NASDAQ:ASTL Algoma Steel Group Q3 2024 Earnings Report $5.25 +0.32 (+6.49%) Closing price 04/24/2025 04:00 PM EasternExtended Trading$5.22 -0.04 (-0.67%) As of 09:14 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Algoma Steel Group EPS ResultsActual EPS-$0.57Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AAlgoma Steel Group Revenue ResultsActual Revenue$452.07 millionExpected Revenue$453.22 millionBeat/MissMissed by -$1.15 millionYoY Revenue GrowthN/AAlgoma Steel Group Announcement DetailsQuarterQ3 2024Date2/6/2024TimeN/AConference Call DateWednesday, February 7, 2024Conference Call Time11:00AM ETUpcoming EarningsAlgoma Steel Group's Q4 2025 earnings is scheduled for Tuesday, April 29, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Algoma Steel Group Q3 2024 Earnings Call TranscriptProvided by QuartrFebruary 7, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Hello, and welcome to today's conference call to discuss Algoma Steel's Fiscal Third Quarter 2024 Financial Results. My name is Paul, and I'm your operator for today's call. At this time, I'd like to hand the call over to Mike Moraca, Treasurer and Investor Relations Officer for Algoma. Mr. Maraca, please go ahead. Speaker 100:00:22Good morning, everyone, and welcome to Algoma Steel Group Inc. 3rd Quarter Fiscal 20 24 Earnings Conference Call. Leading today's call are Michael Garcia, our Chief Executive Officer and Rajat Marwa, 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 corporate website atwww.algoma.com. 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. Speaker 100:00:56Actual 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 to certain non IFRS financial measures. Last evening, we posted an earnings presentation to accompany today's prepared remarks. Speaker 100:01:16The 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 2 of the accompanying earnings presentation and also to refer to the risks and assumptions outlined in Algoma Steel Algoma Steel's 3rd Quarter Fiscal 20 24 Management Discussion and Analysis. Please note that our financial statements are prepared using the U. S. Dollar as our functional and the Canadian dollar as our presentation currency. Speaker 100:01:46Our fiscal year runs from April 1 to March 31, Our financial statements have been prepared for the 3 9 months ended December 31, 2023. 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. Mike? Speaker 200:02:12Thank you, Mike. Morning and thank you for joining us to discuss our fiscal 3rd quarter results. As is customary, I'll start by highlighting our top priority, the safety of our employees. At Algoma, we uphold an unwavering commitment to safety, which has resulted in a notable improvement to lost time injury performance year to date. While our site remains bustling with activity, it's crucial to underscore the significance of safety, particularly as our EAF project progresses with increasing contractor involvement. Speaker 200:02:43We remain steadfast in our pursuit of 0 workplace injuries. Next, I'll cover key events and milestones during our fiscal Q3 and subsequent to its end, as well as give an update on progress at our transformative EAF project. I will then turn the call over to Rajat for a deeper dive into the numbers and a discussion of our liquidity and balance sheet before closing with an update on market conditions. There are a few important things I would like to get across on this call. Our long term strategy remains unchanged and on track to successfully execute the transition to being one of North America's Greenest producers of steel. Speaker 200:03:24Our results for the quarter were comfortably in line with our expectations. Our facilities are back online with a goal of reaching full production as quickly and safely as possible following the coke making utility structure collapse. And finally, the outlook for our end markets calls for an improvement in pricing relative to calendar year 2023. Now let me give you some additional color on those key themes. Our results for the fiscal Q3 of 2024 were in line with our previously disclosed guidance on both shipments and adjusted EBITDA, and we achieved year over year improvements in nearly all of our key metrics. Speaker 200:04:03As a reminder, our fiscal Q3 included major seasonal maintenance, which was completed as planned ahead of the winter months. Due to the lagging nature of our order book, realized pricing in the quarter did not yet reflect the run up in markets around the end of the UAW strike. That stronger pricing is expected to begin benefiting our financial results in the fiscal Q4, which unfortunately will be largely offset by impacts related to the outage caused by the incident at our coke making plant that I will discuss in more detail shortly. Our fiscal Q3 is typically a busy one in terms of seasonal maintenance and this year was no exception. In totality, the work was completed as planned. Speaker 200:04:45We also built seasonal inventories for our normal practice going into the end of the calendar year. During the quarter, we made additional progress on Phase 2 of our plate mill modernization project, including bringing the in line share online and ramping up its production through the end of the year. We expect higher production levels of play going forward, will allow us to capture market opportunities and to build inventory ahead of the planned outages for the implementation of the final pieces of the modernization project. As a reminder, we have split the originally planned 40 day outage into 2 shorter duration outages with the first outage scheduled in April and the second outage planned for late calendar year 2024 to align with other planned maintenance activities, providing some efficiencies on downtime. Next, I'd like to update you on the progress during the quarter On our transformational electric arc or EAF project, the EAF will ultimately increase our throughput capacity by roughly a third From 2,800,000 tons per year of liquid steelmaking capacity by conventional means today to 3,700,000 tons employing dual furnaces upon completion. Speaker 200:05:59The higher output will match our expanded downstream finishing capacity as we increase capacity at our plate mill. We will improve overall product mix and lower our carbon emissions by approximately 70% when fully operational. When factoring in the makeup of our power supply When we switch to EAF operations, we expect to be one of the greenest producers of steel in North America. During the quarter, cumulative investment in the EAF project reached $510,000,000 To date, we have committed contracts totaling approximately $750,000,000 with approximately 7% tied to time and material contracts, While the balance is fixed price in nature, we expect to contract the majority of the remaining project elements by the end of the current quarter. This will significantly de risk the EAF project budget as we progress towards our expected commissioning in late calendar year 2024. Speaker 200:06:57As a reminder, our start up plan continues to include normal production from our existing steelmaking facility, while ramping up steel production from our EAFs in calendar year 2025, followed by a complete switch to EAF production. Before I hand it over to Rajat, let me give you an update on our operations currently. As we previously disclosed on January 20 In January 23, there was an incident at our coke making plant that involved the collapse of a structure supporting utilities piping. Thankfully, there were