Algoma Steel (ASTL)2022-08-05 23:10Financial Data and Key Metrics Changes - Algoma Steel reported revenue of CAD 934 million for Q1 2023, with adjusted EBITDA of CAD 358 million, reflecting an adjusted EBITDA margin of 38.3% [12][15] - Net income was CAD 301.4 million or CAD 1.49 per share, with cash generated from operating activities amounting to CAD 277 million [15][19] - The company finished the quarter with CAD 1.1 billion in unrestricted cash, maintaining a strong balance sheet despite funding a CAD 400 million substantial issuer bid [15][19] Business Line Data and Key Metrics Changes - Shipments totaled 538,000 tons, down 2% sequentially and down 12% year-over-year, impacted by a scheduled outage at the plate mill [16][19] - Net sales realization averaged CAD 16.32 per ton, up 1% sequentially and up 38% compared to the prior year [16][19] - Steel revenue was CAD 877 million, flat sequentially but up 21% year-over-year [16] Market Data and Key Metrics Changes - The North American steel market pricing has fallen from recent highs, but current pricing remains historically high compared to pre-2021 levels [21][22] - Demand from automotive, construction, and oil and gas sectors remains consistent, with controls on imports still in place [22] Company Strategy and Development Direction - Algoma Steel is focused on transitioning to a leading North American producer of green steel, with ongoing construction of an electric arc furnace project on budget and on schedule for a 2024 startup [12][21] - The company aims to maintain financial discipline while returning capital to shareholders through dividends and share repurchases [20][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about pricing stability and market fundamentals, despite concerns regarding inflation, currency fluctuations, and global conflicts [21][22] - The company is positioned to benefit from favorable market conditions while executing the EAF project [22] Other Important Information - The company successfully completed a substantial issuer bid, repurchasing approximately 41 million shares, or about 27.9% of its issued shares [14][20] - The plate mill modernization project has faced delays, impacting production and shipments [10][12] Q&A Session Summary Question: Can you talk through what is happening operationally and the delays mentioned? - Management indicated that the start-up of the plate mill has taken longer than planned, affecting operations [28] Question: Can you provide insights on operating assumptions and metrics for the upcoming quarter? - Management noted that the plate mill outage would result in lower production and shipments in the upcoming quarter [30] Question: What is the expected impact of pricing trends on the business? - Management stated that current pricing remains above mid-cycle levels, with expectations of stability [31] Question: How is the decline in shipments trending, and is it primarily on the spot business? - The decline is mostly attributed to the spot business, affected by the plate mill outage [37] Question: What flexibility is there in contracted business? - There is typically a flexibility of plus/minus 10% in contracted business [39] Question: What are the trends in cost, particularly regarding iron ore and natural gas? - Costs are expected to decrease due to a lag in iron ore prices, while natural gas prices are being monitored for potential hedging strategies [42][48] Question: What is the cadence of capital spending for the EAF project? - A significant portion of capital spending is expected in the next two quarters, with key milestones anticipated [57]