Algoma Steel Group, Inc. Q3 FY2024 earnings call

• Safety is a top priority, with improved lost time injury performance year-to-date. • Fiscal third quarter included completed seasonal maintenance, and plate and strip operations ran well. • Progress on Phase II of plate mill modernization project, including bringing in-line share online. • EAF project cumulative investment reached CAD 510 million, with committed contracts totaling approximately CAD 750 million. • Coke-making plant incident led to suspension of coke making operations, but partial coke production resumed; blast furnace operations temporarily suspended but repairs completed and gradually being brought back online.

Steel revenue in the quarter totaled CAD 556.9 million, up 8.8% versus the same quarter of last year. Net sales realization averaged CAD 1,079 per ton, down 3.3% versus the prior year period. Although most cost per ton of steel products sold averaged CAD 10.07 in the quarter, down 11.2% versus the prior year period, adjusted EBITDA in the quarter was negative CAD 1 million and adjusted EBITDA margin was negative 0.2%, an improvement from negative CAD 35.9 million and negative 6.3% in the year ago period.

• Expect the fourth fiscal quarter to experience directionally higher EBITDA versus the third fiscal quarter. • Incident is expected to impact production and shipments for more than three weeks, totaling roughly 120,000 tons to 150,000 tons. • Working capital release plan adjusted due to coke-making plant incident, still expecting to release approximately CAD 150 million over the period.

• Collapse of a structure supporting utilities at coke-making plant impacted operations. • Blast furnace experienced operational challenges upon restart. • Impact on inventory release due to incident affecting inputs like ore and coal.

Q: On a bigger picture, when looking to 2025, does the recent incident change the tune on being a hybrid operator?

A: Michael Garcia states plan still remains to operate in 2025 in a hybrid mode, assuming nothing significantly changes with asset integrity of blast furnace and coke ovens.

Q: How to think about cost structure as a hybrid operator?

A: Rajat Marwah says it will operate an additional electric arc facility, with added fixed cost of 100 to 140 more people from mining perspective, rest mostly variable.

Q: Confirm working capital numbers and if it contemplates investing in additional working capital ahead of EAF ramp?

A: Rajat Marwah confirms and says it does consider buying scrap and reducing inventory, still expecting to reduce CAD 100 million or CAD 150 million in total by next year.

Q: Color on OpEx impact of coke incident and long-term costs?

A: Michael Garcia says repair costs expected to be in $20 million to $30 million range; Rajat Marwah says too early to say long-term additional costs but repair costs assessed at $20 million to $30 million.