no injuries, But the event did impact several of the utilities that service the coke batteries and other facilities throughout the steelworks. Boak making operations were suspended at the time of the incident, and we are able to stabilize heat to all three batteries and resume partial coke production within 72 hours of the incident. Speaker 200:07:50When factoring in coke inventories on hand, the availability of third party coke and our partial production capabilities, we are able to satisfy all of our steelmaking raw material input needs, while at the same time pursuing a permanent repair plan for the plant. As we also disclosed previously at the time of the incident, we temporarily suspended blast furnace operations for safety reasons. The blast furnace experienced operational challenges upon initial restart due to unforeseen impacts related to the piping collapse. All necessary repairs to the blast furnace have been completed And the furnace is gradually being brought back online. Usable hot metal is expected to be produced within the 7 days with the return to full production anticipated within the next 2 weeks. Speaker 200:08:40Most importantly, we will undertake these recovery efforts with safety of our employees and our community at the forefront. While doing this, we continue to advance the EAF project on schedule. I'd like to once again thank all of our employees for their hard work, dedication and professionalism. Now I will pass the call over to Rajit go over our financial results for the quarter. Rajit? Speaker 300:09:04Thanks, Mike. Good morning and thank you all for joining the call. As a reminder, All numbers are expressed in Canadian dollars unless otherwise noted. We shipped 516,000 tons in the quarter, 6% as compared to the prior year period. Our plate and strip operations ran well in the quarter, even as we completed our normal seasonal maintenance, including our annual steel making vessel reline. Speaker 300:09:35Net sales realization averaged $10.79 per ton, down 3.3% versus the prior year period. The decrease versus the prior year level primarily reflects somewhat softer market conditions in the quarter. In particular, the residual lower prices resulting from the UAW strike and due to the lagging nature of our order book. Plate pricing continued to enjoy a significant premium relative to hot rolled coil during the quarter, driven by resilient demand, particularly from spending on infrastructure projects and durables. Steel revenue in the quarter totaled $556,900,000 up 8.8% versus the same quarter of last year, reflecting the increase in shipments that more than offset lower average realizations per ton of steel. Speaker 300:10:26On the cost side, Algoma's cost per ton of steel products sold averaged $10.27 in the quarter, down 11.2% versus the prior year period. The decrease versus the prior year period is primarily attributable to favorable leverage on higher volumes. This resulted in adjusted EBITDA in the quarter of negative $1,000,000 and adjusted EBITDA margin of negative 0.2 percent, an improvement from negative $35,900,000 and negative 6.3 percent in the year ago period. Cash used in operations totaled $47,400,000 for the quarter compared to a use of $128,600,000 in the prior year period. Our inventories at the quarter rent were $886,600,000 up 7.8% during the quarter due to normal seasonal build patterns ahead of winter. Speaker 300:11:22We would typically expect to release inventories in the first half of calendar twenty twenty four, Heavily weighted towards the 1st calendar quarter, but the impact of the coke making plant incident will result in higher levels of inventory for inputs like ore and coal delaying some of that anticipated inventory release. Looking prospectively, We do expect the 4th fiscal quarter to experience directionally higher EBITDA versus the 3rd fiscal quarter. Earnings performance will obviously be impacted by the production outage related to the utility structure collapse. All told, we expect the incident to impact production and shipments for more than 3 weeks, totaling roughly 120,000 tons to 150,000 tons. It should be noted that Algoma carries standard insurance coverage that is intended to protect the company at times like these, including Business Interruption Insurance. Speaker 300:12:21We have begun the process of submitting claims under our policy for covered losses And insurance adjusters and advisors were on-site in Sosimery. We are working closely with them to secure our protection. We expect to have more details on this front in coming months. From a working capital perspective, We had mentioned on our previous call that we expect to release a total of $150,000,000 by the end of fiscal 2025, with approximately $100,000,000 of working capital drawdown in the 4th fiscal quarter of 2024. On account of the coke making utility structure collapse and the related operational outages, we expect to release 70% less than originally expected amount in the 4th fiscal quarter. Speaker 300:13:11This timing issue will result in us releasing the balance over subsequent quarters and we still expect to release approximately $150,000,000 over this period. I would like to provide a reiteration of our funding plans for the year project. As previously noted, our outlook for total cost of the project remains in the range of 8 $5,000,000 to $875,000,000 Though the end of the quarter, we had spent $510,000,000 or 60% of the expected total, leaving $340,000,000 of investment remaining. We are well positioned today when we look at our expected sources for those expenditures over the course of 2024. We have structured our balance sheet such that the only long term debt we carry is in the form of government loans linked to our capital projects, allowing us to maintain a very low leverage profile. Speaker 300:14:06The ample liquidity of nearly $400,000,000 at quarter end to manage through market fluctuation and complete our capital initiatives. We have cash on hand of nearly 95,000,000 another $76,000,000 of available capacity on our federal SIP loan and approximately $150,000,000 of cash to be generated from working down excess working capital in the months ahead. Combined, this roughly matches the expected capital requirements to complete the project, highlighting our ability to advance this transformative project as planned. I'd now like to turn the call back to our CEO, Michael Garcia for closing comments. Mike? Speaker 200:14:48Thank you, Rajat. Looking at the state of the North American steel market, hot rolled coil index prices moved dramatically higher in October as a settlement in the UAW strike became apparent and Steel consumers rush to replenish their inventory needs. Over the calendar Q4, pricing moved from the mid-six hundred range to touch nearly $1100 per net ton by the end of the year. Pricing so far in 2024 has come in with index prices dropping by approximately $50 and futures falling into the mid-eight hundred dollars per ton U. S. Speaker 200:15:24Average for the balance of 2024. While off from year end highs, these prices still represent a meaningful from levels seen during much of 2023. As Rajat mentioned, we are also supported by the fact that Plate pricing continues to demonstrate a significant premium as overall demand for plate products remains high. This in turn continues to benefit our average price realizations, especially as we ramp up operations in our plate mill. 2024 will be an important year in the story of Algoma As we