🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

Earnings call: Algoma Steel reported a decrease in adjusted EBITDA to $4 million

EditorLina Guerrero
Published 07/11/2024, 20:02
ASTL
-

Algoma Steel Group Inc. (NASDAQ:ASTL) faced a challenging second quarter in 2025, with soft market conditions leading to a decline in both shipments and steel revenue. During the earnings call on October 30, 2024, CEO Michael Garcia underscored the company's commitment to safety and the advancement of its electric arc furnace (EAF) project.

Despite a decrease in adjusted EBITDA to $4 million and a 19% drop in steel revenue year-over-year, Algoma maintains a strong liquidity position, with cash exceeding $450 million. Executives also expressed optimism for potential steel pricing recovery following the U.S. elections and the company's transition to greener steel production.

Key Takeaways

  • Algoma Steel reported a 5.2% decline in shipments and a 19% decrease in steel revenue year-over-year.
  • The company's adjusted EBITDA fell to $4 million, with a robust liquidity position of over $800 million.
  • The EAF project is on track, with first steel production expected by the end of Q1 2025.
  • Algoma anticipates a $100 million release in working capital by March 2025 and supports Canadian tariffs on Chinese steel.
  • Executives are hopeful for a post-election recovery in steel pricing and are focused on transitioning to greener steel production.
  • Insurance proceeds of $32 million will offset costs from a utility corridor incident, and over $60 million is expected in recoveries for property damages and potential business interruption claims.

Company Outlook

  • Algoma Steel is modernizing operations and strategically managing inventory in response to the current slow demand in the plate market.
  • The company's transition to EAF production is expected to significantly improve environmental impact and expand production capacity.
  • Algoma changed its fiscal year-end from March 31 to December 31, starting in 2025, affecting reporting periods.

Bearish Highlights

  • The average net sales realization fell by 14.6% to $1,036 per ton, with costs per ton increasing by 1.1%.
  • The North American steel market is currently facing challenges, with low pricing levels.

Bullish Highlights

  • Algoma is optimistic about the potential for steel pricing recovery after the U.S. elections.
  • The company supports Canada's tariffs on Chinese steel, which may bolster North American steel trade.

Misses

  • The company experienced a decline in adjusted EBITDA and a notable decrease in steel revenue and shipments.
  • Inventory levels decreased slightly, with the company aiming to reduce working capital.

Q&A Highlights

  • Discussions on the carbon tax program focused on taxes paid for 2022 emissions, with the province to confirm continuation for future years.
  • The diluted share count equals the basic share count this quarter due to negative income, with a maximum dilution of approximately one-third at a share price of $18.
  • CEO Garcia expressed confidence in the EAF project's budget, with costs expected to remain below a 5% increase from the original budget.

Algoma Steel Group Inc. maintains its dedication to growth and modernization despite facing market headwinds. The company's strategic approach and optimism for the future, particularly with the advancement of the EAF project, suggest a focus on long-term resilience and environmental sustainability in the steel industry.

InvestingPro Insights

Algoma Steel Group Inc. (ASTL) is navigating through a challenging market environment, as reflected in both the company's recent earnings report and current market data. According to InvestingPro data, ASTL's revenue for the last twelve months as of Q2 2025 stood at $1.84 billion, with a concerning revenue growth decline of 11.34% over the same period. This aligns with the company's reported 19% drop in steel revenue year-over-year mentioned in the earnings call.

Despite these headwinds, ASTL's stock has shown remarkable resilience. InvestingPro Tips highlight that the company has experienced a strong return over the last month, three months, and year, with a significant 62.2% price total return over the past year. This positive stock performance comes even as the company faces profitability challenges, with InvestingPro Tips noting that ASTL was not profitable over the last twelve months and analysts do not anticipate profitability this year.

The company's liquidity position, emphasized in the earnings call, is supported by InvestingPro data showing that liquid assets exceed short-term obligations. This financial flexibility could be crucial as ASTL continues to invest in its EAF project and navigates the current market downturn.

