Algoma Steel (ASTL) 7 Feb 242024 Q3 Earnings call transcript

Hello, and welcome to today's conference call to discuss Algoma Steel's Fiscal Third Quarter 2024 Financial Results. My name is Paul, and I'm your operator for today's call. At this time, I'd like to hand the call over to Mike Moraca Treasurer and Investor Relations Officer for Algoma. Mr. Maraca.

welcome Earnings Steel Conference and Quarter Inc.'s everyone, XXXX Fiscal Call. morning, to Group, Algoma Third Good Leading today's call Officer; and are Michael Garcia, Marwah, Chief our our Financial Officer. Rajatt Chief Executive

inherent today's and this remind the which is replay reminder, you today made on Investors website Steel's statements the of call in made would and and at meaning involve a applicable As www.algoma.com. later being comments recorded I available forward-looking will call from for Algoma within corporate may section results that statements be Actual laws, like of securities assumptions materially may risks uncertainties. contain differ today. made to

In evening, currency. XXXX today's Algoma Analysis. everyone prepared Third prepared which to of to earnings and includes would call addition, financial using our corporate accordance accompany risks references the in mind, U.S. we presentation on as read functional ask and With Canadian legal dollar found to statements non-IFRS presentation to in slides our The of section outlined discussion are to accompanying X currency with Please the can earnings assumptions note prepared in the Slide that call financial I measures. today as the be and fiscal the and on posted Quarter differs also in presentation disclaimers Management certain that our an statements Last today's Discussion refer IFRS, GAAP, Steel's our our the U.S. dollar today's for financial are remarks. from and website. our Investors

been X XXXX. X XX, otherwise noted. to and months runs ended year unless all our dollars are prepared referred Please Canadian financial on amounts note, X fiscal XX, to Our today's in have and statements December April the for call March from

Following call a Michael to Mike? will remarks, the Garcia. will we turn Executive over question-and-answer Chief our conduct I now session. our Officer, prepared

our discuss us results. thank fiscal Good you morning, to you, for and Mike. third Thank joining quarter

we unwavering our of I'll to to an a which uphold injury safety, priority, is customary, performance year-to-date. improvement At the highlighting in start safety by commitment notable As time lost resulted top Algoma, our employees. has

site our significance bustling contractor our pursuit steadfast injuries. crucial progresses in as safety, project EAF involvement. the to of of increasing particularly X underscore with We remains with it's While remain activity, our workplace

strong the and numbers like would and key across cover market Ascent to the I'll as milestones turn balance over Next, update deeper liquidity and few as project. then important will closing an call this progress our on subsequent EAF sheet get to give well with quarter our are of into during at a conditions. dive I before our discussion things on and There a third the fiscal events on call. update transformative an I for Roger to

Our on to greenest transition long-term strategy of steel. the track producers and successfully North being America's to execute unchanged remains one of

Our in with results for expectations. the quarter comfortably line our were

markets end calendar facilities structure our possible are reaching for quickly finally, goal coke-making pricing with utility full as improvement year as back relative safely and an in And outlook calls the of production following XXXX. to collapse. Our a online the for

me let color you on Now those key some themes. give additional

key in both were fiscal metrics. we for shipments with XXXX previously the results of guidance all disclosed adjusted nearly in of improvements year-over-year line quarter achieved our Our third and on EBITDA, and our

of our realized outage As the caused results coke-making did to impacts offset pricing plan stronger Due ahead will planned to completed fourth maintenance, in months. which I incident related a be begin the our benefiting included by winter That expected fiscal in strike. largely discuss at yet markets reflect in UAW unfortunately shortly. more nature of the of our as detail the major that the quarter, order was financial our seasonal the book, pricing is quarter fiscal the the lagging quarter around not reminder, run-up by will to third which in the end

Our seasonal and work no totality, was in was year of fiscal completed as maintenance, is a exception. In typically terms this busy third one planned. the quarter

built also the seasonal year. for calendar We of end our the going inventories practice normal into

online additional the year. production in-line project, up Phase During of the bringing the quarter, plate made including we its X progress of the through our on mill end modernization ramping share and

us We project. plate for to of to outages production the pieces which inventory build ahead the modernization and higher capture expect opportunities of forward, going final the market planned the allow levels will of of implementation

into the split have year we outage first on some and calendar planned outage late April XXXX to maintenance for in duration reminder, outages other with originally XX-day outage shorter providing the activities, efficiencies planned a X planned align As downtime. scheduled with the second