continue to execute work towards the commissioning of our transformative EAF project, this will usher in the next phase of our company that defines the future of Algoma provides the foundation for long term value creation for our stakeholders and solidifies our leadership position at the forefront of green steel production in North America. Speaker 200:16:19Thank 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 and A session. Operator00:17:19Thank you. Our first question is from David Ocampo with Cormark Securities. Please proceed with your question. Speaker 400:17:29Thanks for taking my questions. My first one is just on a bigger picture question. I guess when you look to 2025, You guys have always discussed being a hybrid operator and either tilting towards being a pure play EAF or throwing in a little bit of your blast furnace there. When you think about the issues that just happened at the Koch facility and even the blast furnace, does that change your tune On what you guys ultimately decide for 2025 or is it just going to come down to cost? I'm curious on your thoughts there. Speaker 200:18:04Hi, David. This is Mike. Yes, I think that right now our plan still remains to operate in 2025 in a hybrid mode. That's been the plan for some time as well as We think it makes the right financial sense as well. And obviously, financials will continue to keep a very close eye on that. Speaker 200:18:30Given the incident this in the past 2 weeks, we'll have to understand the state of the assets and make sure we're comfortable With the asset integrity of both the blast furnace, which we pay a lot of attention to and it features very prominently on Our asset integrity and asset reliability plan, but as well as the coke ovens. But assuming nothing significantly changes in either one of those perspectives or analysis, we feel comfortable with our current plan. Speaker 400:19:04Got it. And maybe early days and maybe this one's for Rigeloft, but should we be thinking about the cost structure when you guys are hybrid operator? Is it cost plus type model or Just curious what the added cost will be with the dual cost structure, dual manufacturing process? Speaker 300:19:24Hi, David. The best way to look at it is that we will be operating an additional facility which is the electric arc facility and as we indicated in the past, it probably will carry 100 to 140 people more from Manning perspective, which becomes your fixed cost and rest most of it becomes variable in the form of using metal in the electric arc furnace or using metal through the blast furnace. So as far as the added fixed cost is concerned, it's that And the maintenance costs will not be much as it is a new asset. So we don't expect it to be substantially higher as we go through it. It definitely will be higher as we are transitioning and as we transition and start shutting down the facilities and start reducing the fixed on those facilities, the cost will start coming down. Speaker 400:20:31Got it. And lots on for me, Rizal. You gave some Capital plans, at least as it relates to the EAF, I was hoping you could square up the total CapEx for this year broken down by maintenance, the plate modernization and then layering on the EAF on top of that. Speaker 300:20:49So when you say this year, you're talking of 2025 fiscal? Speaker 400:20:54I guess, 2024 calendar. Speaker 300:20:582024 calendar. So yes, pretty much should be in line. So it should be roughly $250 odd 1,000,000 on EAF that we'll be spending From CapEx perspective, we and this is gross CapEx, not net. And then we will be spending on our maintenance. It's roughly $100,000,000 to $120,000,000 on our maintenance CapEx that we will be spending. Speaker 300:21:34So that's your total. Now there is some plate mill CapEx that will be spent in the Q1 and little bit later on with to complete the plate mill project. And that's how the CapEx will run. There is money spent on recovery of the coke batteries, which definitely will form part of the whole analysis that we are doing along with insurance, but that will be in addition. Speaker 400:22:12Got it. Okay. Thanks so much. I'll hand the call over. Operator00:22:18Thank you. Our next question is from Katya Jansak with BMO Capital Markets. Please proceed with your question. Speaker 500:22:26Hi. Thank you for taking my questions. First, just to confirm, you expect EBITDA to be higher sequentially in 4Q? Speaker 300:22:37That's correct. Speaker 500:22:39And that's mostly going to be driven by pricing or is there any cost puts and takes there? Speaker 300:22:46It mostly will be pricing cost will be pretty similar and from variable cost perspective, fixed cost depending on the volume definitely will be higher, but it's mostly coming from pricing. Speaker 500:23:00And this currently assumes 3 weeks of lost Production, right? Speaker 300:23:07Yes. Roughly 120,000 to 150,000 tons of of production and shipment. Speaker 500:23:14And maybe just on the blast furnace, it's close to needing a full realign. Is there a risk that that complicates the restart? Speaker 200:23:26Hi, Katya. This is Mike. No, not really. I think the blast furnace disruption was more related to the utility service incident at coke making. We've restarted it and are slowly bringing it back to good metal. Speaker 200:23:48I don't think that the time since the last reline is really a factor into the incident that happened or the state that we'll get it back to once we're making good metal. Does that help? Speaker 500:24:08Yes. Thank you. I'll hop back into the queue. Operator00:24:13Thank you. Our next question is from Ian Giles with Stifel. Please proceed with your question. Speaker 600:24:20Good morning, everyone. Speaker 200:24:22Hey. Good morning, Ian. Speaker 600:24:24Just to reconfirm on the working capital numbers you provided, Were you suggesting that for fiscal year 'twenty four, there will be, call it, a $40,000,000 to $50,000,000 release? And then in fiscal year 'twenty five, We're looking at another at $100,000,000 release? Speaker 100:24:43Yes. Speaker 600:24:45And the follow on from that question is, does that contemplate Incurrence of or investing in additional working capital ahead of the EAF ramp, because I presume you're going to have to start buying scrap ahead of startup and commissioning at year end? Speaker 300:25:05Yes, it does. And just for context, We will be buying scrap, but not much as we are not much by end of this year as we are ramping up. It probably will be more in the following year. As we buy and at that point in time, our iron ore and coal inventory will go down substantially as well. So yes, it does consider whatever we will buy for the ramp up And we'll still be reducing that $100,000,000 or $115,000,000 total by next year. Speaker 600:25:43And Rajat, given some of, I guess, the timing differences now with spending in relation to the EAF and the use of the credit facility, Is there anything within the government loans you have right now that prevents the incurrence of additional debt or anything like that that could limit your availability? Speaker 300:26:04No, there are buckets or baskets which are available that we can if we have to that the credit market we can. Speaker 600:26:16Okay. And then I suppose as we start looking into the remainder of this year and as we think about timing of The capital cost for the EAF, is that an update you'll provide with your typical guidance that you provide in the early part of April or will that be provided at a later