Investors should note that while ASTL is trading near its 52-week high, with the stock price at 97.61% of its 52-week high, the RSI suggests the stock may be in overbought territory. This could indicate a potential for a short-term price correction, despite the overall positive momentum.

For those interested in a deeper analysis, InvestingPro offers 13 additional tips for ASTL, providing a more comprehensive view of the company's financial health and market position.

Full transcript - Algoma Steel Group Inc (ASTL) Q2 2025:

Operator: Greetings, and welcome to the Algoma Steel Group Inc. Second Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Moraca, Vice President, Corporate Development and Treasurer. Thank you, sir. You may begin.

Mike Moraca: Good morning, everyone, and welcome to Algoma Steel Group Inc. Second quarter fiscal 2025 earnings conference call. Leading today's call are Michael Garcia, our Chief Executive Officer, and Rajat Marwah, our Chief Financial Officer. As a reminder, this call is being recorded and will be made available for replay later today in the Investors section of Algoma Steel's website. I would like to remind you that comments made on today's call may contain forward-looking statements within the meaning of applicable securities laws, which involve assumptions and inherent risks and uncertainties. Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IFRS, which differs from U.S. GAAP, and our discussion today includes references to certain non-IFRS financial measures. Last evening, we posted an earnings presentation to accompany today's prepared remarks. The slides for today's call can be found in the Investors section of our corporate website. With that in mind, I would ask everyone on today's call to read the legal disclaimers on slide two of the earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel's second quarter fiscal 2025 management discussion analysis. Please note that our financial statements are prepared using the US dollar as our currency and the Canadian dollar as our presentation currency. Our fiscal year runs from April 1st to March 31st, and our financial statements have been prepared for the three and six months ended September 30th, 2024, and September 30th, 2023. Furthermore, today, we are announcing that our board of directors has approved the change in Algoma's fiscal year-end from March 31st to December 31st starting this year. This will result in a period of March 31st to December 31st being reported as a nine-month reporting period. We plan to provide reclassified historical financial information in the first quarter of 2025 to assist investors in evaluating the impact the change in fiscal year will have on reported operating results for the years ended December 31st, 2023, and 2024. Please note all amounts referred to on today's call are in Canadian dollars unless otherwise noted. Following our prepared remarks, we will conduct a question and answer session. I will now turn the call over to our Chief Executive Officer, Michael Garcia.

Michael Garcia: Thank you, Mike. Good morning, and thank you for joining us to discuss our fiscal second quarter 2025 results. Over the last several quarters, our relentless focus on employee safety yielded measurable results, demonstrated by our improved lost time injury performance. With construction of the EAF project reaching peak levels of activity, our commitment to workplace safety has never been more vital. We continue to prioritize the well-being of every team member, reinforcing safety as not just a corporate value, but a fundamental aspect of how we operate. Next (LON:NXT), I'll cover key events and milestones during our fiscal second quarter, as well as give an update on progress at our transformative EAF project. We will then turn the call over to Rajat for a deeper dive into the numbers and a discussion of our strong liquidity and balance sheet, before closing with an update on market conditions. There are a few important themes I would like to get across on this call. First, we delivered solid operational performance in the quarter, partly blunting the impact of continued soft conditions across global steel markets. Second, our balance sheet and liquidity are strong, with cash at quarter-end of over $450 million and total liquidity of $800 million. We are well-funded to complete our transformative EAF project in the coming months. And finally, we have further de-risked the EAF project as we enter the start of commissioning activities this quarter.