X/X capacity Next, by conventional update I'd EAF today X.X capacity tons higher employing the completion. capacity or furnaces from our finishing increase capacity tons match steelmaking million liquid electric means increase Art EAF we progress project. ultimately expanded during our like transformational quarter our roughly of to at our year to throughput you per as on X.X mill. will downstream the on will dual The by upon million output The plate

the emissions operations, in XX% to When when supply, We operational. by of improve be overall mix America. factoring the EAF in producers one power lower will to when product approximately expect and makeup North of our steel of switch greenest carbon we we our fully

is investment the totaling in To in contracts quarter, date, and reached contracts, have with project fixed tied nature. we EAF cumulative approximately $XXX committed the price time $XXX million. million X% to approximately while the balance During material

the the year progress We late the end budget project expect the quarter. EAF elements by project current towards This as will of the of commissioning expected we majority derisk XXXX. in significantly remaining contract our to calendar

EAF to up calendar steelmaking As to existing our ramping production production. switch by a reminder, while start-up followed a complete include normal year from from EAFs continues production plan facility our steel our in XXXX,

you Rajat, it operations hand over an give I currently. on Before let me our to update

a the were that XX, on we but hand, impact other are disclosed able January on all we time partial batteries of service and the making collapse did to the to Thankfully, steel incident, utilities no throughout supporting incident capabilities, production plant. partial and resume availability works. within of event needs coke batteries repair X previously plan our of raw our of coke at there that our pursuing Bok and hours the the material coke while we at able at was facilities utilities the an satisfy of all time factoring stabilize steelmaking are XX the there January permanent plant in for same structure coke-making input incident. involved several coke heat XX to piping. suspended a When and and operations inventories were production the third-party the injuries, As the

of upon As furnace at reasons. previously challenges experienced has safety the also the All operational to for related The repairs of and been restart we collapse. unforeseen time the the completed, necessary furnace incident, disclosed operations and piping furnace impacts anticipated to is blast blast furnace a due temporarily we blast initial to these suspended employees gradually weeks. the X will metal forefront. hot importantly, days X being produced community the full brought back at undertake to be online. with to our Most we with the safety the our production next within within is recovery efforts the return Usable next expected

project of again to doing on schedule. continue dedication this, advance all work, thank to employees hard for EAF I'd the While and like once our professionalism. we their

Now to Rajat? pass call Rajat financial will our the to for I over results over go the quarter.

morning, you for joining all Good and thank call. the Mike. Thanks,

as Canadian dollars, in expressed are year numbers in all to compared tons period. XXX,XXX shipped unless up reminder, XX.X% a quarter, As noted. prior We the otherwise the

quarter In market Our prior sales year primarily and our the steelmaking decrease down realization ran lagging from well normal averaged X.X% The plate lower coil particular, Steel line. reflects and Plate by the Net to to significant the the our spending of operations in in a on resulting we strike quarter during enjoy that nature a durables. even CADXX.XX infrastructure from softer than demand, per realizations driven reflecting to quarter, more prices year, resilient the strip totaled completed somewhat year the steel. maintenance, seasonal prior book. revenue of the versus and X.X% last tonne UAW quarter up same average per the order increase versus residual shipments CADXXX.X vessel in in level premium versus including relative hot lower annual particularly due offset the continued the a projects as million, conditions period. of rolled quarter. pricing tonne, the

volumes. period. cost tonne year is the year averaged in Algoma's compared leverage negative of margin operations and versus on sold EBITDA in steel adjusted primarily from used the adjusted Cash per of This The period. On the cost in and prior million in CADXX.X XX.X% down X.X% period products million an year favorable EBITDA the CADX prior quarter prior a year-ago negative higher the negative versus CADXXX.X million negative CADXX.X decrease totaled of side, quarter million quarter, of in resulted CADXX to for period. attributable the X.X%, the use XX improvement in to the

that inventories CADXXX.X end typically ore winter. towards weighted to some coke-making in of release. Our and of build inventory calendar We patterns in result of impact due inventories incident the the quarter, of first higher levels inventory the were anticipated million, delaying would heavily ahead up like release XXXX, at calendar inputs plant first the during quarter to expect quarter seasonal X.X% the of will half but normal the for coal,