date do you think? Speaker 200:26:47We're not sure what you mean By the capital cost E and O Speaker 600:26:51Well, sorry, just to be clear, you'd suggested that you think you'll have every all the projects the capital cost secured by the end of this calendar quarter. And you typically provide guidance in and around EBITDA for a quarter, it early the following months or early April. I was just wondering if within that release you think you'll provide an update on the EAF and costs etcetera? Speaker 300:27:15Yes, sure. We will as we typically do, we will provide Where we are on the EAF on the capital cost side, our expectation is majority of our cost should be fixed by that time. And we'll definitely provide an update by that time. Speaker 600:27:38Okay. Thanks very much. I'll turn it back over. Speaker 200:27:41Thanks, Ian. Operator00:27:44Thank you. Our next question is from Ahmed Shah with Beacon Securities. Please proceed with your question. Speaker 700:27:53Hey, guys. Just maybe first follow-up, I guess, what reference point do you suggest we use in terms of shipments for Q4 relative to the $120,000 to $150,000 that you guys mentioned, just because there's a lot of variability year to date on the shipments volume? Speaker 300:28:11Yes. So typically we are at around $550,000,000 as an average for each quarter. So you can start from there. Speaker 700:28:22Perfect. That's very helpful. And in terms of Pricing, I guess you guys said that you expect directionally stronger prices for throughout calendar 'twenty four compared to calendar 'twenty 23. Is that the driver behind that? Is this the current futures curve? Speaker 700:28:44Or what assumptions are you Who's driving this comment? Speaker 300:28:51Yes. It's actually the future curves that we are seeing that's driving where pricing is. The other thing that's definitely driving our expectation for this year is The spending that's happening on the infrastructure and other areas, the consumption as such But the demand as such has been stable. So we don't expect big changes as such other than the sentimental changes that happen and also we are factoring in the cost element which has kept the lows at a higher number and kept the average through the cycle pricing at a higher number as well. So some of those factors are considered, but yes, the futures are also indicating where the pricing is going. Speaker 700:29:45Okay. That's very helpful. Thanks for that. And last Speaker 500:29:49one, I'm not sure if Speaker 700:29:49you guys touched on it, but are you guys planning maybe as we get closer to the commissioning of the AF, just update us on The potential savings and OpEx structure, I mean, it's been a while since I think the last update we had is from The data from the roadshow, while you go public, just wondering if there is a chance we get an update around those numbers this year? Speaker 200:30:17Yes, Amal. This is Mike. We'll continue to do that as we update information and get closer to the commissioning the commencement of commissioning on the EAFs at the end of this year, both on where what our end state will be as well as more information around what the short hybrid period will look like from that perspective. Speaker 700:30:45Got it. That's really helpful. Thanks. That's why I answered my question. Operator00:30:54Thank you. Our next question is from Lucas Pipes with B. Riley Securities. Please proceed with your question. Speaker 800:31:00Thank you very much, operator. Good morning, everyone. Apologies if I missed this, but I wondered if you could maybe Provide some color in terms of dollars and cents in regards to the Coke incident and wondered what's the OpEx impact This year might be and then also from a CapEx side, what would be any additional costs from longer term, any kind of long term costs to consider? Thank you very much. Speaker 200:31:32Sure. I'll start, Lucas. So we've completed the preparation of the repair plan using it out both outside engineering and internal resources. So we expect the total repair cost to be in the $20,000,000 to $30,000,000 range and should be complete sometime in the April time period. In terms of cost beyond that, our aim is to do a complete recovery back to full production of the coke batteries. Speaker 200:32:13Thankfully, during the incident, none of the 3 batteries suffered any thermal integrity degradation, we are able to protect the thermal integrity of all three batteries. So once the Repair is executed. Our goal is to get back to pre incident coke production levels. Speaker 800:32:39Got it. Any longer term costs that might be associated with this? Speaker 300:32:49I think it's too early to say, but we the way we've looked at it right now and the work that we are doing, The batteries as such are okay, the walls are okay. So we don't expect much degradation there, which is the key from long term cost perspective. As far as the corridor is concerned, the piping, that's the cost that we have assessed, which is $20,000,000 to $30,000,000 So at high level, We don't think that there will be additional cost, but we'll know more as we start the furnace to full production. And just an added color, during that period, we'd probably be running at 30% to 40% of our production and using external coke during this quarter. So and come next quarter, we should get down to our full production levels. Speaker 800:33:41Very helpful. Thank you. And I'll turn to a kind of high level topic on M and A. Saw a very active process in the U. S. Speaker 800:33:52With U. S. Steel and kind of I wondered how you look at the M and A landscape at this time, is there something that you think strategically Could really benefit Algoma? Or how do you expect the landscape to kind of evolve, Maybe more within Canada. Would appreciate your thoughts. Speaker 800:34:16Thank you. Speaker 200:34:19Hi, Lucas. While I'm sure it will evolve, it's our policy not to speculate or comment on how we may be thinking around Speaker 800:34:35Anything that would strategically Maybe be the uniquely beneficial to Alagoma? Or is it really just Focus on the EAF, so from your side nothing? Speaker 200:34:51Yes. I mean, obviously, our short term strategic path is clear. We believe that the EAF brings a tremendous strategic value to Algoma. We're We're laser focused on executing that. We're on time, on budget, and we very much look forward to commissioning at the end of this year, beginning commissioning. Speaker 800:35:16All right. Well, I appreciate that. Thank you very much. Thank you, Louis. Operator00:35:23Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mike Maraca for any closing comments. Speaker 100:35:31Well, thank you very much again for your participation in our Q3 fiscal 2024 earnings conference call and your continued interest in Algoma Steel. We look forward to updating you on our results and progress when we report our fiscal Q4 results scheduled for June. Thank you.