ASI third quarter results

The following is the continuation of SooToday.com's excerpts from today's quarterly results from Algoma Steel Inc:

**************************************************************** Financial and operating results

Average revenue per ton shipped of $499 compares with $504 per ton in the first nine months of 2002.

Shipment levels were almost unchanged at 1.66 million tons in the first nine months of 2003 compared with 1.67 million tons in 2002.

Cost of sales fell to $222 million for the three months ended September 30, 2003 from $240.5 million for the three months ended September 30, 2002 due to lower shipments.

Cost of sales per ton shipped was up 1% for the quarter at $442 from the same period last year.

For the nine months ended September 30, 2003, cost of sales was $752.8 million or $454 per ton shipped as compared with $706.5 million or $423 per ton shipped in 2002.

Unit operating costs have increased in 2003 mainly due to the absence of favourable inventory valuation adjustments realized in the first half of 2002 and higher scrap, natural gas and labour costs.

Partially offsetting these factors is the appreciation of the Canadian dollar which has contributed to lower raw material costs in 2003. Cost of sales per ton shipped improved in the third quarter by $8 (2%) over the three months ended June 30, 2003, despite lower production levels.

The improvement was the result of lower labour (reduced manning), raw material (impact of strong Canadian dollar) and generally lower spending levels. EBITDA for the quarter of $7.2 million was $54.3 million lower than the $61.5 million realized in the third quarter of 2002 mainly the result of lower average revenue per ton.

For the nine months ended September 30, 2003, EBITDA was $38.5 million as compared with $105.9 million in 2002. EBITDA was down $2.5 million versus the second quarter total of $9.7 million.

Lower shipments and a decline in revenue per ton shipped, offset in part by improved costs, account for the decline. An operating loss of $6.9 million was incurred in the third quarter of 2003 as compared with operating income of $46.7 million in 2002.

The operating loss of $4.7 million for the nine months ended September 30, 2003 was down $65.4 million from the $60.7 million realized in the equivalent period of 2002.

Financial expense for the three months ended September 30, 2003 was $6.1 million compared to $17.5 million for the quarter ended September 30, 2002.

A $0.1 million foreign exchange gain was realized in the quarter as compared with a $9.3 million exchange loss for the same period in 2002.

Interest expense was $2.0 million lower in the quarter at $6.2 million versus the same period last year, the result of reduced borrowings under the revolving credit facility and lower borrowing rates.

Financial resources and liquidity Cash provided by operating activities was $32.4 million for the three months ended September 30, 2003 which included a $26.5 million reduction in operating working capital.

The significant components of the change in operating working capital were a decline in accounts receivable of $16.6 million and a decline in prepaid expenses of $4.3 million, offset by an increase in accrued interest on long-term debt of $5.1 million.

For the nine months ended September 30, 2003, cash provided by operating activities was $144.5 million which included $109.2 million from a reduction in operating working capital, composed primarily of an $86.0 million decrease in inventories.

Capital expenditures for the three and nine month periods ended September 30, 2003 were $13.8 million and $27.4 million, respectively.

Expenditures in the corresponding periods of 2002 were $6.7 million and $15.4 million. Financing activities for the three months ended September 30, 2003 included a $9 million repayment of the term loan and a decrease in bank indebtedness of $7.2 million. On September 3, 2003, the Corporation entered into a new four-year Loan and Security Agreement providing financing under a revolving credit facility equal to the lesser of $200 million and a borrowing base determined by the agreement.

Unused availability under the revolving credit facility at September 30, 2003 was $131 million compared to $108 million under the previous credit facility at June 30, 2003.

The Corporation is required to maintain a minimum availability of $25 million.

Trade The Government of Canada has announced that they will not implement remedies relating to the Canadian Steel Safeguard despite the finding of injury by the Canadian International Trade Tribunal (CITT) in respect of several steel products.

Canada is the only NAFTA partner without Safeguard remedies covering steel products.

Both the United States and Mexico implemented such remedies some time ago.

Based on a complaint by Algoma, an investigation into the dumping of carbon and HSLA plate from Bulgaria, the Czech Republic and Romania was initiated earlier in the year.

A preliminary determination of dumping by the Canada Customs and Revenue Agency was issued in early September imposing provisional duties ranging from 53% to 75% on imports of subject goods from these countries.

An injury hearing before the CITT is scheduled for early December.

A final injury determination by the CITT will be made in January 2004. During 2004, anti dumping findings covering plate and sheet from a number of countries are scheduled to expire.

At the request of the Canadian producers, the CITT has initiated reviews of both findings to determine whether they will be extended.

The plate review will be completed by mid-May 2004 and the hot rolled sheet review by the end of June 2004.

The Company is very concerned about the significant increase in imports of alloy plate from Sweden in 2002 and 2003.

These imports are being carefully monitored.

Outlook

There has been a recent increase in manufacturing activity in North America which is contributing to improved steel demand.

The steel industry has announced several price increases in recent months which should result in an improvement in profitability in the fourth quarter.

Bank indebtedness is expected to increase in the fourth quarter due to raw material purchases preceding the close of the navigation season and the payment of interest on the 11% and 1% Notes in December.

This news release contains forward-looking information with respect to Algoma's operations and future financial results.

Actual results may differ from expected results for a variety of reasons including the factors discussed in the Management's Discussion and Analysis section of Algoma's 2002 Annual Report.