Mr. Alan Kestenbaum reports

STELCO HOLDINGS INC. REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS

Stelco Holdings Inc. has released financial results of the company for the three months and year ended Dec. 31, 2023. Stelco is the 100-per-cent owner of Stelco Inc., the operating company.

"Our fourth quarter results were down over the previous quarter, but we do expect improved margins in [first quarter] and into [second quarter] 2024 as we begin to realize the higher market pricing that we saw in the latter part of 2023," said Alan Kestenbaum, executive chairman and chief executive officer. "We remain optimistic that market demand will stay strong and that the fundamental strength we have built into our business will allow us to continue to generate cash and in turn deliver positive results that benefit our shareholders. Further to our commitment to effectively deploy capital, we are launching a normal course issuer bid that will allow the company to purchase up to 3,344,684 common shares. We are also pleased to increase our regular quarterly dividend by almost 20 per cent to 50 cents per share."

"Our average selling price declined 13 per cent quarter over quarter, which, combined with a scheduled maintenance outage that had an impact on our shipments for the fourth quarter, led to a decline in adjusted [earnings before interest, taxes, depreciation and amortization] to $51-million and adjusted net income of $9-million," said Paul Scherzer, chief financial officer. "Despite the impact of pricing and the challenging market conditions that we faced throughout 2023, the business was able to generate $484-million in adjusted EBITDA and pay $258-million in dividends, and we ended the year with $645-million of cash and no borrowings under our revolving credit facility.

"Entering Q1 2024, we anticipate a return to shipping volume of approximately 625,000 to 675,000 net tons and an improvement in adjusted EBITDA due to the realization of more favourable pricing witnessed through much of the fourth quarter," continued Mr. Scherzer. "Over all, we are pleased with what we were able to accomplish through 2023 and anticipate a continuation of our successful track record of delivering positive results and strong returns for all our stakeholders."

Fourth quarter 2023 financial review

Compared with Q4 2022

Q4 2023 revenue decreased $61-million, or 9 per cent, from $674-million in Q4 2022 to $613-million in Q4 2023, primarily due to a 9-per-cent decline in shipping volume and a 2-per-cent decrease in average selling price per net ton. Its shipping volume decreased 61,000 nt to 609,000 nt from 670,000 nt in Q4 2022. The average selling price of its steel products decreased from $963 per nt in Q4 2022 to $941 per nt in Q4 2023. Also impacting revenue were non-steel sales, which increased to $40-million in Q4 2023 from $29-million in Q4 2022.

The company realized an operating loss of $16-million for the quarter, compared with operating income of $47-million in Q4 2022, a decrease of $63-million, consisting of a decline in revenue of $61-million and higher selling, general and administrative expenses of $17-million, partly offset by a decrease in cost of goods sold of $15-million.

Finance costs decreased by $8-million from $26-million in Q4 2022 to $18-million in Q4 2023, primarily due to the following: $10-million connected to the period-over-period impact of foreign exchange translation on U.S.-dollar-denominated working capital and $3-million lower accretion expense associated with its employee benefit commitment obligation, partly offset by a $3-million change related to the gross remeasurement impact from its employee benefit commitment obligation and a $2-million increase in inventory monetization arrangement finance charges.

The company realized a net loss of $25-million for the quarter, compared with net income of $23-million in the fourth quarter of 2022, a change of $48-million primarily due to the following: $63-million decrease in operating income, $10-million decline in finance and other income, and $7-million decrease in current tax recovery, partly offset by $21-million in lower deferred taxes, an $8-million decrease in finance costs and $2-million share of income from joint ventures. Adjusted net income totalled $9-million in Q4 2023, a decrease of $23-million from $32-million in Q4 2022.

Adjusted EBITDA in Q4 2023 totalled $51-million, a decrease of $31-million from $82-million in Q4 2022, which mostly reflects a decline in average selling price per net ton and the impact of lower shipping volume.

Compared with third quarter 2023

Q4 2023 revenue decreased $163-million, or 21 per cent, from $776-million in Q3 2023 to $613-million in Q4 2023, primarily due to a 13-per-cent decline in average selling price per net ton and an 8-per-cent decrease in shipping volume. The average selling price of its steel products declined from $1,083 per nt in Q3 2023 to $941 per nt in Q4 2023. Its shipping volume decreased from 661,000 nt in Q3 2023 to 609,000 nt in Q4 2023. Non-steel sales decreased by $20-million from $60-million in Q3 2023 to $40-million during Q4 2023.

