ASTL — Algoma Steel Group Inc.

Summary of Algoma Steel Group, Inc. Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted EBITDA: $13.8 million, representing an adjusted EBITDA margin of 5.2%, compared to an adjusted EBITDA loss of $32.4 million in Q2 2025.
• Revenue: $267.5 million, down from $589.7 million in the prior year quarter, primarily due to the transition to EAF-only steelmaking.
• Steel Shipments: 181,000 tons, significantly lower than 472,000 tons in Q2 2025, but slightly above the guidance range of 175,000 to 180,000 tons.
• Average Net Sales Realization: Increased to $1,361 per ton, up 20.2% from $1,132 per ton in the prior year quarter.
• Direct Tariff Costs: $18.7 million, down from $64.1 million in the prior year quarter.
• Net Loss: $96 million, improved from a loss of $110.6 million in Q2 2025.
• Cash Position: Ended the quarter with $62.6 million in cash and $437 million in total available liquidity.

2. Strategic Updates and Business Highlights

• EAF Transition: Successfully transitioned to EAF-only steel production, with the first unit operating at full capacity and the second unit nearing completion.
• Record Plate Sales: Achieved record plate shipments of 125,000 tons in the quarter, reflecting strong demand in infrastructure, construction, and defense sectors.
• Diversification Initiatives: Launched a joint venture with Roshel for ballistic steel production, enhancing Algoma's role in Canada's defense supply chain.
• Market Position: Continued focus on a Canada-centric plate-first strategy to mitigate the impact of U.S. tariffs.

3. Forward Guidance and Outlook

• Production Capacity: Anticipates a production run rate of 1.5 to 2 million tons as it exits 2026, with a focus on increasing plate production to meet growing demand.
• Third Quarter Expectations: Forecasted a 10% to 20% decline in shipments due to scheduled maintenance and operational downtime related to the second EAF unit.
• Improving EBITDA: Expected continued improvement in underlying EBITDA performance as operational efficiencies are realized and capacity utilization costs decline.

4. Bad News, Challenges, or Points of Concern

• Declining Shipments: A significant drop in shipments compared to the previous year due to the transition to EAF operations.
• High Operating Losses: Despite improvements, the company reported a substantial loss from operations of $134.2 million.
• Ongoing Tariff Costs: The 50% U.S. Section 232 tariff on Canadian steel imports continues to pose a structural headwind, although costs have decreased.
• Legal Proceedings: Engaged in legal matters concerning supply agreements affected by tariffs, which may pose additional risks.

5. Notable Q&A Insights

• Volume Outlook: Management indicated that the anticipated decline in Q3 volumes is primarily due to maintenance activities rather than demand issues.
• Cost Management: Costs are expected to stabilize as capacity utilization improves, although fixed costs will remain a challenge during the transition.
• Defense Contracts: Despite losing a contract to a competitor, Algoma remains committed to participating in defense projects and continues to engage with relevant stakeholders.
• Future Financing: The company is focused on achieving cash flow breakeven and is exploring financing options, including potential government support, as it navigates through the transition period.

Overall, Algoma Steel is navigating a complex transition to EAF operations while managing financial challenges and seeking to capitalize on strategic opportunities in the Canadian market.