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAlgoma Steel Group Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckInterim report Algoma Steel Group Earnings HeadlinesAlgoma Steel to Announce 2025 First Quarter Results April 29, 2025April 22 at 5:30 PM | globenewswire.comAlgoma Steel Group (NASDAQ:ASTL) Downgraded to Hold Rating by Stifel CanadaApril 19, 2025 | americanbankingnews.comCrypto’s crashing…but we’re still profitingMost traders are panicking right now. Bitcoin’s dropping. Altcoins are bleeding. The stock market’s a mess. The news is screaming fear. But while most traders watch their portfolios tank…April 25, 2025 | Crypto Swap Profits (Ad)Canada steel, aluminum plants lay off workers due to US tariffsMarch 26, 2025 | msn.comAlgoma Steel price target lowered to C$15 from C$18 at BMO CapitalMarch 17, 2025 | markets.businessinsider.comAlgoma Steel price target lowered to C$15.25 from C$21 at StifelMarch 14, 2025 | markets.businessinsider.comSee More Algoma Steel Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Algoma Steel Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Algoma Steel Group and other key companies, straight to your email. Email Address About Algoma Steel GroupAlgoma Steel Group (NASDAQ:ASTL) produces and sells steel products primarily in North America. The company provides flat/sheet steel products, including temper rolling, cold rolled, hot-rolled pickled and oiled products, floor plate, and cut-to-length products for the automotive industry, hollow structural product manufacturers, and the light manufacturing and transportation industries; and plate steel products that consist of rolled, hot-rolled, and heat-treated for use in the construction or manufacture of railcars, buildings, bridges, off-highway equipment, storage tanks, ships, and military applications. Algoma Steel Group Inc. was founded in 1901 and is headquartered in Sault Ste. Marie, Canada.View Algoma Steel Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 9 speakers on the call. Operator00:00:00Hello, and welcome to today's conference call to discuss Algoma Steel's Fiscal Third Quarter 2024 Financial Results. My name is Paul, and I'm your operator for today's call. At this time, I'd like to hand the call over to Mike Moraca, Treasurer and Investor Relations Officer for Algoma. Mr. Maraca, please go ahead. Speaker 100:00:22Good morning, everyone, and welcome to Algoma Steel Group Inc. 3rd Quarter Fiscal 20 24 Earnings Conference Call. Leading today's call are Michael Garcia, our Chief Executive Officer and Rajat Marwa, 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 corporate website atwww.algoma.com. 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. Speaker 100:00:56Actual 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 to certain non IFRS financial measures. Last evening, we posted an earnings presentation to accompany today's prepared remarks. Speaker 100:01:16The 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 2 of the accompanying earnings presentation and also to refer to the risks and assumptions outlined in Algoma Steel Algoma Steel's 3rd Quarter Fiscal 20 24 Management Discussion and Analysis. Please note that our financial statements are prepared using the U. S. Dollar as our functional and the Canadian dollar as our presentation currency. Speaker 100:01:46Our fiscal year runs from April 1 to March 31, Our financial statements have been prepared for the 3 9 months ended December 31, 2023. 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. Mike? Speaker 200:02:12Thank you, Mike. Morning and thank you for joining us to discuss our fiscal 3rd quarter results. As is customary, I'll start by highlighting our top priority, the safety of our employees. At Algoma, we uphold an unwavering commitment to safety, which has resulted in a notable improvement to lost time injury performance year to date. While our site remains bustling with activity, it's crucial to underscore the significance of safety, particularly as our EAF project progresses with increasing contractor involvement. Speaker 200:02:43We remain steadfast in our pursuit of 0 workplace injuries. Next, I'll cover key events and milestones during our fiscal Q3 and subsequent to its end, as well as give an update on progress at our transformative EAF project. I will then turn the call over to Rajat for a deeper dive into the numbers and a discussion of our liquidity and balance sheet before closing with an update on market conditions. There are a few important things I would like to get across on this call. Our long term strategy remains unchanged and on track to successfully execute the transition to being one of North America's Greenest producers of steel. Speaker 200:03:24Our results for the quarter were comfortably in line with our expectations. Our facilities are back online with a goal of reaching full production as quickly and safely as possible following the coke making utility structure collapse. And finally, the outlook for our end markets calls for an improvement in pricing relative to calendar year 2023. Now let me give you some additional color on those key themes. Our results for the fiscal Q3 of 2024 were in line with our previously disclosed guidance on both shipments and adjusted EBITDA, and we achieved year over year improvements in nearly all of our key metrics. Speaker 200:04:03As a reminder, our fiscal Q3 included major seasonal maintenance, which was completed as planned ahead of the winter months. Due to the lagging nature of our order book, realized pricing in the quarter did not yet reflect the run up in markets around the end of the UAW strike. That stronger pricing is expected to begin benefiting our financial results in the fiscal Q4, which unfortunately will be largely offset by impacts related to the outage caused by the incident at our coke making plant that I will discuss in more detail shortly. Our fiscal Q3 is typically a busy one in terms of seasonal maintenance and this year was no exception. In totality, the work was completed as planned. Speaker 200:04:45We also built seasonal inventories for our normal practice going into the end of the calendar year. During the quarter, we made additional progress on Phase 2 of our plate mill modernization project, including bringing the in line share online and ramping up its production through the end of the year. We expect higher production levels of play going forward, will allow us to capture market opportunities and to build inventory ahead of the planned outages for the implementation of the final pieces of the modernization project. As a reminder, we have split the originally planned 40 day outage into 2 shorter duration outages with the first outage scheduled in April and the second outage planned for late calendar year 2024 to align with other planned maintenance activities, providing some efficiencies on downtime. Next, I'd like to update you on the progress during the quarter On our transformational electric arc or EAF project, the EAF will ultimately increase our throughput capacity by roughly a third From 2,800,000 tons per year of liquid steelmaking capacity by conventional means today to 3,700,000 tons employing dual furnaces upon completion. Speaker 200:05:59The higher output will match our expanded downstream finishing capacity as we increase capacity at our plate mill. We will improve overall product mix and lower our carbon emissions by approximately 70% when fully operational. When factoring in the makeup of our power supply When we switch to EAF operations, we expect to be one of the greenest producers of steel in North America. During the quarter, cumulative investment in the EAF project reached $510,000,000 To date, we have committed contracts totaling approximately $750,000,000 with approximately 7% tied to time and material contracts, While the balance is fixed price in nature, we expect to contract the majority of the remaining project elements by the end of the current quarter. This will significantly de risk the EAF project budget as we progress towards our expected commissioning