Algoma Steel Announces Results for the Quarter Ended September 30, 1999
26 October 1999
Algoma Steel Announces Results for the Quarter Ended September 30, 1999
SAULT STE. MARIE, Ontario--Oct. 26, 1999-- Algoma Steel (TSE:ALG.) today announced its financial results for the quarter ended September 30, 1999.
Financial Highlights
--------------------
1998 1999
------------- --------------------
Q3 Q4 Q1 Q2 Q3
-- -- -- -- --
Sales (millions) $324.3 $294.4 $295.7 $295.9 $264.0
EBITDA(1) (millions) $23.7 $10.3 $(4.0) $0.5 $14.1
Loss on Closure of
Tubular & Structural
Operations $(27.5) $ - $ - $ -
Net Income/(Loss)
(millions) $(12.9) $(49.1) $(30.5) $(26.9) $(16.8)
Net Income/(Loss)
Per Share $(0.25) $(0.94) $(0.58) $(0.51) $(0.32)
Weighted average shares
outstanding
(millions) 52.40 52.52 52.64 52.72 52.85
Per Ton Shipped
---------------
Revenue $637 $677 $566 $518 $528
EBITDA(1) $47 $24 $(8) $1 $28
(1) Earnings before interest, taxes, depreciation and amortization.
Steel Shipments (000's of net tons)
-----------------------------------
1998 1999
------------- --------------------
Q3 Q4 Q1 Q2 Q3
-- -- -- -- --
Sheet 318 285 351 426 391
Plate 118 82 110 105 104
Structurals 48 51 48 26 2
Tubulars 25 17 13 14 3
--- --- --- --- ---
Total 509 435 522 571 500
--- --- --- --- ---
SummaryA net loss of $16.8 million or $0.32 per share was incurred in the third quarter. This compares to a second quarter loss of $26.9 million or $0.51 per share and a net loss of $12.9 million or $0.25 per share in the third quarter of 1998.
Direct Strip Production Complex (DSPC)
Total production from the DSPC increased to 274,000 tons in the third quarter from 266,000 tons in the second quarter with production in the month of September of 105,000 tons. Progress continues to be made on quality issues and expanding product capability. The Company has been encouraged by the recent higher levels of production from the facility, but continues to focus on the issues limiting production.
Financial and Operating Results
The loss from operations for the quarter was reduced to $4.7 million from a $15.4 million loss from operations in the second quarter. Lower shipments of negative margin structural and tubular products and improved selling prices for sheet contributed to the improvement as did a successful municipal tax appeal and a forgiveness of debt in a subsidiary which totalled $9 million. The latter two items reduced the after-tax net loss in the quarter by $7.6 million.
Steel shipments decreased to 500,000 tons for the third quarter from 571,000 tons in the second quarter. The decline in shipments was due to the elimination of the seamless tubular and structural product lines as well as lower sheet shipments due to summer customer shutdowns. The exit from these businesses has resulted in higher flat rolled sales with 495,000 tons of shipments in the third quarter versus 436,000 tons shipped in the third quarter of 1998.
Cash flow from operations before changes in working capital was a deficiency of $2.5 million. This represents a $12.2 million improvement from the deficiency in the second quarter.
Unused availability from the banking facility was $130 million at September 30 compared to $136 million at June 30.
The workforce level at September 30 was 4,250 people compared to 4,500 people at June 30 and 5,200 people in mid-1998.
Year 2000 Status
The Company believes that it is well positioned to avoid any material problems arising from the Year 2000 issue. The Year 2000 project team has completed more than 99% of the total changes and testing required for Year 2000 readiness. During the fourth quarter, the small number of remaining items will be completed along with final preparation of contingency plans for the transition period starting December 31, 1999 through February 29, 2000.
Trade
In late August, the Canadian International Trade Tribunal made a material injury finding covering cold rolled sheet originating in or exported from Belgium, Russia, the Slovak Republic and Turkey. Imports from these countries must be at normal values as determined by Revenue Canada, otherwise they will be subject to anti-dumping duty.
Based on a complaint by Algoma and another Canadian producer of carbon steel plate, Revenue Canada has initiated an investigation into the alleged dumping into Canada of product from Brazil, India, Indonesia, Finland, Thailand and the Ukraine. The investigation will also look at countervailable subsidies on product from India, Indonesia and Thailand. A preliminary determination with respect to dumping and countervailable subsidies is expected early in the new year with final determinations expected in the second quarter of 2000.
Litigation
The Township of Michipicoten has stated that it will initiate a class action lawsuit against the Company in respect of arsenic in the soil in the Wawa area. The Company has no reason to believe that the arsenic in the soil represents a health risk. The Company plans to participate with the Township and the Province in appropriate studies respecting this issue. The Company intends to conduct a vigorous defence of any action brought against it.
Outlook
Demand for steel products remains strong with sheet prices continuing to strengthen. Plate prices appear to be stabilizing with some producers announcing price increases.
The main operating priorities continue to be improving productivity at the DSPC and cutting costs throughout the Company.
A. ADAM H. EARL JOUDRIE
PRESIDENT AND CHAIRMAN OF THE BOARD
CHIEF EXECUTIVE OFFICER
Sault Ste. Marie, Ontario
October 26, 1999
Algoma Steel Inc.
