Algoma Steel reports first-quarter loss

Algoma Steel has reported a loss of $25.3 million for the for the three months ended March 31.

That compares to a profit of $23.1 million for the same period last year.

The red ink was largely attributable to foreign exchange losses as well as interest expenses related to the company's acquisition last year by Essar Steel Holdings Ltd.

First-quarter sales were up - $502.3 million this year, as compared to as compared to $480.2 million last year.

"The higher sales in the first quarter of 2008 were due to higher shipment totals and product mix changes, offset by the effects of the stronger Canadian dollar," the company said.

The steelmaker shipped 683,100 tons in the recently-ended quarter, up six percent over the same period last year.

Labour cost per hour was down two percent. At the end of March, approximately 3,400 employees worked at Algoma Steel.

The company's energy costs have been rising sharply, up 25 percent in the first quarter, compared to the same period last year.

However, this was largely due to increased production.

"The average unit cost of natural gas increased one percent compared to the first quarter of 2007," the company said in a statement.

Natural gas accounts for roughly 63 percent of Algoma Steel's energy costs. Consumption and cost of purchased electricity remained virtually unchanged from last year.

The company expects continued sales growth in the coming year with recently announced steel price increases and the expected start-up of #6 blast furnace.

Manufacturing costs will depend on current negotiations with Algoma Steel's primary iron ore supplier.

Coal costs per ton, together with rail and vessel freight costs, are expected to rise.

"Employment levels are not expected to change significantly from calendar 2007 levels," the company said.

The company issued the following news release today.

************************* Algoma Steel significantly improves performance in first quarter 2008 Algoma Steel Inc. announced today in a call with their lenders significant performance improvements for the first quarter of 2008, as compared to the first quarter of 2007.

Shipments increased by 6.2 percent, sales increased by 4.6 percent and EBITDA, a meaningful indicator of the Company’s profitability, was $71.4 million, an increase of $17.6 million from the same period last year and $22.5 million over the previous quarter. Algoma further reported a net loss of $25.3 million, essentially attributable to a $26.2 million non-cash foreign exchange loss on U.S. dollar denominated debt that must be reported for accounting purposes. Armando Plastino, Chief Operating Officer said today, “We remain optimistic about Algoma’s overall financial performance throughout the course of this year. We expect that the increased volumes will be sustainable over the long term and the Company’s demonstrated performance improvements of this quarter will continue.” A member of the Essar Group, Algoma Steel Inc. is based in Sault Ste. Marie, Ontario.

As a fully integrated steel producer, Algoma’s revenues are derived primarily from the manufacture and sale of rolled steel products including hot and cold rolled sheet and plate.

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