Michael Garcia: Now let me give you some additional color on those key themes. Our results for the fiscal second quarter of 2025 were in line with our previously disclosed guidance for both shipments and adjusted EBITDA. They reflect a continuation of the challenging market conditions we have seen this year in steel pricing, which touched year-to-date lows during the quarter as uncertainty around the US, the pace of interest rate cuts, soft demand, and overall economic factors weighed on our customers' buying behavior. All told, softer realized steel prices and lower shipments led to an overall decline in revenue, adjusted EBITDA, and cash flow generation versus the prior year period. Our plate shipments in the second fiscal quarter of 2025 were approximately 73,000 tons, up from 61,000 tons in the fiscal first quarter. Market conditions impacted our expected plate shipments; however, our production was in line with our expectations of approximately 90,000. We were able to grow market share despite poor market conditions, and we were able to rebuild strategic inventories for product categories that will help us improve delivery performance as we continue to position Algoma as the North American leader in customer service. While there are no clear signals of the market improving in the near term, we plan to continue ramping up plate production over the balance of the fiscal year towards our expected annual run rate capacity of over 650,000 net tons. We are Canada's only discrete producer of plate products, and the completed modernization and associated quality and volume improvements should result in a more favorable product mix going forward, which is expected to drive meaningful margin enhancement. Market conditions remain challenging; however, we remain focused on what we can control, including the consistent operation of our facility and an unwavering focus on our customers. We are entering our normal seasonal maintenance period, but we do not expect any unusual impacts to production and should see directionally higher shipments in the third fiscal quarter. Now let me give you an update on our exciting progress during the quarter on our transformational electric arc furnace project. With the facility now towering over our site, we are in the busiest phase of the project with nearly 500 specialized trades contractors on-site. Critical equipment installation is well underway, including our 550-ton cranes, our fume treatment system with over 2,500 feet of large diameter piping, and our automated scrapyard cranes. Critical electrical infrastructure has been installed, including our Tignelli Q1 Power Systems, and our EAF substation has now been energized. I have told you that we expect to commence commissioning activities by the end of this calendar year, and I am proud to say we remain on track for that important milestone. We have selected and staffed the EAF operating team who will be tasked with executing commissioning activities beginning as expected in December, and we remain on track to deliver first steel production by the end of the calendar first quarter of next year. When both furnaces are up and running, we expect to reach a steady-state shipping capacity of approximately 3 million tons per year, 35% higher than current production levels. Every bit as important as the project being on time is the milestone we reached with regard to contracting activity for the remaining construction. As you all know, we have been advancing the project during what has been a period of sustained high inflation, particularly for labor and materials associated with large industrial projects. Our project team has worked closely with all stakeholders, including major equipment suppliers and subcontractors, to de-risk the project at every turn. I am proud to share today that we have contracted substantially all the remaining work on the EAF project. As we continue to work towards the completion of construction and commissioning of both EAFs, we expect to finish the project within 5% of the most recent budget guidance. We are also excited to announce that Algoma's EAF project is eligible under Ontario's Ministry of the Environment Conservation and Parks Emissions Performance Program. Under this program, Algoma has applied for and expects to receive reimbursement for carbon taxes paid since 2022, driving down the net cash cost of the EAF project and further enhancing the strength of our balance sheet and liquidity. Specifically, during the quarter, cumulative investment in the EAF project reached $672 million, and to date, we have committed contracts totaling approximately $870 million, with over 90% tied to fixed-price contracts. The transition to EAF steelmaking involves the support and partnership of many agencies and companies. In August, we were pleased to see PUC Transmission and Hydro One each obtaining authorization pursuant to the Ontario Energy Board Act to construct a new 230-kilowatt transmission line and related transformation components in Sault Ste. Marie. The combined project improves the city's access to Hydro One's planned regional grid infrastructure upgrade as previously prioritized by the province of Ontario. No capital contribution from Algoma will be required for these upgrades. This enhancement is part of phase two of the transition to EAF steelmaking, and power required for the two EAFs will come from the grid supported by our own Lake Superior power plant. As a reminder, our startup plan continues to include normal production from our existing steelmaking facility while ramping up steel production from our EAF in calendar 2025, followed by an eventual switch to full EAF production. This provides us with operational flexibility as we ramp up the EAF furnaces to full production. In summary, in very tough market conditions, we focused on the safe operation of our existing facilities, our customers, and the planned ramp-up of plate production, finalizing our contracting for the remaining components of our EAF project, and taking the first steps toward the on-time start of commissioning activities for the EAF project. As I said last quarter, the near-term weakness in steel markets cannot dampen our excitement for what's happening at our site and the huge step forward it represents for our company and our community. I would like to once again thank all our employees for their hard work, dedication, and professionalism. Now I will pass the call over to Rajat to go over our financial results for the quarter.

