Algoma Steel turns $10.1 million profit

The following is the continuation of SooToday.com's excerpts from today's fourth-quarter announcement from Algoma Steel:

******************************* Cost of sales per ton shipped improved in the fourth quarter by $25 (6%) over the three months ended September 30, 2003.

The improvement was mainly the result of higher production levels (up 9%) and lower raw material costs due to the stronger Canadian dollar.

EBITDA for the quarter of $28.9 million was $11.0 million higher than the $17.9 million realized in the fourth quarter of 2002, mainly the result of lower operating costs and higher shipments, offset in part by lower average revenue per ton.

For the twelve months ended December 31, 2003, EBITDA was $67.5 million as compared with $123.8 million in 2002.

The significant drop in EBITDA from 2002 was mainly the result of lower selling prices.

EBITDA was up $21.7 million versus the third quarter total of $7.2 million.

Higher average selling prices, better product mix and lower operating costs all contributed to the improvement in EBITDA. Operating income of $17.2 million was realized in the fourth quarter of 2003 as compared with operating income of $5.2 million in 2002.

For the twelve months of 2003, operating income of $12.6 million was realized, down $53.3 million from the $65.9 million realized in the equivalent period of 2002. Financial income for the three months ended December 31, 2003 was $1.9 million compared to $8.0 million of financial expense for the quarter ended December 31, 2002.

Interest expense was $3.0 million lower in the quarter at $5.5 million versus the same period last year, the result of reduced borrowings under the revolving credit facility and lower borrowing rates.

A $7.4 million foreign exchange gain was realized in the quarter as compared with a $0.5 million exchange gain for the same period in 2002.

Financial resources and liquidity

Cash used in operating activities was $3.0 million for the three months ended December 31, 2003 compared with the use of $31.9 million of cash for the three months ended December 31, 2002.

Cash provided by operating activities for the year ended December 31, 2003 was $136.4 million including a $74.4 million reduction in operating working capital due primarily to a $60.6 million reduction in inventories. Capital expenditures for the three and twelve month periods ended December 31, 2003 were $9.4 million and $36.8 million, respectively.

Expenditures in the corresponding periods of 2002 were $10.5 million and $25.9 million. Financing activity for the three months ended December 31, 2003 consisted of an increase in bank indebtedness of $12.4 million.

Financing activities for the year ended December 31, 2003 included $29 million as repayment of the term loan and a decrease in bank indebtedness of $68.2 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 December 31, 2003 was $125 million compared to $68 million under the previous credit facility at December 31, 2002.

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

Trade

On January 9, 2004, the Canadian International Trade Tribunal (CITT) determined that certain hot rolled carbon steel plate and high strength low alloy steel plate originating in or exported from Bulgaria, the Czech Republic and Romania have caused material injury to the domestic industry.

As a result of the injury finding, dumping duties will be applied to imports from these countries.

During 2004, anti dumping findings in place covering plate, hot rolled sheet and cold rolled sheet from a number of countries are scheduled to expire.

At the request of the Canadian producers, the CITT has initiated reviews of all three findings.

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

Outlook

Steel markets in North America are strong due to: the strength in global markets and particularly China; a weaker U.S. dollar combined with an increase in ocean freight rates which discourages imports; and a general recovery in the manufacturing sector.

Price increases have been announced for the first quarter. The benefit of higher prices is expected to be partially offset by higher costs for sourcing of raw materials.

The Corporation has commenced a three-year project with Exiros, a member of the Techint Group, to identify and implement cost savings through improved purchasing and operating practices.

The Techint Group is a $9 billion U.S. global company headquartered in Buenos Aires, Argentina which operates a number of seamless pipe and flat rolled steel plants throughout the world.

The Board of Directors has approved a revised capital management program for the No. 7 Blast Furnace which is designed to avoid a planned outage in April and further defer the reline until 2010.

Total spending between 2004 and 2010 is estimated at $52 million with a portion of this outlay expected to reduce the reline cost in 2010.

CURRENTLY ADDING ADDITIONAL INFORMATION.