ASTL — Algoma Steel Group Inc.

Algoma Steel Group Inc. Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted EBITDA: Loss of CAD $95.2 million, representing a margin of -20.9%.
• Cash Flow: Cash used in operating activities was CAD $3 million, a significant improvement from CAD $77 million in the prior year.
• Shipments: 378,000 net tons shipped, down 31% year-over-year.
• Net Sales Realizations: Averaged CAD $1,077 per ton, up from CAD $976 in the prior year.
• Steel Revenue: CAD $408 million, down 23.9% year-over-year.
• Cost of Steel Products Sold: Averaged CAD $1,332 per ton, up from CAD $1,032 in the prior year.
• Year-End Cash Position: CAD $77 million in cash, with CAD $195 million available under revolving credit and CAD $417 million under a large enterprise tariff loan facility.

2. Strategic Updates and Business Highlights

• Algoma Steel is transitioning from blast furnace operations to Electric Arc Furnace (EAF) production, with the first EAF running 24/7 and a second unit on schedule.
• The company has secured CAD $500 million in government-backed liquidity to support its transformation.
• A binding MOU with Hanwha Ocean Company could provide CAD $250 million in potential value, enhancing Algoma's role in Canada’s defense and industrial supply chain.
• The focus is shifting towards high-value plate products, with expectations for increased production in 2026.

3. Forward Guidance and Outlook

• For Q1 2026, shipments are expected to be lower than Q4 2025 but are projected to ramp up to 1,000,000 to 1,200,000 tons over the year, with a 50/50 split between plate and sheet products.
• Anticipated improvements in pricing and cost performance could lead to better adjusted EBITDA in Q1 2026 compared to Q4 2025.

4. Bad News, Challenges, or Points of Concern

• The 50% US Section 232 tariff has significantly impacted Algoma's ability to sell in the US market, leading to a structural shift in operations and financial performance.
• The company absorbed CAD $225 million in direct tariff costs for the year, contributing to lower shipments and elevated costs.
• The overall market for steel in Canada remains challenging, with coil pricing down approximately 40% compared to historical levels.
• The transition has resulted in layoffs of approximately 1,000 employees, highlighting the human cost of the operational shift.

5. Notable Q&A Insights

• Shipments: Management expects a gradual increase in shipments throughout 2026, with a focus on balancing plate and sheet production.
• Energy Costs: Algoma has a mix of self-generated and grid power, with some hedging in place for natural gas costs.
• Plate Pricing: Plate pricing remains more stable than sheet pricing, benefiting from government initiatives to limit imports.
• Beam Mill Project: The company is actively assessing the beam mill project, with expectations of government support and potential partnerships.
• Scrap Supply: The joint venture for scrap sourcing is performing well, contributing positively to the EAF operations.

Overall, while Algoma Steel faces significant challenges due to tariffs and market conditions, the strategic pivot towards domestic production and high-value products, along with government support, positions the company for potential recovery and growth in the coming years.