Algoma Steel posts fourth-quarter loss of $20.4M

Algoma’s electric arc furnace conversion is expected to be as much as $175 million over its $700-million budget. Start-up won’t commence until the end of 2024

Mike Panzeri was announced Wednesday night as Algoma Steel’s new senior vice president, production. Panzeri was previously chief operating officer of JSW Steel USA Ohio Inc. He reports directly to Algoma CEO Michael Garcia.Supplied photo

Consistent with expectations, Algoma Steel Group Inc. reported Wednesday evening a net fourth-quarter loss of $20.4 million, compared to net income of $242.9 million during the same fiscal period last year.

The steelmaker attributed the year-over-year drop as primarily caused by a lower selling price of steel, higher costs from replacing internally produced coke with purchased coke, and an increase in the purchase price of key supplies including metallurgical coke and coal.

”Our results for the fiscal fourth quarter of 2023 were in line with our previously disclosed outlook," said chief executive officer Michael Garcia.

“Following a period of dynamic commodity prices and operational improvements, the quarter saw plate and strip operations return to normal production levels.

"We expect to continue this momentum into fiscal 2024, with expected strong first quarter shipments and operating cash flow," Garcia said in a written statement.

Garcia also disclosed that Algoma's game-changing electric arc furnace transition – the most costly construction project in Sault Ste. Marie history – is going to cost as much as $175 million over its original $700-million budget.

Firing up the new furnaces is also expected to take longer than expected.

"As we enter the next phase of the project, inflationary pressures on construction costs and materials are currently estimated to increase spending on the project beyond our original budget estimates by approximately $125 million to $175 million, with the impact coming across the balance of the project," Garcia said.

"In addition, global supply chain disruptions affecting certain micro-processing chips are estimated to extend the targeted commencement of start-up activities to calendar year-end 2024."

The company also announced the appointment of Mike Panzeri as its new senior vice president, production.

Panzeri was previously chief operating officer of JSW Steel USA Ohio Inc.

He comes to Sault Ste. Marie with both engineering and business credentials: a Bachelor of Science in Materials Engineering from the Rensselaer Polytechnic Institute and a Master of Business Administration from the University of Maryland.

Panzeri reports directly to CEO Garcia.

The following are highlights of the fiscal fourth quarter ended Mar. 31, 2023, as reported by the company:

consolidated revenue of $677.4 million, compared to $941.8 million in the prior-year quarter
consolidated income from operations of $21.7 million, compared to $310.6 million in the prior-year quarter
net loss of $20.4 million, compared to net income of $242.9 million in the prior-year quarter
adjusted EBITDA of $47.9 million and adjusted EBITDA margin of 7.1 per cent, compared to $334.4 million and 35.5 per cent in the prior-year quarter
cash flows generated from operations of $95.4 million, compared to $443.8 million in the prior-year quarter
shipments of 571,647 tons, compared to 547,217 tons in the prior-year quarter
paid quarterly dividend of US$0.05/share

Algoma also announced the following full-year comparisons between fiscal 2023 and fiscal 2022:

consolidated revenue of $2,778.5 million, compared to $3,806.0 million the prior year
consolidated income from operations of $290.5 million, compared to $1,411.0 million the prior year
net income of $298.5 million, compared to $857.7 million the prior year
adjusted EBITDA of $452.3 million and adjusted EBITDA margin of 16.3 per cents, compared to $1,503.2 million and 39.5 per cent the prior year
cash flows generated from operations of $177.3 million, compared to $1,263.4 million the prior year
shipments of 2,002,715 tons, compared to 2,297,159 tons the prior year

Notwithstanding problems with its plate mill modernization project over the past year, the company says its plate and strip facility is operating at normal production levels.

Algoma is now proceeding with a second phase of upgrades there, including installation of a heavy gauge inline shear and upgrades to hot mill drives.

"Algoma is pleased to report that the shear installation is currently progressing ahead of schedule, and the company expects to be able to further increase plate production in the third calendar quarter of 2023," the company said in a news release.

"This higher production is expected to allow Algoma to respond to market opportunities and to build inventory ahead of the planned Phase 2 hot mill outage currently scheduled in April of 2024."