Algoma Steel Group, Inc. Q4 FY2024 earnings call

• Safety: Ensured employee safety was a top priority, leading to improved lost time injury performance. Added Erin Oliver as Vice President of Health and Safety. - Operational Challenges: Fiscal fourth quarter results were impacted by a coke-making utility structure collapse and blast furnace outage, resulting in ~150,000 tons lost production. - Plate Mill Upgrade: Completed planned upgrade of the plate mill, with plate production expected to increase, aiming for an annual run rate capacity of over 650,000 net tons. - EAF Project: Cumulative investment in the EAF project reached $563 million, with progress derisking the project budget, and expected start of commissioning in late 2024.

In the fourth quarter of fiscal 2024, adjusted EBITDA was CAD41.5 million with an adjusted EBITDA margin of 6.7%, and cash generated from operating activities was CAD121.2 million. Shipments in the quarter were 451,000 tons, down 21.1% year-over-year. Net sales realization averaged CAD1,260 per ton, up 18.2% year-over-year. For the full year 2024, shipments were 2.1 million tons, up 4.1% year-over-year. Net sales realization averaged CAD1,220 per ton, down 4.1% year-over-year. Adjusted EBITDA for the full year was CAD313 million, representing an adjusted EBITDA margin of 11.2% compared to CAD452 million and 16.3% margin in fiscal 2023.

• Fiscal Q1 2025: Expected adjusted EBITDA in the range of CAD30 million to CAD40 million and total shipments of 500,000 to 510,000 tons. - Working Capital: Expect to release at least CAD100 million in working capital in fiscal 2025. - Financing: Raised US$350 million in high-yield bonds, enhancing balance sheet strength.

• Weather delays and labor disruptions pose small risks, with less than 10% of work being time and materials. - Coke oven related CapEx still to be finalized, and recovery from insurers regarding losses from the outage is uncertain in terms of amount and timing.

Q: David Ocampo asked about shipments for the June quarter and lower volumes attributed to what factors.

A: Rajat Marwah responded that lower volumes were due to the 20-day plate mill outage and ramp-up, normally losing 50,000-60,000 tons, but plate mill recovered some losses.

Q: David Ocampo asked about CapEx in the quarter and potential recovery from insurers.

A: Rajat Marwah said CapEx included CAD70 million related to coke ovens and blast furnace issues, and recovery from insurers is being worked on but amount and timing uncertain.

Q: David Ocampo asked about risks to EAF project cost and potential cost savings.

A: Michael Garcia said project is substantially derisked, small risks include weather and labor, with less than 10% of work being time and materials; potential for cost savings from efficiencies and remaining contracts.

Q: Ian Gillies asked about scrap strategy for EAF start-up.

A: Michael Garcia said joint venture with Triple M Metals is operational, buying scrap for ongoing operations, but large-scale scrap buying for EAF will start later in 2025.

Q: Ian Gillies asked about plate market share capture.

A: Michael Garcia said plate mill modernization improved surface quality, delivery, and commercial team is engaging with customers to grow share.

Q: Katja Jancic asked about CapEx for fiscal 2025.

A: Rajat Marwah said normal maintenance CapEx ~CAD100-120 million, EAF CapEx ~CAD250-270 million, with coke oven related CapEx ~CAD30-40 million.

Q: Katja Jancic asked about EAF ramp-up and volume stabilization.

A: Michael Garcia said EAF will start producing in Q1 2025, commissioning starts late 2024, and blast furnace will operate normally during start-up to maintain production levels.