Algoma Steel Group Inc. shipped 435,202 tons of steel in its fiscal 2023 second quarter, down 25.9 per cent from 587,340 tons shipped during the same period last year.
"The year-over-year decline in shipments was largely attributable to previously disclosed plate mill modernization commissioning delays and production shortfalls at our direct strip production complex (DSPC) related to temporary workforce availability events," the company said in a news release issued after the close of markets Monday.
This and other less-than-stellar numbers came as no surprise.
As SooToday reported in late August, a $120-million modernization upgrade at Algoma's plate mill has been running months behind schedule, bedevilled by technological gremlins.
The delay was one cause cited in August for an 11.9 per cent drop in first-quarter shipments: 537,524 tons compared to 610,057 during the same period last year.
Rajat Marwah, Algoma's chief financial officer, cautioned then that upcoming shipments for the fiscal second quarter would be similarly affected.
Monday night, the company reported second-quarter revenue totalling $599.2 million, down 40.7 per cent from $1.01 billion in the prior-year quarter.
Steel revenue was $551.5 million, down 41.1 per cent.
Revenue per ton of steel sold was $1,377, down 19.9 per cent from $1,720.
Algoma's plate mill is the only Canadian producer of discrete plate steel – a product used to make Royal Canadian Navy warships (HMCS Toronto and HMCS Halifax), as well as bridges (Champlain Bridge, Bluewater Bridge), buildings (Pearson International Airport, Rogers Centre, GFL Memorial Gardens) and wind turbines across the province.
Our local plate mill is actually a combination mill, producing strip steel as well as plate.
Other gleanings from Algoma's Monday-night announcement:
- consolidated revenue for the latest quarter was $599.2 million, compared to $1.01 billion in the prior-year quarter
- consolidated income from operations was $5.6 million, compared to $402.1 million in the prior-year quarter
- net income was $87.2 million, or $0.36 per diluted share, compared to $288.2 million, or $4.02 per diluted share in the prior-year quarter
- adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, considered an important indicator of operating performance and profitability) was $82.7 million and adjusted EBITDA margin was 13.8 per cent, compared to $430.6 million and 42.6 per cent in the prior-year quarter
- average realized price of steel net of freight and non-steel revenue was $1,266 per ton, down 20.6 per cent from $1,594 per ton in the prior-year quarter
- cost per ton of steel products sold was $1,033, up 20.7 per cent from $857 in the prior-year quarter, driven primarily by higher input costs associated with third-party metallurgical coke purchases, natural gas, alloys, and scrap
“As previously disclosed, the fiscal second quarter presented a number of operational challenges that adversely impacted our results, while we worked against the backdrop of steel pricing uncertainty," said Michael Garcia, Algoma's chief executive officer.
"We are focused on overcoming those transitory events to return our facilities to full operating capacity. We estimate the operational challenges to have a financial impact of $130 million on adjusted EBITDA, with approximately 60 per cent incurred in the second fiscal quarter and the balance to affect the third fiscal quarter," Garcia said.
"We continue to advance our transformative electric arc furnace project, which remains on time and on budget, and are completing the final stages of the plate mill modernization Phase 1 commissioning.”
"Despite near-term challenges on pricing, we will continue to focus on improving operational performance and disciplined execution to drive long-term value creation for all of our stakeholders,” Garcia said.
The year-over-year decrease in income from operations was primarily due to a decrease in the selling price of steel and an increase in costs, Garcia added, including replacement of internally produced coke with purchased coke as a result of a conveyor fire and an increase in the purchase price of key inputs including metallurgical coke, natural gas, alloys and scrap.
Net income in the second quarter was $87.2 million, compared to $288.2 million during the same period last year.
Algoma reported that its $700 million electric arc furnace project is "advancing as planned" and will take two years to finish.
Algoma's board of directors declared a regular quarterly dividend of US$0.05 on each common share outstanding, payable on Dec. 30, 2022 to holders of record of common shares of the corporation as of the close of business on Nov. 30, 2022.
"Today Algoma is on a transformation journey, investing in its people and processes, optimizing and modernizing to secure a sustainable future," the company said in its Monday-night news release.
"Our customer focus, growing capability and courage to meet the industry’s challenges head-on position us firmly as your partner in steel."