Rajat Marwah: Thanks, Mike. Good morning, and thank you all for joining the call. As a reminder, all numbers are expressed in Canadian dollars unless otherwise noted. Our second quarter results include adjusted EBITDA of $4 million, which reflects an adjusted EBITDA margin of 0.6%. This includes the benefit of net insurance proceeds totaling approximately $28 million, which I will explain in more detail. Cash generated from operating activities totaled $25.4 million. We finished the quarter with a strong balance sheet, including $452 million of cash and availability of $348 million under our revolving credit facility, for total liquidity of approximately $800 million. Now let me walk you through the key drivers of our performance. Steel revenue was $539 million in the quarter, down 19% versus the prior year period. Steel shipments were 520,000 net tons in the quarter, down 5.2% versus the prior year quarter. The decrease in shipments and revenue was largely attributable to soft market conditions and depressed pricing. Net sales realization averaged $1,036 per ton, down 14.6% versus the prior year period. The decrease versus the prior year level reflects weaker market conditions partially offset by improvements in our value-added product mix as a proportion of steel sales. On the cost side, Algoma's cost per ton of steel products sold averaged up 1.1% versus the prior year period. The main drivers of the increase versus the prior year period include lower volumes and the increased use of purchased coke. Inventories at the quarter-end were $793 million, down modestly from $808 million at the end of the 2024 fiscal year. We remain focused on driving down working capital levels. From a timing perspective, during the December quarter, we will grow inventories at a lower level than seen in previous years, and we expect a release of at least $100 million of total working capital by March 2025 as previously discussed. One additional note on the utility corridor incident from last January. During the quarter, we received an advance from insurers related to property damage. You will see approximately $32 million in insurance proceeds flowing through our financial statement as other income during the quarter, offset by approximately $4 million of costs associated with the outage. We continue to work with our adjusters on recovering funds for the balance of the property damage and business interruption claims. I would now like to turn the call back over to Michael Garcia for closing comments.

Michael Garcia: Thank you, Rajat. Looking at the state of the North American steel market, demand and pricing remain depressed prior to the US election, contributing to overall economic uncertainty. During the past quarter, index pricing touched year-to-date lows in the mid-six hundreds. While we saw some modest price improvement, it again moved lower and has traded sideways over the past few weeks. Potentially a reflection of market participants sitting on the sidelines awaiting a result from the US election. We are optimistic that post-election, steel prices will gain ground. We applaud Canada's recent imposition of tariffs on Chinese steel and aluminum as it aligns Canadian trade policy more closely with the United States, fostering a unified North American approach that strengthens the regional steel market by mitigating competition from unfairly traded overseas imports. In the near term, we do expect that current prices will continue to generate headwinds on our earnings performance on account of our lagging contract order book. As we wait for these headwinds to abate, we will continue to focus on what we can control: operating our facilities safely, servicing our customers, and positioning ourselves to best capture market opportunities, all while executing the completion of construction and commissioning of the EAF. It's no exaggeration to say that in the 120-plus year history of Algoma, we are in the most exciting phase of our existence, transitioning from traditional blast furnace steel production to being one of North America's greenest producers of steel. This is further supported by recent modernization investments across the steelworks, including Canada's only discrete plate production. We will significantly expand our production capacity, dramatically improve our environmental footprint, energize the local economy, and unlock tremendous value for all of our stakeholders. I'm proud of what the team has accomplished, their dedication to safety, and their focus on enhancing every aspect of our operations. The last several years have been busy ones in Sault Ste. Marie, and we are truly excited for what the future holds. Thank you very much for your continued interest in Algoma Steel. At this point, we would be happy to take your questions. Operator, please give the instructions for the Q&A session.

