Algoma Steel Reports Revenue Decline Due to Lower Shipments and Falling Steel Prices
Algoma Steel Group Inc. reported a significant revenue decline for its fiscal second quarter, ending September 30, 2024. The company’s consolidated revenue fell to CA$600.3 million ($431.9 million), compared to CA$732.6 million ($527.1 million) last year. Steel shipments decreased to 520,443 tons, down from 548,998 tons. A reduction in realized steel prices also contributed to the decline. As a result, Algoma posted an operating loss of CA$83.6 million ($60.15 million), reversing the CA$36.8 million ($26.48 million) income in Q2 2023. In addition, the company 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) last year.
Steel Prices and Rising Costs Impact Earnings
During Q2 2024, Algoma’s average realized steel price dropped to CA$1,036 ($745) per ton, down from CA$1,213 ($873) the previous year. Despite benefiting from a higher proportion of value-added products, the broader downturn in steel prices negatively affected earnings. Adjusted EBITDA decreased sharply to CA$3.5 million ($2.52 million), a significant drop from CA$81 million ($58.3 million) in Q2 2023. Cash flow from operations also fell to CA$25.5 million ($18.3 million), a drop from CA$57.2 million ($41.2 million) last year.
Electric Arc Furnace Transition Set for Future Growth
Algoma is transitioning to electric arc furnace (EAF) steelmaking, expected to reduce carbon emissions significantly. The company plans to commission its two new EAFs in Q4 2024, with production set to begin by Q1 2025. This shift will reduce carbon emissions by 70%. CEO Michael Garcia confirmed that the project is progressing smoothly. Algoma has secured almost all necessary equipment, and contracted commitments total CA$870 million ($625.9 million). This transition aligns with Algoma’s strategy to become one of North America’s greenest steel producers. Additionally, the project qualifies for Ontario’s Emissions Performance Program, potentially helping offset some costs by reimbursing carbon taxes paid since 2022.
Fiscal Year-End Change and Dividend Announcement
Algoma also announced a change in its fiscal year-end, moving from March 31 to December 31. The current fiscal year will run from April 1 to December 31, 2024. The company declared a quarterly dividend of CA$0.05 per share, payable on December 27, 2024, to shareholders of record as of November 27, 2024.
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