the utility Algoma tonnes and intended coverage versus fourth expect totaling will noted at impacted we directionally by collapse. is standard to impact business the the experience X fiscal EBITDA XXX,XXX Earnings structure XXX,XXX production should to expect be that insurance fiscal company weeks, All the prospectively, protect tonnes. times than like Looking higher do related shipments told, incident for outage including these, to carries obviously we quarter performance the interruption be quarter. to production the third that insurance. to It more roughly

for We claims losses advisers covered have who the ensuring [indiscernible]. of in process site submitting on and under adjusters and policy were our begun

protection. closely working secure with are to them We our

over operational million than funding would timing of provide quarter. year and collapse outages, recreation releasing CADXXX a issue related balance in to the over on of plans approximately front of we had we working From by to mutate CADXXX call account in mentioned capital million We million coke-making previous CADXXX quarter that end less more with to the the our fourth of on approximately and project. have the I capital period. the release we result originally of to this On details working us total expect expect to to quarters, coming of will release months. expect in we expected amount the fiscal this release structure like subsequent fiscal expect in still drawdown the This XXXX. perspective, fourth XX% our fiscal a a for XXXX the

previously leaving our million. of As the the cost remains CADXXX range the million the of in we spent for XX% CADXXX total CADXXX noted, of project expected end to total, outlook million of or had demand. quarter, investment the of million CADXXX Through

look those We the we are today expected well at sources positioned course expenditures over when XXXX. for of our

only such we in initiatives. balance projects, our linked us to million goverment leverage through CADXXX our and sheet capital the structured that have We of quarter manage complete fluctuation at allowing is profile. the liquidity market of our capital form end to long-term low maintain The loans dental nearly debt to carry very a

capital project, working We have million to the approximately from nearly now capacity call cash of comments. back federal this down metal CADXXX the another advance closing our projects million excess on of available CADXX capital for Combined, expected our like be and this SIP CADXX as subtle to Mike? to Garcia loan working million, months the to highlighting generated ahead. cash matches our hand in transform I'd to on complete requirements planned. the Michael turn CEO, ability of

Thank you, Rajat.

prices in the the the became consumers higher to North steel as in settlement October apparent index replenish American hot-rolled at the Looking coil rushed steel and of UAW their market, inventory strike state dramatically moved needs.

XXXX has fourth futures mid-$XXX net index the year. average to ton Pricing and of nearly far $X,XXX Over range the falling per per come touch $XX ton into by approximately in quarter, end pricing with mid-$XXX the of balance from dropping the by for in prices so moved the XXXX. calendar the

these prices meaningful highs, While levels from during year-end off much of a improvement represent seen XXXX. still from

the of the benefit you of next overall our the continues green future foundation turn, forefront This as plate that the long-term products remains in plate of Steel. also As price project. position we demonstrate Operator, production in be will for Algoma especially our work please we to significant realizations, At high. very our your supported XXXX will in creation to value mill. we we are leadership EAF transformative provides that defines plate our This, the important the continue your as commissioning phase the ramp an of for premium up our towards by our story stakeholders questions. be fact steel solidifies mentioned, year to a would pricing demand average for this in continues interest for Algoma in session. Raj Algoma the operations at North execute as and America. for give take Q&A company point, in Thank usher instructions happy the much continued to of

Instructions] from Securities. Cormark David is Our question first with [Operator Ocampo

about little even a the there. always a for you facility guys just EAF the furnace, is when that XXXX? issues of on being cost? on I'm think to down furnace question. My a Or first your picture happened you one just does bit discussed either to curious tune and you your towards pure-play you that come and Coke being bigger there. on to ultimately thoughts it I blast change the guess at When what a decide throwing going operator blast is or guys just hybrid in look have your XXXX, tilting

our David, plan mode. some And keep hybrid as on plan I makes continue this close Mike. been now, sense as eye financial a very think financials That's that. is as Yes, the it the XXXX in to remains well. operate obviously, for right -- to a that in think we will right well still time

this make nothing it on of analysis, comfortable as to, and one past or well X our lot and the a incident assuming and in either prominently of both we'll asset the the the -- significantly current furnace, perspectives weeks, ovens. very asset of which we integrity But we're understand coke state changes comfortable in but asset the sure integrity plan the with as to the assets with attention our we blast have those pay features Given plan. feel reliability of

