Dofasco sets all-time record for second quarter

In the volatile business of making steel, things have definitely taken a turn for the better.

Dofasco Inc., a major competitor of Algoma Steel, announced today that its second-quarter earnings have never been better.

The following is excerpted from a Dofasco news release:

************************** Dofasco posts record second quarter results Strong pricing, robust demand, excellent operating performance in the quarter Well-positioned for improving results going forward

HAMILTON, ON, July 28 - Dofasco Inc. today reported record earnings for the second quarter of 2004, a result of a strong pricing environment, robust demand and excellent operating performance.

For the three months ended June 30, 2004, Dofasco's consolidated net income was $110.5 million ($1.45 per share after deducting preferred share dividends) compared to $38.7 million ($0.51 per share) earned in the same quarter last year.

Excluding Quebec Cartier Mining (QCM) results, pro forma net income was $33.9 million ($0.45 per share) in the second quarter of 2003.

On December 31, 2003, Dofasco disposed of its common shares in QCM and accounts for its remaining preferred share investment on a cost basis. The second quarter results included an $11.6 million reduction of income tax expense due to a favourable adjustment to future U.S. income tax assets, resulting from excellent performance at Gallatin in the first half of the year and expected performance for the remainder of 2004.

"Employees at both our Steel Operations and Gallatin Steel operating segments executed with excellence this quarter to capitalize on favourable steel market conditions, deliver record earnings and to generate value for customers and shareholders," said Don Pether, President and CEO. "Dofasco is very well-positioned for improved results in the third quarter." Consolidated sales in the second quarter were $1,061.6 million compared to $923.2 million in the same period last year.

Steel shipments increased to 1.28 million tons, up six percent from 1.21 million tons a year earlier.

Dofasco's Steel Operations segment, which includes the company's Hamilton operations, reported income before income taxes of $105.1 million compared to $52.9 million in the same quarter last year, reflecting strong pricing and robust steel demand.

Shipments from Hamilton were 1.1 million tons compared to 1.02 million tons in second quarter of 2003.

Average realized revenue per ton increased by $65 relative to the second quarter of 2003, due to the significant strengthening of the North American steel market.

The average cost per ton increased by $42 over the high level experienced in the same quarter of 2003, due primarily to record high scrap prices combined with high raw material and energy costs. Gallatin Steel posted superb operating results in a record quarter.

Dofasco's 50% share of Gallatin Steel's pre-tax income for the quarter increased to $46.5 million from a loss of $0.7 million in the second quarter of 2003.

Record U.S. spot market selling prices, continued strong shipments and continued excellent operating performance contributed to this significant improvement.

These factors were partially offset by the record high scrap costs and higher prices for energy and alloys.

Gallatin Steel's second quarter shipments were 376,000 tons, slightly less than the 385,000 tons shipped in the same period last year. Dofasco continues to re-invest in enhanced facilities to meet and anticipate the needs of its customers. In June, Dofasco's Board of Directors approved $158 million for the second phase of the 5-year Finishing Division Improvement Program (FDIP).

This phase will focus on upgrading the galvanizing operations in Hamilton, which will provide enhanced product quality and increased product feature capability to Dofasco customers.

The $384 million first phase of the program, which focuses on pickling and cold rolling assets, is underway and on schedule.

"When the program is completed in 2008, Dofasco will have invested approximately $700 million in our finishing assets to create a truly world-class division capable of providing next-generation Solutions in Steel(TM) to Dofasco customers," said Pether.

The company has also welcomed a new member to its Board of Directors.

Mr. Brian Robbins, President and CEO of Exco Technologies Limited, joined the Board effective July 1.

Mr. Robbins brings experience and knowledge of the automotive products and services industry. Exco is listed on the TSX and is a global supplier of innovative technologies serving the die-cast, extrusion and automotive industries, with operations in Canada, the United States, Mexico and Morocco. "Dofasco is very well-positioned for the next quarter and beyond," said Pether.

"In Hamilton, we will be renewing the majority of our contract business later this year in what is anticipated to be a strong, sustained pricing environment which will solidify and enhance Dofasco's longer-term performance. Gallatin will continue to benefit from its spot market exposure in this pricing environment, further contributing to Dofasco's financial performance." 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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