Algoma cites low pricing in revenue drop

Algoma Steel Group Inc. says revenue in its 2023 fiscal year second quarter fell by 40 percent compared with last year as a” decrease in the selling price of steel” affected its top line and its bottom line.

The Ontario-based company, in accompanying notes to its earnings report, says its late 2021 decision to construct two new electric arc furnaces (EAFs) to replace its existing blast furnace and basic oxygen steelmaking operations remains in effect. “The C$700 million ($518 million) project is expected to take two years to complete and is advancing as planned,” Algoma says.

The company’s most recent quarter, which ran from July 1 to Sept. 30, consisted of reduced activity and revenue compared with the summer of 2021.

Its summer 2022 revenue of C$599.2 million ($443.4 million) was down by 40.7 percent compared with the summer 2021 timeframe. “Average realized price of steel net of freight and nonsteel revenue was C$1,266 ($937) per ton, down 20.6 percent from C$1,594 ($1,180) per ton in the prior-year quarter,” Algoma adds.

While steel costs were dropping, input costs were rising, the firm says, adding, “Cost per ton of steel products sold was C$1,033 ($764), up 20.7 percent from C$857 ($634) in the prior-year quarter, driven primarily by higher input costs associated with third-party metallurgical coke purchases, natural gas, alloys and scrap."

The compressed margins were evident in Algoma’s income statement. Consolidated income from operations of just C$5.6 million ($4.14 million) was registered this summer. That compares with C$402.1 million ($298 million) earned in the summer of 2021. The firm’s net income reached C$87.2 million ($64.5 million)  for the summer, down from $288.2 million ($213.3 million) netted last summer.

“As previously disclosed, the fiscal second quarter presented a number of operational challenges that adversely impacted our results, while we worked against the backdrop of steel pricing uncertainty," Algoma CEO Michael Garcia says. "We are focused on overcoming those transitory events to return our facilities to full operating capacity.”

Looking forward, Garcia adds, “We continue to advance our transformative electric arc furnace project, which remains on time and on budget and are completing the final stages of the plate mill modernization phase one commissioning.”