is bottle? how a early the manufacturing Got about Is cost Or for dual one Rajat, it cost should maybe And structure it. days, guys structure or you plus cost when this what with the costs just are added thinking a hybrid process. type a maybe and we operator? will be be but dual curious

people past, facility. additional the most that is be perspective, we more your from way becomes becomes manning using which operating indicated look furnace. at blast of And the XXX, best XXX through to arc electric we form it it it as in carry of fixed rest, The David. is in furnace which metal the will probably an cost. facility, variable the the metal electric using will Hawk And or in

maintenance the added not as is it's far as cost much as will be and fixed is the new cost it a asset. So concerned, that

start it. start And transition It down and costs shutting to it are facilities, expect reducing we go don't coming be we facilities through and on those as start higher the we the transitioning. cost we higher So will definitely down. fixed be as substantially as will the

last it. from one And Rajat. Got me,

some as it on was hoping You on and I plans, of the you CapEx up year, could for that. the to capital broken down maintenance, this at square layering EAF gave the by relates least the plate then top modernization total EAF.

you're So talking fiscal? year, XXXX when this you of say

'XX guess, calendar. I

calendar. 'XX

should in be much pretty So yes, line.

It's spending And So from $XXX roughly this will maintenance. million we maintenance gross $XXX-odd spending. that million on on be we'll CapEx not EAF be a $XXX it will and spending CapEx, on million is that to roughly should be we then perspective be CapEx our our net.

So your total. that's

form run. There of that part analysis on and the project. along first insurance, -- whole batteries, will the on the that is the recovery will which some is plate be are addition. with a coal will we money be the will spent doing in complete how there to that that's quarter CapEx of which definitely mill platelet later with And little bit spent Now in CapEx but

question BMO Jancic Our is Katja Markets. with from Capital next

First, XQ? confirm, sequentially in to to be you EBITDA just do expect higher

correct. That's

and there pricing? cost there? is And be that's puts any Or going by to driven mostly takes

variable mostly fixed be perspective, from pricing. will definitely pricing will It on coming a be similar. depending be from pretty cost cost, volume higher, it's but will cost the mostly And

this lost currently does weeks right? production, X assumes And of

Yes, of XXX,XXX and roughly shipment. tonnes production to XXX,XXX

on maybe the risk full blast And a needing that there just close a complicates furnace. the It's to reline. Is that, restart?

No, This not is Mike. really.

state restarted to I coke disruption bringing are the don't back at incident last incident happened metal. think the factor reline good utility slowly the that we're Does think since making. blast was time that and the really it making it metal. once is more to We've related back that furnace help? we'll the a or into get good that it to I the service

with question Our Ian is Stifel. next Gillies from

you year -- reconfirm be, working on fiscal release. $XX $XXX to call suggesting $XX Just at And that we're a 'XX, million Were to 'XX, capital year looking will you then provided. in the fiscal release. million numbers another for it, at million there a

Yes.

follow-on from additional to buying have incurrence contemplate investing ahead the ahead the of start-up does commissioning you're Because is, and And capital in of scrap that at that to or I start EAF year-end. presume working going of ramp? question

it year we that as ore but year the much iron will scrap, And go It not well. as as be as in be substantially at ramping will just up. of coal buying are for following buy. we in much and point Yes, this inventory does. our we by time, we not more down probably context, are And will end

in million year. does it we'll by total the reducing will be still ramp-up $XXX and or So $XXX whatever buy yes, million consider for that we next

facility, some loans government you to limit the and incurrence EAF the have the there or anything of, that, with use within like credit relation now differences availability? guess, in the additional And now timing right could of the that prevents your the Rajat, is I anything of that debt given spending

buckets are can. baskets we have available to which tap credit the we No, are or that we there market -- if can

think? remainder Okay. the looking early that you'll think provide as typical And of be we into of as later update date, the in guidance you start I we capital a is year. with will part your provide an that about this And for suppose EAF, that then the Or at of do you the April? timing provided cost

mean you Could you sure we're what -- not cost... the by capital

and sorry, have the projects think had the suggested the Well, you by and all just EBITDA EAF secured was clear, months around the think cost in this you'll you'll release, early cetera. et it, every for quarter, you and following typically of wondering early that to that or guidance quarter. provide an -- a call if end be you update within And just costs, I April. capital secured on calendar the you provide

sure. Yes,

are we we we We as capital EAF on where will will, typically the the on do, cost provide side.

