under the Company's profile on SEDAR at www.sedar.com.
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 strategic objectives, its expectation to pay a quarterly dividend, Algoma’s ability to reach agreements with labour unions and potential purchases under the NCIB. 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 EAF ; 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; and the risk of being unable to reach an agreement with United Steelworkers Local 2251 in the time required or at all. 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” inAlgoma’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, restructuring costs, impairment reserve, foreign exchange loss (gain), finance income, carbon tax, changes in fair value of warrant, earnout and share-based compensation liabilities, transaction costs, share based compensation related to performance share units and business combination adjustments. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue for the corresponding period. 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. In addition, we consider Adjusted EBITDA margin to be a useful measure of our operating performance and profitability across different time periods that enhance the comparability of our results. However, these measures have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, net income, cash flow from operations or other data prepared in accordance with IFRS. Because of these limitations, such measures should not be considered as measures 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 such measures only as supplements to such results. See the financial tables below for a reconciliation of the non-IFRS financial measures reported herein.
About Algoma Steel Group 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.
| Algoma Steel Group Inc. Condensed Interim Consolidated Statements of Financial Position (Unaudited) | ||||||
| As at, | June 30, 2022 | March 31, 2022 | ||||
| expressed in millions of Canadian dollars | ||||||
| Assets | ||||||
| Current | ||||||
| Cash | $ | 1,136.9 | $ | 915.3 | ||
| Restricted cash | 3.9 | 3.9 | ||||
| Taxes receivable | 2.7 | - | ||||
| Accounts receivable, net | 324.1 | 402.3 | ||||
| Inventories, net | 637.7 | 480.0 | ||||
| Prepaid expenses and deposits | 92.7 | 79.9 | ||||
| Margin payments | - | 29.5 | ||||
| Derivative financial instruments | 8.9 | - | ||||
| Other assets | 5.8 | 5.6 | ||||
| Total current assets | $ | 2,212.7 | $ | 1,916.5 | ||
| Non-current | ||||||
| Property, plant and equipment, net | $ | 854.5 | $ | 773.7 | ||
| Intangible assets, net | 1.2 | 1.1 | ||||
| Other assets | 2.1 | 2.3 | ||||
| Total non-current assets | $ | 857.8 | $ | 777.1 | ||
| Total assets | $ | 3,070.5 | $ | 2,693.6 | ||
| Liabilities and Shareholders' Equity | ||||||
| Current | ||||||
| Bank indebtedness | $ | 0.3 | $ | 0.1 | ||
| Accounts payable and accrued liabilities | 764.5 | 261.9 | ||||
| Taxes payable and accrued taxes | 162.0 | 64.3 | ||||
| Current portion of other long-term liabilities | 0.4 | 0.4 | ||||
| Current portion of governmental loans | 10.0 | 10.0 | ||||
| Current portion of environmental liabilities | 4.3 | 4.5 | ||||
| Derivative financial instruments | - | 28.8 | ||||
| Warrant liability | 63.9 | 99.4 | ||||
| Earnout liability | 18.7 | 22.7 | ||||
| Share-based payment compensation liability | 37.2 | 45.4 | ||||
| Total current liabilities | $ | 1,061.3 | $ | 537.5 | ||
| Non-current | ||||||
| Long-term governmental loans | $ | 85.0 | $ | 85.2 | ||
| Accrued pension liability | 180.2 | 118.1 | ||||
| Accrued other post-employment benefit obligation | 210.2 | 239.8 | ||||
| Other long-term liabilities | 4.0 | 4.0 | ||||
| Environmental liabilities | 34.4 | 33.5 | ||||
| Deferred income tax liabilities | 104.2 | 92.9 | ||||
| Total non-current liabilities | $ | 618.0 | $ | 573.5 | ||
| Total liabilities | $ | 1,679.3 | $ | 1,111.0 | ||
| Shareholders' equity | ||||||
| Capital stock | $ | 931.4 | $ | 1,378.0 | ||
| Accumulated other comprehensive income | 199.8 | 152.0 | ||||
| Retained earnings | 282.3 | 77.8 | ||||
| Contributed deficit | (22.3 | ) | (25.2 | ) | ||
| Total shareholders' equity | $ | 1,391.2 | $ | 1,582.6 | ||
| Total liabilities and shareholders' equity | $ | 3,070.5 | $ | 2,693.6 | ||
| Algoma Steel Group Inc. Condensed Interim Consolidated Statements of Net Income (Unaudited) | |||||
| Three month periods ended | June 30, 2022 | June 30, 2021 | |||
| expressed in millions of Canadian dollars, except for per share amounts | |||||
| Revenue | $ | 934.1 | $ | 789.1 | |
| Operating expenses | |||||
| Cost of sales | $ | 576.8 | $ | 510.2 | |
| Administrative and selling expenses | 28.4 | 26.7 | |||
| Income from operations | $ | 328.9 | $ | 252.2 | |
| Other (income) and expenses | |||||
| Finance income | $ | (1.9 | ) | ||
| Finance costs | 4.7 | 15.1 | |||
| Interest on pension and other post-employment benefit obligations | 3.4 | 2.9 | |||
| Foreign exchange (gain) loss | (11.7 | ) | 10.0 | ||
