Dofasco makes $47.1 million in first quarter

One day after Stelco Inc. announced a first-quarter loss of $44 million, rival Dofasco says it made more than that much in profits.

The following is excerpted from a Dofasco news release:

***************************************************************** Dofasco reports $47.1 million first quarter net income

HAMILTON, ON, April 23 - Dofasco Inc. reported its results for the first quarter of 2003 today, attributing much-improved earnings from the first quarter of 2002 to higher shipments and selling prices.

For the three months ended March 31, 2003, Dofasco's consolidated net income was $47.1 million.

After deducting preferred share dividends, earnings were $0.62 per common share.

In the first quarter of 2002, Dofasco's net income was $16.4 million, or $0.22 per share.

Commenting on the quarter, Dofasco's Chair of the Board and Chief Executive Officer John Mayberry said, "Dofasco's excellent quarterly results are directly attributable to the success of our growth strategy and the skill with which our people have implemented it.

"They are committed to sustainable growth in shareholder value through shipment growth, product and market mix improvements, and an unwavering focus on cost control." Mr. Mayberry continued, "For the fourth consecutive quarter, shipments from Hamilton exceeded one million tons, while we have continued to increase the proportion of high value-added galvanized, tinplate, cold rolled and automotive tubular products in our product mix.

"Gallatin Steel, our joint venture flat rolled facility in Kentucky, also maintained strong shipments in a weakening U.S. market."

Dofasco's consolidated sales of $902.9 million in the first quarter of 2003 represent a 13% increase from the same period in 2002, as steel shipments increased to 1,182,000 tons from 1,156,000 tons a year earlier.

Dofasco's Steel Operations segment, which includes the company's Hamilton operations, reported income before income taxes of $73.3 million in the quarter, compared to $40.5 million for the first quarter of 2002.

Shipments from Hamilton were 1,011,000 tons, an increase from 973,000 tons in the same quarter of 2002.

Higher selling prices resulted in a $60 increase in the average revenue realized per ton of steel shipped from Hamilton in the first quarter of 2003 compared to the same period in 2002.

The average cost per ton of steel shipped increased by $32, reflecting increased consumption of purchased semi-finished steel slabs while the oxygen steelmaking vessel in Hamilton was being replaced from December 10, 2002 until January 11, 2003.

Costs in the quarter were also impacted by higher energy and scrap prices. Gallatin Steel shipped 341,000 tons in the quarter, down from the near-record 365,000 tons shipped in the first quarter of 2002.

Higher selling prices, partially offset by an increase in the cost of electricity and steel scrap, resulted in Dofasco's 50% share of Gallatin's pre-tax income for the quarter increasing to $3.0 million from a loss of $2.3 million in the first quarter of 2002. Quebec Cartier Mining Company (QCM), Dofasco's joint venture iron ore mine in Quebec, shipped 1.9 million tonnes of iron ore products in the first quarter, down from 2.1 million tonnes in the first quarter of 2002.

Dofasco's 50% share of QCM's loss before income taxes was $7.0 million, an improvement from the loss of $13.9 million in the first quarter of 2002.

Addressing the status of the QCM restructuring process, Mr. Mayberry said "Dofasco is continuing discussions with all QCM stakeholders, including QCM's management and workforce, our joint venture partner CAEMI of Brazil, the Government of Quebec and related agencies.

"We are making significant progress towards finalizing agreements under which a restructured QCM would be positioned to execute a new multi-year mining plan, sustaining the company's ability to operate competitively. When completed, Dofasco's support of future mine development will be limited and its ownership position reduced. The transactions are expected to be completed by the end of the second quarter." Looking forward, Mr. Mayberry said, "North American steel markets are showing signs of weakening, emphasizing the importance of customer service and cost control in maintaining our leadership position.

"Dofasco is committed to remaining one of North America's lowest cost steelmakers. Our practice of continuously re-investing in our facilities to maintain world-class standards will ensure that our most valuable resource - our people - are equipped to ensure the company's continued growth."

In 2003, Dofasco will begin Phase 1 of its five-year, $700 million Finishing Division Improvement Program in Hamilton which will enhance quality and product mix, reduce costs and improve customer service.

Dofasco is a leading North American steel solutions provider.

Product lines include hot rolled, cold rolled, galvanized, Extragal(TM), Galvalume(TM) and tinplate flat rolled steels, as well as tubular products, laser welded blanks and Zyplex(TM), a proprietary laminate.

Dofasco's wide range of steel products is sold to customers in the automotive, construction, energy, manufacturing, pipe and tube, appliance, packaging and steel distribution industries.

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