The company realized an operating loss of $16-million in Q4 2023 compared with operating income of $121-million in Q3 2023, and adjusted EBITDA of $51-million compared with $153-million during Q3 2023, which mostly reflects the impact from a decrease in average selling price per net ton and lower shipping volume.

Full-year 2023 financial review

Revenue for 2023 decreased $546-million, or 16 per cent, to $2,917-million in 2023 from $3,463-million in 2022, primarily due to a 17-per-cent decline in average selling price per net ton and lower shipping volume. The average selling price for its steel products decreased from $1,261 per nt in 2022 to $1,051 per nt in 2023. Shipping volume decreased from 2,627,000 nt in 2022 to 2,618,000 nt in 2023. Non-steel sales increased $16-million from $150-million in 2022 to $166-million in 2023.

Operating income for the year decreased $776-million from $1,085-million in 2022 to $309-million in 2023, consisting of a decrease in revenue of $546-million, higher cost of goods sold of $214-million, and an increase in selling, general and administrative expenses of $16-million during 2023.

Finance costs increased $32-million from $78-million in 2022 to $110-million in 2023, due to the following: a $14-million increase in inventory monetization arrangement finance charges, $13-million higher accretion expense related to lease and other related obligations, $10-million connected to the period-over-period impact of foreign exchange translation on U.S.-dollar-denominated working capital during the period, $5-million remeasurement charge related to a lease-related obligation, $2-million increase in interest on the asset-based lending facility, and $2-million increase in receivables purchase agreement finance charges, partly offset by $12-million lower accretion expense associated with its employee benefit commitment obligation and $1-million related to the gross remeasurement impact from its employee benefit commitment obligation.

Net income for the year was $149-million, compared with $997-million in 2022, a decrease of $848-million primarily due to the following: $776-million decrease in operating income, $260-million gain on the sale of land and buildings in 2022, and $32-million in higher finance costs, partly offset by $160-million decrease in current tax expense, $53-million lower deferred tax expense, $4-million decrease in other costs, and $2-million increase in finance and other income. Adjusted net income decreased $601-million period over period from $819-million in 2022 to $218-million in 2023.

Adjusted EBITDA in 2023 totalled $484-million, a decrease of $709-million, from $1,193-million in 2022, which mostly reflects a decrease in average selling price per net ton and an increase in cost of goods sold during the period.

Declaration of quarterly dividend

Stelco's board of directors approved the payment of a regular quarterly dividend of 50 cents per common share, which will be paid on March 7, 2024, to shareholders of record as of the close of business on March 1, 2024.

The regular quarterly dividend has been designated as an eligible dividend for purposes of the Income Tax Act (Canada).

Quarterly results conference call

Stelco management will host a conference call to discuss its results on Thursday, Feb. 22, 2024, at 9 a.m. ET. To listen to the call, please dial 1-833-950-0062 or 1-226-828-7575, and use access code 937274. The conference call will also be webcasted live on the investor relations section of Stelco's website. A presentation that will accompany the conference call will be made available on the website prior to the conference call. Following the conclusion of the live call, a replay of the webcast will be available on the investor relations section of the company's website for at least 90 days. A telephonic replay of the conference call will also be available from 12 p.m. ET on Feb. 22, 2024, until 11:59 p.m. ET on March 7, 2024, by dialling 1-866-813-9403 or 1-929-458-6194 and using the access code 276832.

Consolidated financial statements and management's discussion and analysis

The company's consolidated financial statements for the year ended Dec. 31, 2023, and management's discussion and analysis thereon are available under the company's profile on SEDAR+.

About Stelco Holdings Inc.

Stelco is a low-cost, integrated and independent steelmaker with one of the newest and most technologically advanced integrated steelmaking facilities in North America. Stelco produces flat-rolled value-added steels, including premium-quality coated, cold-rolled and hot-rolled steel products, as well as pig iron and metallurgical coke. With first-rate gauge, crown and shape control, as well as uniform through-coil mechanical properties, its steel products are supplied to customers in the construction, automotive, energy, appliance, and pipe and tube industries across Canada and the United States, as well as to a variety of steel service centres, which are distributors of steel products. At Stelco, it understands the importance of its business, reflecting the communities it serves, and is committed to diversity and inclusion as a core part of its workplace culture, in part, through active participation in the BlackNorth Initiative.

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