Operator: Thank you. We will now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question and one follow-up. You may press star two if you'd like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first question comes from the line of Katja Jancic with BMO Capital Markets. Please proceed with your question.

Katja Jancic: Hi. Thank you for taking my questions. Maybe starting on the working capital, just to clarify, Rajat, I think you said that in this current quarter, the build is not going to be as much as in the recent past. Can you talk more about what's driving that? Because I would assume that it would be higher given the EAF start.

Rajat Marwah: Hi, Katja. So the EAF startup will start the first heat at the beginning of March. The EAF startup will happen at the end of March, sometime in the next quarter. So we are not building much material specifically for the EAF. And for the blast furnace and coke, we already carry inventory and we are trying to manage that. So the buildup normally, we build up around $150 million by December from March to December, and then we bring it down. I think it would be lower than that. When you look at the three quarters, I think it will be probably around $100 million if you see the buildup, and then we'll see a release happening in March. But the point is, right, come next year, we'll see some buildup happening extra on the scrap side as we are ramping up our EAF, that will be 2025. 2024 will be smoother.

Katja Jancic: And can you maybe talk about how to think about that buildup for the EAF side? So it will, you know...

Rajat Marwah: We will be building up to the extent of, you know, roughly a month, month and a half, or max two months of inventory for scrap. But then we'll be reducing some of the material that we need for the blast furnace and the coke batteries as we will be transitioning slowly out of them. So the way to think about it is that we may have, you know, anywhere from $30 to $50 million of buildup. But eventually, during the transition period, we will see at least $100 million of further release in working capital when the blast furnace and coke batteries are shut down and we are only on the EAF. So overall working capital-wise, at least $100 million we should see releasing by March. And then we will see another $100 million at least coming out when the transition is complete. In between, we may see a slight buildup happening for the EAF, which will be next December.

Katja Jancic: And you said the slight buildup is $30 to $40 million? Is that correct?

Rajat Marwah: Yeah. Yep.

Katja Jancic: Oh, if I may, one more. I think, Mike, you initially mentioned that for the current quarter, you expect volumes to increase a bit sequentially. What will drive that increase? Because typically, right, in the December quarter, the environment is a little softer. So we see most of your peers are talking about lower volumes.

Michael Garcia: Yeah. I think, primarily, it's our operating schedule. So we don't have any outages scheduled in the quarter. So I think you'll see our volume increase from that perspective. You're right. As we enter the holiday period, although I think there's probably a positive sentiment on economic activity, I don't think we'll see a significant demand increase over the next six or seven weeks in the quarter.

Katja Jancic: Okay. Thank you.

Operator: Our next question comes from the line of David Ocampo with Cormark Securities. Please proceed with your question.

David Ocampo: Thanks, everyone. Rajat or Mike, maybe you could take this. But I was hoping you could comment on the timing and total insurance proceeds that remain to be delivered to you guys both from damages to the property as well as lost production that occurred in the quarter. And then also in terms of timing and total proceeds that could come from the Ministry of Environment program.