definitely should expectation fixed update of majority cost our by an Our time. that that be by is provide time. And we'll

from is with Securities. Shaath Ahmed question Beacon next Our

follow-up. to first relative shipments lot of to suggest shipment valuability do $XXX the in date for I volume. just QX the point we what on because $XXX,XXX terms a maybe there's guess, use latent guys that you you Just million to mentioned of

Yes.

for are each at an around So typically, we average as quarter. XXX

there. So start you can from

current to throughout 'XX. And That's I Is this assumptions stronger guys the that calendar this very are what said driver you actually of you curve? Is futures Or you behind expect pricing, in helpful. calendar compared prices that for Perfect. 'XX comment? the driving guess terms that?

curves It's seeing where pricing that driving are future actually that's is. the we

year has such infrastructure as is on expectation that's the areas. driving the thing stable. been consumption as this other the demand for such or other The happening and our that's spending definitely The

well. that the a such And don't as pricing number factoring through sentimental at which other the expect changes So and than in average higher we big at also changes kept are we the cost higher a element, kept has we happened. number the lows as the cycle

yes, also are those futures So the going. considered, are factors some the pricing but is indicating of where

BAF, as I'm one, get are the on we last touched closer update And not to planning maybe guys if just it, guys and helpful. very sure since update public. mean, That's you on you Okay. we of commission you show think structure. potential I the us been while road OpEx a the while from data savings the go last the I had it's from but

chance wondering get if we update is numbers this a Just those an around year. there

do where will will period on Ahmad, the state -- as to that Yes, get the We'll what the as look short of on closer of -- perspective. like end we and around as that this well our the what Mike. information commissioning information update the more is year, this continue commencement commissioning be from end EAFs hybrid to at both

Our with Pipes next question is Securities. from Riley Lucas B.

the cents incident. could OpEx costs year And missed regards very terms much, some I long-term operator. consider? in color to if you the any of kind wondered Thank to from any additional a Apologies be this, this but And of CapEx you I wondered what's also be? dollars if might what then side, impact provide costs term, from I maybe in the will longer and Coke incident

Sure. I'll start, Lucas.

completed it we've using engineering both repair resources. preparation of and the plan outside So internal out, the

we million expect repair And be be period. cost complete time to in should to range. $XX total the sometime the the million April in $XX So

do full batteries. thermal any Thankfully, the production during We integrity the our back In the to is batteries of integrity were batteries. all protect complete the terms aim degradation. X to that, of co cost of able a thermal none of to recovery beyond X suffered incident,

get back pre-incident coke to is repair to levels. the goal is executed, production once our So

it. longer-term Got that costs this? associated might with Any be

we -- it's we to we that walls I now way batteries work the doing, are the too it and as have are early right at okay, okay. such think looked are the the say, but

which the there, degradation long-term much key from cost expect is a perspective. don't we So

concerned, is XX%. XX% the which piping, have cost that's As is as the we corridor to that the far assessed,

probably production to of XX% we'll quarter. there this a high additional during and we during cost, just don't full start don't external level, XX% added as more color period, -- the to be coke we'll running that be using our at furnace but an at production. So think I that will know we And

production and to So -- should we full next get come quarter, our down levels.

or I'll on to very you I kind saw a look U.S. M&A And kind Steel. of a the there landscape do M&A. helpful. think turn at this something to time. Very more I that process appreciate of you could wondered active in I landscape at how with kind your Algoma evolve the U.S. Is the expect strategically you And benefit of within really would high-level thoughts. Canada. maybe topic how

sure I'm our while policy to not speculate appreciate around evolve, it's thinking it be comment or the question. Lucas, will specific on But how may I we opportunities. M&A

Anything Algoma. beneficial that is strategically on would the EAF really side, it maybe nothing? your uniquely be to focused Or from the just

the on strategic that. mean, of and path very look to our We're commissioning time, obviously, We value Algoma. We're strategic the this EAF on much brings commissioning. I Yes. on at beginning executing that believe forward to is year, clear. laser-focused tremendous budget, a short-term we end

the hand There like back over for to comments. this I'd Moraca, Mike to any are further at time. questions floor no closing

participation results for scheduled our forward results to conference fourth fiscal again progress third Well, June. your when Algoma interest call quarter continued look quarter you We thank much Steel. you we updating report our for and very Thank earnings in your in you. and XXXX on our fiscal

conference. This concludes today's

disconnect may your time. for your participation. You this lines you at Thank