Algoma Steel Provides Guidance for the Quarter Ended December 31, 2024

Rhea-AI Summary

Algoma Steel Group (NASDAQ: ASTL; TSX: ASTL) has provided guidance for Q4 2024, projecting total steel shipments between 545,000 to 550,000 tons and an Adjusted EBITDA range of ($55) million to ($65) million. Despite market headwinds, the company reported solid operational execution, particularly in its plate business.

The company's Electric Arc Furnace project reached a significant milestone with the start of cold commissioning activities. While record snowfall in late November and early December briefly impacted project work, management doesn't expect material delays in achieving first steel production by the end of Q1 2025. The company continues its strategic transformation toward becoming a leading low-carbon steel producer in North America.

Positive

• Plate business showing production improvements
• Electric Arc Furnace project progressing with cold commissioning underway
• On track for Q1 2025 first steel production from new EAF facility

Negative

• Expected Adjusted EBITDA loss of $55-65 million for Q4 2024
• Experiencing market headwinds in steel sector
• Weather-related project delays due to record snowfall

Insights

Financial Analyst

Algoma Steel's Q4 2024 guidance reveals concerning financial metrics, with projected <money>$55-65 million</money> negative Adjusted EBITDA and shipments of 545,000-550,000 tons. These numbers signal significant operational challenges amid difficult market conditions. The negative EBITDA particularly stands out as it indicates the company is struggling with profitability despite maintaining reasonable shipment volumes.

The ongoing Electric Arc Furnace (EAF) transformation represents a substantial strategic pivot, but it's occurring during a challenging period of negative cash flow. While the EAF project promises long-term benefits through reduced carbon emissions and operating costs, the short-term financial strain could pressure the company's balance sheet. The timing of first steel production by Q1 2025 remains important for stemming losses and capturing operational efficiencies.

Think of this as a company going through an expensive home renovation during a period of reduced income - the investment may be necessary for long-term sustainability, but the timing creates near-term financial pressure.

Industry Analyst

The steel sector's current dynamics present a complex backdrop for Algoma's performance. The plate business showing improvement amid broader market headwinds suggests targeted operational efficiency gains, though not enough to offset overall market weakness. The guidance reflects broader industry challenges, including subdued demand and pricing pressures affecting North American steel producers.

The EAF transition positions Algoma at the forefront of the industry's decarbonization trend. While weather-related delays in the EAF project are noteworthy, they appear manageable within the project's timeline. This transformation will significantly impact Algoma's competitive positioning, potentially allowing it to capture premium pricing for low-carbon steel products, particularly as automotive and construction sectors increasingly prioritize green steel.

SAULT STE. MARIE, Ontario, Jan. 02, 2025 (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 provided guidance for its quarter ended December 31, 2024. Unless otherwise specified, all amounts are in Canadian dollars.

Total steel shipments for the quarter are expected to be in the range of 545,000 to 550,000 tons and Adjusted EBITDA is expected to be in the range of ($55) million to ($65) million.

Michael Garcia, Chief Executive Officer of Algoma, commented, "Despite market headwinds, our results for the quarter demonstrated solid operational execution, particularly in our plate business where production continued on its upward trajectory. While macroeconomic uncertainties persist in the steel sector, we remain positioned to capitalize on improving fundamentals as conditions normalize."

"The Electric Arc Furnace project reached a major milestone in the quarter with the commencement of cold commissioning activities, which are accelerating. We encountered record days of snowfall in late November and early December at the site which briefly impacted project work. Our team is working hard on mitigating these impacts and we do not expect any material delay in our plan for first steel production by the end of the first quarter 2025. We continue to make significant progress in our strategic transformation to become one of North America's leading low-carbon steel producers, setting the stage for an exciting 2025."

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. Driven by a purpose to build better lives and a greener future, Algoma is positioned to deliver responsive, customer-driven product solutions to applications in the automotive, construction, energy, defense, and manufacturing sectors. Algoma is a key supplier of steel products to customers in North America and is the only producer of discrete plate products in Canada. Its state-of-the-art Direct Strip Production Complex (“DSPC”) is one of the lowest-cost producers of hot rolled sheet steel (HRC) in North America.

Algoma is on a transformation journey, modernizing its plate mill and adopting electric arc technology that builds on the strong principles of recycling and environmental stewardship to significantly lower carbon emissions. Today Algoma is investing in its people and processes, working safely, as a team to become one of North America's leading producers of green steel.

As a founding industry in their community, Algoma is drawing on the best of its rich steelmaking tradition to deliver greater value, offering North America the comfort of a secure steel supply and a sustainable future 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 expected total steel shipments and Adjusted EBITDA, improving market fundamentals and Algoma’s ability to capitalize on market conditions, Algoma’s transition to electric arc furnace (EAF) steelmaking, including the timing thereof and expectation for first steel production in the first quarter of 2025, Algoma’s overall expectations for 2025, Algoma’s future as a leading producer of green steel, Algoma’s modernization of its plate mill facilities, transformation journey, ability to deliver greater and long-term value, ability to offer North America a secure steel supply and a sustainable future, and investment in its people, and processes. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “design,” “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. Readers should also consider the other risks and uncertainties set forth in the section entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Information” in Algoma’s Annual Information Form, filed by Algoma with applicable Canadian securities regulatory authorities (available under the company’s SEDAR+ profile at www.sedarplus.com) and with the SEC, as part of Algoma’s Annual Report on Form 40-F (available at www.sec.gov), as well as in Algoma’s current reports with the Canadian securities regulatory authorities and SEC. 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 gain, finance income, inventory write-downs, carbon tax, changes in fair value of warrant, earnout and share-based compensation liabilities, transaction costs, share-based compensation, and past service costs related to pension benefits and post-employment benefits. 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.

For more information, please contact:

Michael Moraca
Vice President – Corporate Development and Treasurer
Algoma Steel Group Inc.
Phone: 705.945-3300
E-mail: IR@algoma.com

FAQ

What is Algoma Steel's (ASTL) projected shipment volume for Q4 2024?

Algoma Steel projects total steel shipments between 545,000 to 550,000 tons for Q4 2024.

What is ASTL's expected Adjusted EBITDA for Q4 2024?

Algoma Steel expects Adjusted EBITDA to be in the range of ($55) million to ($65) million for Q4 2024.

When is Algoma Steel's (ASTL) Electric Arc Furnace expected to begin production?

The Electric Arc Furnace is expected to begin first steel production by the end of the first quarter 2025.

What challenges did ASTL face in their EAF project during Q4 2024?

The project faced brief delays due to record snowfall in late November and early December 2024.

How is Algoma Steel's (ASTL) plate business performing?

The plate business is showing solid operational execution with production continuing on an upward trajectory.