1999 Third Quarter Report
Unaudited - Expressed in Canadian dollars
Consolidated statements of income (loss) and retained earnings
Three months Nine months
ended ended
September 30 September 30
1999 1998 1999 1998
------- ------- ------- -------
(millions of dollars)
Sales
$ 264.0 $ 324.3 $ 855.6 $ 977.6
------- ------- ------- -------
Cost of sales 239.9 290.7 814.6 852.9
Administrative and
selling expense 10.0 9.9 30.4 30.6
Depreciation and
amortization 18.8 15.2 50.2 44.4
------- ------- ------- -------
268.7 315.8 895.2 927.9
------- ------- ------- -------
Income (loss) from
operations (4.7) 8.5 (39.6) 49.7
Net financial
expense 18.6 22.1 61.9 59.7
------- ------- ------- -------
Loss before income
taxes (23.3) (13.6) (101.5) (10.0)
------- ------- ------- -------
Provision for income
taxes - current 0.7 (4.9) 2.4 (11.0)
- deferred (7.2) 4.2 (29.7) 11.0
------- ------- ------- -------
(6.5) (0.7) (27.3) -
------- ------- ------- -------
Net loss $ (16.8) $ (12.9) $ (74.2) $ (10.0)
------- ------- ------- -------
------- ------- ------- -------
Net loss per common
share $ (0.32) $ (0.25) $ (1.41) $ (0.19)
------- ------- ------- -------
------- ------- ------- -------
Weighted average common shares
outstanding -
millions 52.85 52.40 52.73 52.35
------- ------- ------- -------
------- ------- ------- -------
Retained earnings
Balance, beginning
of period $ 173.0 $ 292.5 $ 230.4 $ 289.6
Net loss (16.8) (12.9) (74.2) (10.0)
------- ------- ------- -------
Balance, end of
period $ 156.2 $ 279.6 $ 156.2 $ 279.6
------- ------- ------- -------
------- ------- ------- -------
Operations
(thousands of net tons)
Raw steel production 594 569 1,789 1,750
------- ------- ------- -------
Steel shipments 500 509 1,593 1,552
------- ------- ------- -------
Algoma Steel Inc.
1999 Third Quarter Report
Unaudited - Expressed in Canadian dollars
Consolidated statements of financial position
As at September 30
------------------
1999 1998
--------- ---------
(millions of dollars)
Current assets
Accounts receivable $ 172.6 $ 186.9
Income and other taxes recoverable - 3.4
Inventories 287.6 398.0
Prepaid expenses 7.8 4.4
--------- ---------
468.0 592.7
--------- ---------
Other assets
Deposits in escrow - 1.0
Fixed assets, net 885.6 921.6
Unamortized blast furnace lining 26.2 34.9
Deferred charges 36.6 66.9
--------- ---------
948.4 1,024.4
--------- ---------
Total assets $ 1,416.4 $ 1,617.1
--------- ---------
--------- ---------
Current liabilities
Bank indebtedness $ 83.3 $ 86.1
Accounts payable and accrued
liabilities 163.7 213.3
Income and other taxes payable 10.0 -
Current portion of long-term debt 0.6 6.2
--------- ---------
257.6 305.6
--------- ---------
Other liabilities
Long-term debt 479.9 497.2
Accrued pension liability and
post-employment benefit obligation 382.6 366.5
Deferred income taxes 34.3 63.4
--------- ---------
896.8 927.1
--------- ---------
Shareholders' equity
Common shares 186.9 185.9
Shareholders' deficiency on
restructuring (81.1) (81.1)
Retained earnings 156.2 279.6
--------- ---------
262.0 384.4
--------- ---------
Total liabilities and shareholders'
equity $ 1,416.4 $ 1,617.1
--------- ---------
--------- ---------
Algoma Steel Inc.
1999 Third Quarter Report
Unaudited - Expressed in Canadian dollars
Consolidated statements of cash flow
Three months Nine months
ended ended
September 30 September 30
1999 1998 1999 1998
------- ------- ------- -------
(millions of dollars)
Cash provided by (used in)
Operating activities
Cash from operations $ (2.5) $ 16.4 $ (37.2) $ 61.7
Decrease (increase) in
operating working
capital (9.2) (25.4) 24.6 (106.0)
------- ------- ------- -------
(11.7) (9.0) (12.6) (44.3)
------- ------- ------- -------
Investing activities
Net additions to fixed
assets (9.0) (18.7) (24.5) (69.2)
Deposits in escrow - - 0.9 25.3
------- ------- ------- -------
(9.0) (18.7) (23.6) (43.9)
------- ------- ------- -------
Financing activities
Repayment of long-term
debt (0.7) (0.5) (1.8) (1.7)
Increase in bank
indebtedness 21.4 28.2 38.0 86.1
------- ------- ------- -------
20.7 27.7 36.2 84.4
------- ------- ------- -------
Cash
Change during period - - - (3.8)
Balance, beginning of
period - - - 3.8
------- ------- ------- -------
Balance, end of
period $ - $ - $ - $ -
------- ------- ------- -------
------- ------- ------- -------