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Stelco reports $44 million first-quarter loss

Stelco Inc. today reported a first-quarter loss of $44 million or 45 cents a common share. The following are excerpts from a company news release: **************************************************************** Stelco Inc.
Stelco2

Stelco Inc. today reported a first-quarter loss of $44 million or 45 cents a common share.

The following are excerpts from a company news release:

**************************************************************** Stelco Inc. reports a net loss for first quarter 2003

HAMILTON, ON, April 22 - Stelco Inc. today reported a net loss of $44 million ($0.45 per common share) in first quarter 2003 compared with a loss of $31 million ($0.32 per common share) in first quarter 2002 and fourth quarter 2002 earnings of $21 million or $0.17 per common share (including a one-time fourth quarter non-cash tax credit to earnings of $8 million or $0.08 per common share).

Included in the first quarter 2003 loss is an after-tax charge of $5 million ($0.05 per common share) related to the permanent closure of Welland Pipe Ltd.

Net sales in first quarter 2003 increased 9% to $693 million compared with $638 million in the same quarter of 2002.

Steel shipments in the quarter of 1,166,000 tons were 1% lower than in the same quarter in 2002.

Average revenue per ton in the quarter at $594 was $52 (10%) higher than first quarter 2002, primarily due to higher selling prices.

Production of semi-finished steel in first quarter 2003 of 1,301,000 tons was 3% lower than first quarter 2002.

Costs per ton increased by $57 to $595 in first quarter 2003 from $538 in first quarter 2002.

The increase in cost was primarily due to higher natural gas and scrap prices, higher cost of wages and benefits, lower productivity due to severe winter conditions, the resumption of Stelco-McMaster operations following a strike, and a reduction in rolling and finishing operations due to weak market demand and a high level of low-priced import steel supply. The major factors contributing to the reduced first quarter 2003 results compared with fourth quarter 2002 are lower average revenue per ton, increased energy and operating costs, and the costs related to the closure of Welland Pipe Ltd.

Jim Alfano, President and Chief Executive Officer, stated that, "Higher input costs such as natural gas and scrap, lower selling prices and production volumes due to weak market demand combined with a high level of low-priced imported steel supply reduced our net income considerably compared with the previous quarter.

"North American steel market conditions remain very challenging with reduced market demand due to the sluggish economy, increased steel supply from restarted U.S. mills, and surging steel imports into the Canadian market leading to reduced spot market selling prices."

Net loss was $44 million in first quarter 2003 compared with a restated net loss of $31 million in first quarter 2002.

Effective January 1, 2003, the Corporation changed its method of accounting for the cost of blast furnace relines with restatement of prior periods.

Included in the first quarter 2003 loss is an after-tax charge of $5 million related to the permanent closure of Welland Pipe Ltd.

An accrual has been made for an electricity rebate of $11 million pre-tax in the quarter, attributable to the period May 2002 to January 2003 under the Ontario Power Generation Inc. (OPGI) Market Power Mitigation program.

This program limits the price that OPGI can receive.

The government has committed to maintaining this rebate program with rebate payments, when required, being paid quarterly until May 2006.

North American steel market demand was weak in the first quarter as a result of the sluggish economy.

Steel shipments of 1,166,000 tons were 1% lower than in the same quarter in 2002, primarily due to weaker market demand and the gradual return to normal operations at Stelco-McMaster Ltée after a strike.

Net sales of $693 million for the quarter were 9% higher than the same quarter 2002 mainly due to a $57 increase in average revenue per ton to $594 resulting from higher selling prices.

Production of semi-finished steel in first quarter 2003 of 1,301,000 tons was 3% lower than first quarter 2002 mainly due to the impact of severe winter weather on production volume and the impact of Stelco-McMaster.

Cost per ton increased $57 compared with the same quarter of 2002 mainly due to higher natural gas, electricity, and scrap prices, higher costs of wages and benefits, lower production levels at Stelco-McMaster, lower productivity due to severe winter weather, and a weak order load.

Higher energy costs were partially offset by the electricity rebate. At quarter-end, the Corporation's net short-term debt position (bank indebtedness net of cash and cash equivalents) was $102 million compared with $78 million at the end of fourth quarter 2002.

This change was primarily due to higher accounts receivable balances, capital expenditures, long-term debt repayments, and lower accounts payable and accrued balances, partially offset by lower inventory levels.


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David Helwig

About the Author: David Helwig

David Helwig's journalism career spans seven decades beginning in the 1960s. His work has been recognized with national and international awards.
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