Rajat Marwah: Sure. So on the insurance front, you know, as we've mentioned, there is, you know, $50 to $60 odd million that we see on the property damage, that's slightly higher. I think it'll be a little over $60 million. And we've received some right now, and we'll receive the balance between this quarter and next, most probably in the next quarter, which is the March quarter. And on the property damage, you know, loss has been $120 to $130 million, roughly in that range, as we indicated, and we should see, you know, more than 50% of that recovered. Now we're going through the process. As I said, it's a lengthy process. We do expect to get it before the end of March or it could flow into the June quarter, but that's what our hope is. So most of it should, I mean, at least from a property perspective, should come by March, and we are trying to see if we can get it in the quarter or it will be following for the business interruption. So that's how it will flow through on the insurance side. And on the carbon, we are part of the program. We've applied for 2022, and it gets applied every year. But the way to think about it is that the recovery happens based on the process and the way it's laid out. It's roughly in the second year or third year. It takes two years. So that's 2022. We should get it either this year or early next, and this is how it will flow. It would probably be a two-year lag, the way it works. So they do the work, they do the audit after the year ends, we file, they calculate, and then it gets to you in the following year. So it's a two-year lag, the way we get the money.

David Ocampo: Okay. And just so I have my numbers right, I have you guys having paid $54 million since calendar 2022. Does that line up with your numbers?

Rajat Marwah: No. I think it's a much lower number for calendar 2022. But you start counting it for...

Michael Garcia: Sorry, Rajat. That was cumulative. So 2022 to...

Rajat Marwah: Yeah. Okay. Yeah. No. You're right. The cumulative is that. And it's done on a calendar year basis, which will align with the fiscal year now. It becomes much easier for you guys, for us, and for everybody, and we are pretty happy and excited about it. This is done on an annual basis, which is a calendar year basis. And 2024, we have one more quarter, and then it gets finalized. But you're right. Those are the numbers that you see. And it's actually done year by year.

Michael Garcia: And each year, the province has to decide or declare whether the program is running for another year. So, you know, we're a little guarded in committing that all future carbon taxes for the life of the project while we're undertaking this project will qualify on this. But definitely, you know, the province has made the decision as it applies to the taxes we paid for 2022 emissions that were paid at the end of 2023.

David Ocampo: Okay. That's helpful. That really helps us from a modeling standpoint. And then maybe just a last one for Rajat. This definitely goes to you. But it does look like the diluted share count is equal to the basic share count this quarter. That's probably just because of the negative income. But in the past, if you look at the quarters, it did include all the warrants in the diluted share count, but I know the warrants can be settled on a cashless basis. And they're callable at $18. So what's the right way to think about the maximum dilution for everyone that's trying to model this one?

Rajat Marwah: That's a very good question, David. You know, the right way to look at it is that if you're at $18, it's one-third dilution because it's callable. The strike price is $11.5, and the difference between $11.5 and $18 is it's a six-odd bucks. And that's the dilution that's there from a dollars perspective. So if you issue shares, then it's one-third dilution. So it's not the whole 24 that leads to the dilution. It's only one-third. And accounting is accounting, and we have to follow those rules. So we follow those rules while we show it. But from a real modeling perspective at $18, it's only one-third. And it changes, goes lower, goes higher depending upon where the share price is. But that's how to look at it. And at $18, we have the option to do a cashless settlement, which brings the dilution to one-third.

David Ocampo: Okay. Those are my two questions. I'll hop back in queue. Thank you, everyone.

Michael Garcia: Thanks, David.

Operator: Our next question comes from the line of Ian Gillies with Stifel. Please proceed with your question.

Ian Gillies: Morning, everyone.

Michael Garcia: Hey. Good morning.

Ian Gillies: I asked about this last quarter. I'm gonna ask again. The plate ramp, are you putting any additional thought or are you thinking about slowing that down at all or changing the mix? In the near term just given that that market seems to be a little oversaturated at the moment? Pricing isn't great, etcetera.