in late calendar year 2024. Speaker 200:06:57As a reminder, our start up plan continues to include normal production from our existing steelmaking facility, while ramping up steel production from our EAFs in calendar year 2025, followed by a complete switch to EAF production. Before I hand it over to Rajat, let me give you an update on our operations currently. As we previously disclosed on January 20 In January 23, there was an incident at our coke making plant that involved the collapse of a structure supporting utilities piping. Thankfully, there were no injuries, But the event did impact several of the utilities that service the coke batteries and other facilities throughout the steelworks. Boak making operations were suspended at the time of the incident, and we are able to stabilize heat to all three batteries and resume partial coke production within 72 hours of the incident. Speaker 200:07:50When factoring in coke inventories on hand, the availability of third party coke and our partial production capabilities, we are able to satisfy all of our steelmaking raw material input needs, while at the same time pursuing a permanent repair plan for the plant. As we also disclosed previously at the time of the incident, we temporarily suspended blast furnace operations for safety reasons. The blast furnace experienced operational challenges upon initial restart due to unforeseen impacts related to the piping collapse. All necessary repairs to the blast furnace have been completed And the furnace is gradually being brought back online. Usable hot metal is expected to be produced within the 7 days with the return to full production anticipated within the next 2 weeks. Speaker 200:08:40Most importantly, we will undertake these recovery efforts with safety of our employees and our community at the forefront. While doing this, we continue to advance the EAF project on schedule. I'd like to once again thank all of our employees for their hard work, dedication and professionalism. Now I will pass the call over to Rajit go over our financial results for the quarter. Rajit? Speaker 300:09:04Thanks, Mike. Good morning and thank you all for joining the call. As a reminder, All numbers are expressed in Canadian dollars unless otherwise noted. We shipped 516,000 tons in the quarter, 6% as compared to the prior year period. Our plate and strip operations ran well in the quarter, even as we completed our normal seasonal maintenance, including our annual steel making vessel reline. Speaker 300:09:35Net sales realization averaged $10.79 per ton, down 3.3% versus the prior year period. The decrease versus the prior year level primarily reflects somewhat softer market conditions in the quarter. In particular, the residual lower prices resulting from the UAW strike and due to the lagging nature of our order book. Plate pricing continued to enjoy a significant premium relative to hot rolled coil during the quarter, driven by resilient demand, particularly from spending on infrastructure projects and durables. Steel revenue in the quarter totaled $556,900,000 up 8.8% versus the same quarter of last year, reflecting the increase in shipments that more than offset lower average realizations per ton of steel. Speaker 300:10:26On the cost side, Algoma's cost per ton of steel products sold averaged $10.27 in the quarter, down 11.2% versus the prior year period. The decrease versus the prior year period is primarily attributable to favorable leverage on higher volumes. This resulted in adjusted EBITDA in the quarter of negative $1,000,000 and adjusted EBITDA margin of negative 0.2 percent, an improvement from negative $35,900,000 and negative 6.3 percent in the year ago period. Cash used in operations totaled $47,400,000 for the quarter compared to a use of $128,600,000 in the prior year period. Our inventories at the quarter rent were $886,600,000 up 7.8% during the quarter due to normal seasonal build patterns ahead of winter. Speaker 300:11:22We would typically expect to release inventories in the first half of calendar twenty twenty four, Heavily weighted towards the 1st calendar quarter, but the impact of the coke making plant incident will result in higher levels of inventory for inputs like ore and coal delaying some of that anticipated inventory release. Looking prospectively, We do expect the 4th fiscal quarter to experience directionally higher EBITDA versus the 3rd fiscal quarter. Earnings performance will obviously be impacted by the production outage related to the utility structure collapse. All told, we expect the incident to impact production and shipments for more than 3 weeks, totaling roughly 120,000 tons to 150,000 tons. It should be noted that Algoma carries standard insurance coverage that is intended to protect the company at times like these, including Business Interruption Insurance. Speaker 300:12:21We have begun the process of submitting claims under our policy for covered losses And insurance adjusters and advisors were on-site in Sosimery. We are working closely with them to secure our protection. We expect to have more details on this front in coming months. From a working capital perspective, We had mentioned on our previous call that we expect to release a total of $150,000,000 by the end of fiscal 2025, with approximately $100,000,000 of working capital drawdown in the 4th fiscal quarter of 2024. On account of the coke making utility structure collapse and the related operational outages, we expect to release 70% less than originally expected amount in the 4th fiscal quarter. Speaker 300:13:11This timing issue will result in us releasing the balance over subsequent quarters and we still expect to release approximately $150,000,000 over this period. I would like to provide a reiteration of our funding plans for the year project. As previously noted, our outlook for total cost of the project remains in the range of 8 $5,000,000 to $875,000,000 Though the end of the quarter, we had spent $510,000,000 or 60% of the expected total, leaving $340,000,000 of investment remaining. We are well positioned today when we look at our expected sources for those expenditures over the course of 2024. We have structured our balance sheet such that the only long term debt we carry is in the form of government loans linked to our capital projects, allowing us to maintain a very low leverage profile. Speaker 300:14:06The ample liquidity of nearly $400,000,000 at quarter end to manage through market fluctuation and complete our capital initiatives. We have cash on hand of nearly 95,000,000 another $76,000,000 of available capacity on our federal SIP loan and approximately $150,000,000 of cash to be generated from working down excess working capital in the months ahead. Combined, this roughly matches the expected capital requirements to complete the project, highlighting our ability to advance this transformative project as planned. I'd now like to turn the call back to our CEO, Michael Garcia for closing comments. Mike? Speaker 200:14:48Thank you, Rajat. Looking at the state of the North American steel market, hot rolled coil index prices moved dramatically higher in October as a settlement in the UAW strike became apparent and Steel consumers rush to replenish their inventory needs. Over the calendar Q4, pricing moved from the mid-six hundred range to touch nearly $1100 per net ton by the end of the year. Pricing so far in 2024 has come in with index prices dropping by approximately $50 and futures falling