Algoma Steel (US:ASTL)2024-06-21 17:30Financial Data and Key Metrics Changes - Algoma Steel reported adjusted EBITDA of CAD41.5 million for Q4 2024, with an adjusted EBITDA margin of 6.7% and cash generated from operating activities of CAD121.2 million [16] - The company finished the quarter with CAD98 million in cash and CAD347 million available under its revolving credit facility [16] - For the full fiscal year 2024, adjusted EBITDA was CAD313 million, down from CAD452 million in fiscal 2023, reflecting a decrease in adjusted EBITDA margin from 16.3% to 11.2% [20] Business Line Data and Key Metrics Changes - Shipments for Q4 2024 totaled 451,000 tons, a decrease of 21.1% compared to the prior year, primarily due to operational challenges from a coke-making utility structure collapse [17] - Net sales realization averaged CAD1,260 per ton, an increase of 18.2% year-over-year, driven by higher pricing [18] - The company shipped 2.1 million tons for the full year, up 4.1% compared to the prior year, with net sales realization averaging CAD1,220 per ton, down 4.1% [20] Market Data and Key Metrics Changes - The North American steel market has experienced price volatility, with US Midwest domestic hot-rolled coil prices falling approximately US$400 per ton since January [23] - Despite market weakness, plate pricing has remained strong, benefiting average price realizations for Algoma Steel [23] Company Strategy and Development Direction - Algoma Steel is focused on transitioning to electric arc furnace (EAF) operations, which is expected to increase throughput capacity by roughly one-third and lower carbon emissions by approximately 70% [14] - The company is exiting the wide coil market to prioritize plate production, enhancing its product mix and driving margin improvements [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged operational challenges in Q4 2024 but expressed confidence in the recovery of production levels and the successful execution of the EAF project [10] - The company expects solid production levels in the second half of calendar 2024 and anticipates a range of CAD30 million to CAD40 million in adjusted EBITDA for Q1 2025 [22] Other Important Information - Cumulative investment in the EAF project reached CAD563 million, with committed contracts totaling approximately CAD800 million, 93% of which are fixed price [14] - The company is working closely with insurance providers regarding the financial impact of the coke-making utility collapse, expecting to recover a significant amount of losses [16] Q&A Session Summary Question: What are the reasons for lower shipments in the June quarter? - Management indicated that the lower volumes were primarily due to the 20-day outage for the plate mill, which typically results in a loss of 50,000 to 60,000 tons [27] Question: What was the breakdown of CapEx in the quarter? - The CapEx included CAD50 million for the EAF and approximately CAD70 million related to repairs from the coke oven collapse [28] Question: What are the risks associated with the EAF project costs? - Management noted that risks include weather delays and labor disruptions, but most of the project is contracted, reducing overall risk [32] Question: What is the expected normalized volume per quarter? - Management stated that a normalized volume of 550,000 tons per quarter is expected once operations stabilize [44] Question: When will the EAF begin producing steel? - The EAF is expected to start producing steel in the first calendar quarter of 2025, with commissioning starting before the end of 2024 [46]