| Transaction costs | - | 2.9 | |||
| Change in fair value of warrant liability | (38.4 | ) | - | ||
| Change in fair value of earnout liability | (4.1 | ) | - | ||
| Change in fair value of share-based compensation liability | (9.4 | ) | - | ||
| $ | (57.4 | ) | $ | 30.9 | |
| Income before income taxes | $ | 386.3 | $ | 221.3 | |
| Income tax expense | 84.9 | 17.7 | |||
| Net income | $ | 301.4 | $ | 203.6 | |
| Net income per common share | |||||
| Basic | $ | 1.98 | $ | 2.84 | |
| Diluted | $ | 1.49 | $ | 2.84 | |
| Algoma Steel Group Inc. Condensed Interim Consolidated Statements of Cash Flows (Unaudited) | ||||||
| Three month periods ended | June 30, 2022 | June 30, 2021 | ||||
| expressed in millions of Canadian dollars | ||||||
| Operating activities | ||||||
| Net Income | $ | 301.4 | $ | 203.6 | ||
| Items not affecting cash: | ||||||
| Amortization of property, plant and equipment and intangible assets | 22.6 | 20.7 | ||||
| Deferred income tax expense (benefit) | (0.6 | ) | 17.7 | |||
| Pension expense in excess of funding (pension funding in excess of expense) | (0.3 | ) | (7.3 | ) | ||
| Post-employment benefit funding in excess of expense | (2.1 | ) | (1.6 | ) | ||
| Unrealized foreign exchange loss (gain) on: | ||||||
| accrued pension liability | (4.0 | ) | 3.0 | |||
| post-employment benefit obligations | (7.3 | ) | 4.3 | |||
| Finance costs | 4.7 | 15.1 | ||||
| Interest on pension and other post-employment benefit obligations | 3.4 | 2.9 | ||||
| Accretion of governmental loans and environmental liabilities | 3.1 | 3.0 | ||||
| Unrealized foreign exchange loss (gain) on government loan facilities | (2.9 | ) | 1.2 | |||
| Decrease in fair value of warrant liability | (38.4 | ) | - | |||
| Decrease in fair value of earnout liability | (4.1 | ) | - | |||
| Decrease in fair value of share-based compensation liability | (9.4 | ) | - | |||
| Other | (1.4 | ) | 0.9 | |||
| $ | 264.7 | $ | 263.5 | |||
| Net change in non-cash operating working capital | 12.2 | (141.9 | ) | |||
| Environmental liabilities paid | (0.2 | ) | (0.5 | ) | ||
| Cash generated by operating activities | $ | 276.6 | $ | 121.1 | ||
| Investing activities | ||||||
| Acquisition of property, plant and equipment | ($ | 80.1 | ) | ($ | 19.1 | ) |
| Cash used in investing activities | ($ | 80.1 | ) | ($ | 19.1 | ) |
| Financing activities | ||||||
| Bank indebtedness advanced (repaid), net | $ | 0.2 | ($ | 86.9 | ) | |
| Repayment of term loans | - | (3.4 | ) | |||
| Repayment of governmental loans | (2.5 | ) | - | |||
| Interest paid | (0.1 | ) | (10.7 | ) | ||
| Common shares repurchased and cancelled | (3.7 | ) | - | |||
| Cash used in financing activities | ($ | 6.1 | ) | ($ | 101.0 | ) |
| Effect of exchange rate changes on cash | $ | 31.2 | ($ | 0.3 | ) | |
| Cash | ||||||
| Increase in cash | 221.6 | 0.7 | ||||
| Opening balance | 915.3 | 21.2 | ||||
| Ending balance | $ | 1,136.9 | $ | 21.9 | ||
| Algoma Steel Group Inc. Reconciliation of Net Income to Adjusted EBITDA | |||||||
| millions of dollars | Three months ended June 30, 2022 | Three months ended June 30, 2021 | |||||
| Net income | $ | 301.4 | $ | 203.6 | |||
| Amortization of property, plant and equipment and amortization of intangible assets | 22.6 | 20.7 | |||||
| Finance costs | 4.7 | 15.1 | |||||
| Interest on pension and other post-employment benefit obligations | 3.4 | 2.9 | |||||
| Income taxes | 84.9 | 17.7 | |||||
| Foreign exchange (gain) loss | (11.7 | ) | 10.0 | ||||
| Finance income | (1.9 | ) | - | ||||
| Inventory write-downs (amortization on property, plant and equipment in inventory) | 0.3 | ||||||
| Carbon tax | 3.0 | (0.6 | ) | ||||
| Decrease in fair value of warrant liability | (38.4 | ) | - | ||||
| Decrease in fair value of earnout liability | (4.1 | ) | - | ||||
| Decrease in fair value of share-based payment compensation liability | (9.4 | ) | - | ||||
| Transaction costs | - | 2.9 | |||||
| Share-based compensation | 2.9 | 8.5 | |||||
| Adjusted EBITDA (i) | $ | 357.7 | $ | 280.8 | |||
| Net income Margin | 32.3 | % | 25.8 | % | |||
| Net income / ton | $ | 560.69 | $ | 333.67 | |||
| Adjusted EBITDA Margin (ii) | 38.3 | % | 35.6 | % | |||
| Adjusted EBITDA / ton | $ | 665.46 | $ | 460.34 | |||
| (i) See "Non-IFRS Financial Measures" in this Press Release for information regarding the limitations of using Adjusted EBITDA. | |||||||
| (ii) Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue. | |||||||
For more information, please contact:
Michael Moraca
Treasurer & Investor Relations Officer
Algoma Steel Group Inc.
Phone: 705.945.3300
E-mail: IR@algoma.com
FAQ
What were Algoma Steel's revenue and net income for the first quarter of fiscal 2023?
How did the share repurchase impact Algoma Steel's outstanding shares?
What is the current status of Algoma Steel's electric arc furnace project?
What were Algoma Steel's earnings per share (EPS) for Q1 fiscal 2023?
How much did Algoma Steel's shipments change compared to the previous year?