into the mid-eight hundred dollars per ton U. S. Speaker 200:15:24Average for the balance of 2024. While off from year end highs, these prices still represent a meaningful from levels seen during much of 2023. As Rajat mentioned, we are also supported by the fact that Plate pricing continues to demonstrate a significant premium as overall demand for plate products remains high. This in turn continues to benefit our average price realizations, especially as we ramp up operations in our plate mill. 2024 will be an important year in the story of Algoma As we continue to execute work towards the commissioning of our transformative EAF project, this will usher in the next phase of our company that defines the future of Algoma provides the foundation for long term value creation for our stakeholders and solidifies our leadership position at the forefront of green steel production in North America. Speaker 200:16:19Thank 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 and A session. Operator00:17:19Thank you. Our first question is from David Ocampo with Cormark Securities. Please proceed with your question. Speaker 400:17:29Thanks for taking my questions. My first one is just on a bigger picture question. I guess when you look to 2025, You guys have always discussed being a hybrid operator and either tilting towards being a pure play EAF or throwing in a little bit of your blast furnace there. When you think about the issues that just happened at the Koch facility and even the blast furnace, does that change your tune On what you guys ultimately decide for 2025 or is it just going to come down to cost? I'm curious on your thoughts there. Speaker 200:18:04Hi, David. This is Mike. Yes, I think that right now our plan still remains to operate in 2025 in a hybrid mode. That's been the plan for some time as well as We think it makes the right financial sense as well. And obviously, financials will continue to keep a very close eye on that. Speaker 200:18:30Given the incident this in the past 2 weeks, we'll have to understand the state of the assets and make sure we're comfortable With the asset integrity of both the blast furnace, which we pay a lot of attention to and it features very prominently on Our asset integrity and asset reliability plan, but as well as the coke ovens. But assuming nothing significantly changes in either one of those perspectives or analysis, we feel comfortable with our current plan. Speaker 400:19:04Got it. And maybe early days and maybe this one's for Rigeloft, but should we be thinking about the cost structure when you guys are hybrid operator? Is it cost plus type model or Just curious what the added cost will be with the dual cost structure, dual manufacturing process? Speaker 300:19:24Hi, David. The best way to look at it is that we will be operating an additional facility which is the electric arc facility and as we indicated in the past, it probably will carry 100 to 140 people more from Manning perspective, which becomes your fixed cost and rest most of it becomes variable in the form of using metal in the electric arc furnace or using metal through the blast furnace. So as far as the added fixed cost is concerned, it's that And the maintenance costs will not be much as it is a new asset. So we don't expect it to be substantially higher as we go through it. It definitely will be higher as we are transitioning and as we transition and start shutting down the facilities and start reducing the fixed on those facilities, the cost will start coming down. Speaker 400:20:31Got it. And lots on for me, Rizal. You gave some Capital plans, at least as it relates to the EAF, I was hoping you could square up the total CapEx for this year broken down by maintenance, the plate modernization and then layering on the EAF on top of that. Speaker 300:20:49So when you say this year, you're talking of 2025 fiscal? Speaker 400:20:54I guess, 2024 calendar. Speaker 300:20:582024 calendar. So yes, pretty much should be in line. So it should be roughly $250 odd 1,000,000 on EAF that we'll be spending From CapEx perspective, we and this is gross CapEx, not net. And then we will be spending on our maintenance. It's roughly $100,000,000 to $120,000,000 on our maintenance CapEx that we will be spending. Speaker 300:21:34So that's your total. Now there is some plate mill CapEx that will be spent in the Q1 and little bit later on with to complete the plate mill project. And that's how the CapEx will run. There is money spent on recovery of the coke batteries, which definitely will form part of the whole analysis that we are doing along with insurance, but that will be in addition. Speaker 400:22:12Got it. Okay. Thanks so much. I'll hand the call over. Operator00:22:18Thank you. Our next question is from Katya Jansak with BMO Capital Markets. Please proceed with your question. Speaker 500:22:26Hi. Thank you for taking my questions. First, just to confirm, you expect EBITDA to be higher sequentially in 4Q? Speaker 300:22:37That's correct. Speaker 500:22:39And that's mostly going to be driven by pricing or is there any cost puts and takes there? Speaker 300:22:46It mostly will be pricing cost will be pretty similar and from variable cost perspective, fixed cost depending on the volume definitely will be higher, but it's mostly coming from pricing. Speaker 500:23:00And this currently assumes 3 weeks of lost Production, right? Speaker 300:23:07Yes. Roughly 120,000 to 150,000 tons of of production and shipment. Speaker 500:23:14And maybe just on the blast furnace, it's close to needing a full realign. Is there a risk that that complicates the restart? Speaker 200:23:26Hi, Katya. This is Mike. No, not really. I think the blast furnace disruption was more related to the utility service incident at coke making. We've restarted it and are slowly bringing it back to good metal. Speaker 200:23:48I don't think that the time since the last reline is really a factor into the incident that happened or the state that we'll get it back to once we're making good metal. Does that help? Speaker 500:24:08Yes. Thank you. I'll hop back into the queue. Operator00:24:13Thank you. Our next question is from Ian Giles with Stifel. Please proceed with your question. Speaker 600:24:20Good morning, everyone. Speaker 200:24:22Hey. Good morning, Ian. Speaker 600:24:24Just to reconfirm on the working capital numbers you provided, Were you suggesting that for fiscal year 'twenty four, there will be, call it, a $40,000,000 to $50,000,000 release? And then in fiscal year 'twenty five, We're looking at another at $100,000,000 release? Speaker 100:24:43Yes. Speaker 600:24:45And the follow on from that question is, does that contemplate Incurrence of or investing in additional working capital ahead of the EAF ramp, because I presume you're going to have to start buying scrap ahead of startup and commissioning at year end? Speaker 300:25:05Yes, it does. And just for context, We will be buying scrap, but not much as we are not much by end of this year as we are ramping up. It probably will be more in the following year. As we buy and at that point in time, our iron ore and coal inventory will go down substantially as well. So yes, it does consider whatever we will buy for the ramp up And we'll still be reducing that $100,000,000 or $115,000,000 total by next year. Speaker 600:25:43And Rajat, given some of, I guess, the timing differences now with spending in relation to the EAF and the use of the credit facility, Is there anything within the