Algoma Steel reports billion-dollar quarter (updated)

Algoma Steel Group Inc. (NASDAQ: ASTL; TSX: ASTL) is reporting tonight it generated revenue of $1.01 billion from normal business operations during its second fiscal quarter ended Sept. 30, 2021.

The record quarterly revenue is a 168 per cent increase from $377 million collected the same quarter last year.

Steel revenue was $936.5 million, up from $765 million in the previous quarter and $335.3 million from the same period in 2020.

The company achieved quarterly profit of $288.2 million, compared to $214.2 million in the previous quarter and a loss of $60 million last year.

Chief executive officer Mike McQuade said higher realized steel prices and ongoing cost-cutting contributed to the performance.

Earlier today, the Sault steelmaker announced its board had agreed to replace its existing blast furnace and basic oxygen steelmaking operations with two new state-of-the-art electric-arc-furnaces (EAFs).

The transition is expected to cost C$700 million and construction will take 30 months with the new furnaces going online in 2024.

Preparing for the EAFs, Algoma is "partnering with regional academia to create a system of multi-generational supports to provide new skills training to Algoma’s current employees and to build career pathways for regional youth in science, technology, engineering and mathematics (STEM) subjects and the trades in preparation for the advanced manufacturing jobs of tomorrow," the company said.

After the markets closed Thursday, the company made a second strategic announcement: it will retire all its outstanding senior secured long-term debt.

"This US$358-million debt reduction will leave us with a stronger balance sheet that we believe enhances our position, both operationally and financially, to make critical investments in our business that we expect will drive sales and create additional long-term value for our stakeholders,” McQuade said in a news release.

"Calendar 2021 has been an incredible journey, and we expect that the final three months will be a truly transformative period for Algoma."

For its third fiscal quarter, the company is projecting shipments of 590,000 to 610,000 tons, compared to 587,340 tons in the second quarter and 516,294 tons in the same quarter last year.

Third-quarter adjusted EBITDA (a key measure of profitability) is expected to total least $450 million.

Algoma uses a nonstandard definition of adjusted EBITDA: "net (loss) income before amortization of property, plant, equipment and amortization of intangible assets, finance costs, interest on pension and other post-employment benefit obligations, income taxes, restructuring costs, impairment reserve, foreign exchange loss (gain), finance income, carbon tax, share based compensation related to performance share units and business combination adjustments."

Meanwhile, a quartet of provincial cabinet ministers will be at the steel plant Friday for what's being described as "an important announcement."

The Fordly foursome will consist of:

• Greg Rickford, minister of northern development, mines, natural resources and forestry and Indigenous affairs
• Vic Fedeli, minister of economic development, job creation and trade
• Todd Smith, minister of energy,
• Ross Romano, MPP for Sault Ste. Marie and minister of government and consumer services

The announcement will be made at noon at the Algoma Energy Facility near Algoma Steel's No. 2 gate.