Michael Garcia: Well, I mean, we're not going out and destabilizing the market by chasing a lot of plate business. We are rebuilding strategic inventories. So if we have a slow demand for plate, which we've certainly had during this previous quarter, we're doing a few things. We're making sure that we are refilling some of our strategic stocks. So that includes both our just-in-time automotive program, which needs to be fully stocked because that's the expectation of those automotive customers, but also building some on-the-floor inventory of plate that we know is going to sell. It's not, you know, it's high demand products or grades and sizes that our existing customers are regular consumers of. We are taking advantage of the time to finish any of the modernization work that needs to be done in terms of approving and improving our rolling profile of some of the thinner grade material, the half-inch and below. We are being mindful of that, and we're taking advantage of the slow time in plate demand, building up our promise performance. And we think when plate demand returns, we'll be really well positioned to take advantage of that.

Ian Gillies: Understood. That's helpful. With respect to the EAF and the new cost budget put out, just to confirm, but is there much left that could change in the updated budget? Or do you feel like you're kind of pretty much tied down there and this is a final final number?

Michael Garcia: Yeah. We feel really good that not much is going to change. In fact, you may have noticed we didn't refer to it as a different budget. I mean, the budget is what we previously disclosed, and I think now we're focused on communicating where we're going to end up. And we're having better and better and more confident visibility to that now as we approach commissioning. So substantially all of the contracted work is in place and contracted. We've got less than 10% of the budgeted work operating under time and material. We're probably at a high level, 60% through all that time and material work. And the actual spending on that work is tracking about where it should be tracking, so there hasn't been a cost overrun on that time and material work. If you look back through the life of this project, when the cost of the project has increased from the original budget number, it has not been because of poor execution by a contractor that, you know, gets cost overruns from us that are legitimate cost overruns. So that hasn't increased any of the, you know, that's not what's driven the cost. And it hasn't been time and material contracts that have been overspent. Caused the cost of the project to go up. Again, it's not poor execution. It's finishing all the detailed design and then placing the contracts in a pretty inflationary environment. So we just, you know, the contracts got placed at a higher cost than the original budget contemplated. But that being said, the work is being executed as contemplated once the contracts are in place. So we feel confident about where we're gonna end up, and it'll be, you know, can't give you an exact number, but it's gonna be south of that 5% number we referenced.

Ian Gillies: Understood. That's very helpful. And I guess last one for me, Rajat, are you able to provide any context on how you think cost per ton may trend over the next couple of quarters as you start to use more of your own coking coal rather than some of the third-party you've had probably have purchased in specific inventory?

Rajat Marwah: Sure. So, you know, overall, when you look at it for the next year, the cost will be trending slightly lower. As I mentioned, we have most of the fixed costs tied up based on all the people that we need for the EAFs all sitting there. On some of the variable side where commodity pricing is coming down, coal for next year, I think we should see some reduction coming. Generally, when you look at our cost, the first calendar quarter cost is always slightly higher just because of winter and, you know, getting all those commodities here. Primarily, our end gas goes up, and the consumption also goes up. So that you see that slightly, but overall, you'd see the cost coming down. And coming down further with the production increase that will happen as we stabilize the first EAF and then start work on the second and get that. So that's Ian. You will not see a substantial drop, frankly, and not even a substantial increase. It probably will be hovering within a couple of percentage points, you know, on the cost side, as you see it right now. The mix does make a change when we do higher plate, our cost proportionately will go up. But overall, from a cost per ton basis, we don't see a significant change, and we see it coming down as we start producing more. Does that help? I mean, I've not given you a number, but it's probably within a couple of percentage points.

Ian Gillies: No. No. That's helpful. It's just a matter of us figuring out where plates how much you're gonna be putting out the door. So, anyways, thanks very much.

Rajat Marwah: Thanks, Ian.

Operator: Thank you. We have reached the end of our question and answer session. I'd like to turn the call back over to Mr. Garcia for any closing remarks.

Michael Garcia: Thank you, and thank you again for your participation in our second quarter fiscal 2025 earnings conference call and for your continued interest in Algoma Steel. We look forward to updating you on our results and progress when we report our fiscal third quarter results scheduled for February. That is all, operator. Thank you.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.