government loans you have right now that prevents the incurrence of additional debt or anything like that that could limit your availability? Speaker 300:26:04No, there are buckets or baskets which are available that we can if we have to that the credit market we can. Speaker 600:26:16Okay. And then I suppose as we start looking into the remainder of this year and as we think about timing of The capital cost for the EAF, is that an update you'll provide with your typical guidance that you provide in the early part of April or will that be provided at a later date do you think? Speaker 200:26:47We're not sure what you mean By the capital cost E and O Speaker 600:26:51Well, sorry, just to be clear, you'd suggested that you think you'll have every all the projects the capital cost secured by the end of this calendar quarter. And you typically provide guidance in and around EBITDA for a quarter, it early the following months or early April. I was just wondering if within that release you think you'll provide an update on the EAF and costs etcetera? Speaker 300:27:15Yes, sure. We will as we typically do, we will provide Where we are on the EAF on the capital cost side, our expectation is majority of our cost should be fixed by that time. And we'll definitely provide an update by that time. Speaker 600:27:38Okay. Thanks very much. I'll turn it back over. Speaker 200:27:41Thanks, Ian. Operator00:27:44Thank you. Our next question is from Ahmed Shah with Beacon Securities. Please proceed with your question. Speaker 700:27:53Hey, guys. Just maybe first follow-up, I guess, what reference point do you suggest we use in terms of shipments for Q4 relative to the $120,000 to $150,000 that you guys mentioned, just because there's a lot of variability year to date on the shipments volume? Speaker 300:28:11Yes. So typically we are at around $550,000,000 as an average for each quarter. So you can start from there. Speaker 700:28:22Perfect. That's very helpful. And in terms of Pricing, I guess you guys said that you expect directionally stronger prices for throughout calendar 'twenty four compared to calendar 'twenty 23. Is that the driver behind that? Is this the current futures curve? Speaker 700:28:44Or what assumptions are you Who's driving this comment? Speaker 300:28:51Yes. It's actually the future curves that we are seeing that's driving where pricing is. The other thing that's definitely driving our expectation for this year is The spending that's happening on the infrastructure and other areas, the consumption as such But the demand as such has been stable. So we don't expect big changes as such other than the sentimental changes that happen and also we are factoring in the cost element which has kept the lows at a higher number and kept the average through the cycle pricing at a higher number as well. So some of those factors are considered, but yes, the futures are also indicating where the pricing is going. Speaker 700:29:45Okay. That's very helpful. Thanks for that. And last Speaker 500:29:49one, I'm not sure if Speaker 700:29:49you guys touched on it, but are you guys planning maybe as we get closer to the commissioning of the AF, just update us on The potential savings and OpEx structure, I mean, it's been a while since I think the last update we had is from The data from the roadshow, while you go public, just wondering if there is a chance we get an update around those numbers this year? Speaker 200:30:17Yes, Amal. This is Mike. We'll continue to do that as we update information and get closer to the commissioning the commencement of commissioning on the EAFs at the end of this year, both on where what our end state will be as well as more information around what the short hybrid period will look like from that perspective. Speaker 700:30:45Got it. That's really helpful. Thanks. That's why I answered my question. Operator00:30:54Thank you. Our next question is from Lucas Pipes with B. Riley Securities. Please proceed with your question. Speaker 800:31:00Thank you very much, operator. Good morning, everyone. Apologies if I missed this, but I wondered if you could maybe Provide some color in terms of dollars and cents in regards to the Coke incident and wondered what's the OpEx impact This year might be and then also from a CapEx side, what would be any additional costs from longer term, any kind of long term costs to consider? Thank you very much. Speaker 200:31:32Sure. I'll start, Lucas. So we've completed the preparation of the repair plan using it out both outside engineering and internal resources. So we expect the total repair cost to be in the $20,000,000 to $30,000,000 range and should be complete sometime in the April time period. In terms of cost beyond that, our aim is to do a complete recovery back to full production of the coke batteries. Speaker 200:32:13Thankfully, during the incident, none of the 3 batteries suffered any thermal integrity degradation, we are able to protect the thermal integrity of all three batteries. So once the Repair is executed. Our goal is to get back to pre incident coke production levels. Speaker 800:32:39Got it. Any longer term costs that might be associated with this? Speaker 300:32:49I think it's too early to say, but we the way we've looked at it right now and the work that we are doing, The batteries as such are okay, the walls are okay. So we don't expect much degradation there, which is the key from long term cost perspective. As far as the corridor is concerned, the piping, that's the cost that we have assessed, which is $20,000,000 to $30,000,000 So at high level, We don't think that there will be additional cost, but we'll know more as we start the furnace to full production. And just an added color, during that period, we'd probably be running at 30% to 40% of our production and using external coke during this quarter. So and come next quarter, we should get down to our full production levels. Speaker 800:33:41Very helpful. Thank you. And I'll turn to a kind of high level topic on M and A. Saw a very active process in the U. S. Speaker 800:33:52With U. S. Steel and kind of I wondered how you look at the M and A landscape at this time, is there something that you think strategically Could really benefit Algoma? Or how do you expect the landscape to kind of evolve, Maybe more within Canada. Would appreciate your thoughts. Speaker 800:34:16Thank you. Speaker 200:34:19Hi, Lucas. While I'm sure it will evolve, it's our policy not to speculate or comment on how we may be thinking around Speaker 800:34:35Anything that would strategically Maybe be the uniquely beneficial to Alagoma? Or is it really just Focus on the EAF, so from your side nothing? Speaker 200:34:51Yes. I mean, obviously, our short term strategic path is clear. We believe that the EAF brings a tremendous strategic value to Algoma. We're We're laser focused on executing that. We're on time, on budget, and we very much look forward to commissioning at the end of this year, beginning commissioning. Speaker 800:35:16All right. Well, I appreciate that. Thank you very much. Thank you, Louis. Operator00:35:23Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mike Maraca for any closing comments. Speaker 100:35:31Well, thank you very much again for your participation in our Q3 fiscal 2024 earnings conference call and your continued interest in Algoma Steel. We look forward to updating you on our results and progress when we report our fiscal Q4 results scheduled for June. Thank you.Read morePowered by