Algoma Steel Posts Loss in Fiscal Q2 Amid Market Challenges, Focuses on EAF Transformation

Revenue Decline and Losses Linked to Lower Shipments and Falling Prices
Algoma Steel Group Inc. reported a significant decline in revenue for its fiscal second quarter ended September 30, 2024, with consolidated revenue falling to CA$600.3 million ($431.9 million) from CA$732.6 million ($527.1 million) in the same period last year. This drop was largely driven by a reduction in steel shipments, which fell to 520,443 tons from 548,998 tons, and a decrease in realized steel prices. As a result, Algoma posted a consolidated operating loss of CA$83.6 million ($60.15 million), reversing the income of CA$36.8 million ($26.48 million) in Q2 2023. The company also reported a net loss of CA$106.6 million ($76.7 million), compared to a net income of CA$31.1 million ($22.38 million) in the prior-year quarter.

Steel Prices and Costs Affect EBITDA and Cash Flow
The company’s average realized steel price was CA$1,036 ($745) per ton, down from CA$1,213 ($873) per ton in the previous year. Despite benefiting from a higher mix of value-added products, Algoma’s earnings were impacted by the broader downturn in steel prices and rising input costs. Adjusted EBITDA fell sharply to CA$3.5 million ($2.52 million), down from CA$81 million ($58.3 million) in Q2 2023, reflecting the tough market conditions. Cash flow from operations also declined to CA$25.5 million ($18.3 million), less than half of the previous year’s figure of CA$57.2 million ($41.2 million).

Electric Arc Furnace (EAF) Project On Track
Looking to the future, Algoma is focused on transforming its operations with a major shift to electric arc furnace (EAF) steelmaking, which is expected to significantly reduce carbon emissions. The company is on track to begin commissioning its two new EAFs in the fourth quarter of 2024, with steel production expected to commence by the end of Q1 2025. This move is part of Algoma’s strategy to position itself as one of North America’s greenest steel producers, with an estimated 70% reduction in carbon emissions once the EAF transition is complete.

CEO Michael Garcia noted that the project is progressing smoothly, with the company having secured nearly all required equipment and contracted commitments totaling approximately CA$870 million ($625.9 million). The EAF transition also qualifies for Ontario’s Emissions Performance Program, which could help offset some project costs by reimbursing carbon taxes paid since 2022.

Change in Fiscal Year-End and Dividend Announcement
In addition to its financial results, Algoma announced a change in its fiscal year-end from March 31 to December 31, aligning with the reporting periods of other companies in the steel industry. The company’s current fiscal year will run from April 1 to December 31, 2024. Algoma also declared a quarterly dividend of CA$0.05 per share, payable on December 27, 2024, to shareholders of record as of November 27, 2024.