Stelco Holdings Inc. Reports Second Quarter 2024 Results
NOT FOR DISTRIBUTION TO
-
Revenue of
$716 million for the quarter, down 15% from Q2 2023 and 4% from Q1 2024 -
Operating income of
$125 million for the quarter, down 33% from Q2 2023 and up 3% from Q1 2024 -
Adjusted EBITDA* of
$147 million , representing an industry leading 21% margin, down 32% from Q2 2023 and 4% from Q1 2024 -
Adjusted Net Income* of
$71 million and Adjusted Net Income* per share of$1.29 , down 42% from Q2 2023 and up 1% from Q1 2024 - Shipping Volume* of 634 thousand tons, down 3% from Q2 2023 and comparable to Q1 2024
-
Average Selling Price* per net ton of
$1,085 , down 11% from Q2 2023 and 4% from Q1 2024 - Repurchased 518,238 shares in Q2 and 680,306 total year-to-date
-
Declared quarterly dividend of
$0.75 per share payable onAugust 26, 2024
Selected Financial Information
(in millions Canadian dollars, except volume, per share and net tons (nt)) figures) |
Q2 2024 |
Q2 2023 |
Change |
Q1 2024 |
Change |
2024 |
2023 |
Change |
|||
Revenue ($) |
716 |
841 |
(15 |
%) |
746 |
(4 |
%) |
1,462 |
1,528 |
(4 |
%) |
Operating income ($) |
125 |
186 |
(33 |
%) |
121 |
3 |
% |
246 |
204 |
21 |
% |
Net income ($) |
67 |
117 |
(43 |
%) |
63 |
6 |
% |
130 |
106 |
23 |
% |
Adjusted Net Income ($) * |
71 |
123 |
(42 |
%) |
70 |
1 |
% |
141 |
133 |
6 |
% |
|
|
|
|
|
|
|
|
|
|||
Net income per common share (diluted) ($) |
1.22 |
2.12 |
(42 |
%) |
1.14 |
7 |
% |
2.36 |
1.92 |
23 |
% |
Adjusted Net Income per common share (diluted) ($) * |
1.29 |
2.23 |
(42 |
%) |
1.27 |
2 |
% |
2.56 |
2.41 |
6 |
% |
|
|
|
|
|
|
|
|
|
|||
Average Selling Price per nt ($)* |
1,085 |
1,217 |
(11 |
%) |
1,129 |
(4 |
%) |
1,107 |
1,085 |
2 |
% |
Shipping Volume (in thousands of nt) * |
634 |
653 |
(3 |
%) |
636 |
— |
% |
1,270 |
1,348 |
(6 |
%) |
Adjusted EBITDA ($) * |
147 |
215 |
(32 |
%) |
153 |
(4 |
%) |
300 |
280 |
7 |
% |
Adjusted EBITDA per nt ($) * |
232 |
329 |
(29 |
%) |
241 |
(4 |
%) |
236 |
208 |
13 |
% |
* See "Non-IFRS measures" for a description of certain Non-IFRS measures used in this Press Release and “Non-IFRS Measures Reconciliation” below. |
“I am very pleased to announce that in the second quarter,
“This continued strong level of performance is one of the factors that attracted the interest of Cleveland-Cliffs, and we are working hard to continue delivering results, while also working towards the successful completion of the transaction announced on July 15th,” continued Kestenbaum. “In keeping with our well-established principle of rewarding our valued shareholders with effective deployment of our capital, I am also pleased to announce that in the quarter we repurchased 518,238 shares, for a year-to-date total of 680,306 shares, and that we are increasing our quarterly dividend by 50% to
Second Quarter 2024 Financial Review
Compared to Q2 2023
Q2 2024 revenue decreased
The Company realized operating income of
Finance costs increased by
The Company realized net income of
Adjusted EBITDA in Q2 2024 totaled
Compared to Q1 2024
Q2 2024 revenue decreased
The Company realized operating income of
Summary of Net Tons Shipped by Product
(in thousands of nt)
Tons Shipped by Product |
Q2 2024 |
Q2 2023 |
Change |
Q1 2024 |
Change |
2024 |
2023 |
Change |
||||||||
Hot-rolled |
462 |
475 |
(3 |
%) |
468 |
(1 |
%) |
930 |
987 |
(6 |
%) |
|||||
Coated |
87 |
96 |
(9 |
%) |
84 |
4 |
% |
171 |
184 |
(7 |
%) |
|||||
Cold-rolled |
47 |
50 |
(6 |
%) |
48 |
(2 |
%) |
95 |
107 |
(11 |
%) |
|||||
Other 1 |
38 |
32 |
19 |
% |
36 |
6 |
% |
74 |
70 |
6 |
% |
|||||
Total |
634 |
653 |
(3 |
%) |
636 |
— |
% |
1,270 |
1,348 |
(6 |
%) |
|||||
|
|
|
|
|
|
|
|
|
||||||||
Shipments by Product (%) |
|
|
|
|
|
|
|
|
||||||||
Hot-rolled |
73 |
% |
73 |
% |
|
74 |
% |
|
73 |
% |
73 |
% |
|
|||
Coated |
14 |
% |
15 |
% |
|
13 |
% |
|
13 |
% |
14 |
% |
|
|||
Cold-rolled |
7 |
% |
7 |
% |
|
7 |
% |
|
8 |
% |
8 |
% |
|
|||
Other 1 |
6 |
% |
5 |
% |
|
6 |
% |
|
6 |
% |
5 |
% |
|
|||
Total |
100 |
% |
100 |
% |
|
100 |
% |
|
100 |
% |
100 |
% |
|
|||
1 Includes other steel products: pig iron and non-prime steel sales. |
Statement of Financial Position and Liquidity
On a consolidated basis, the Company ended the period with total liquidity of
(millions of Canadian dollars) |
|
|
As at |
|
|
ASSETS |
|
|
Cash |
657 |
645 |
Trade and other receivables |
219 |
185 |
Inventories |
770 |
832 |
Total current assets |
1,664 |
1,696 |
|
|
|
Property, plant and equipment, net |
1,311 |
1,263 |
Deferred tax asset |
3 |
3 |
Total non-current assets |
1,419 |
1,369 |
Total assets |
3,083 |
3,065 |
|
|
|
LIABILITIES |
|
|
Trade and other payables |
731 |
780 |
Other liabilities |
76 |
73 |
Asset-based lending facility |
15 |
15 |
Income taxes payable |
35 |
2 |
Obligations to independent employee trusts |
43 |
45 |
Total current liabilities |
900 |
915 |
|
|
|
Other liabilities |
413 |
429 |
Asset-based lending facility |
31 |
38 |
Deferred tax liability |
57 |
58 |
Obligations to independent employee trusts |
306 |
298 |
Total non-current liabilities |
838 |
854 |
Total liabilities |
1,738 |
1,769 |
|
|
|
Total equity |
1,345 |
1,296 |
Normal Course Issuer Bid
The Company received approval from the
The maximum number of common shares that may be repurchased for cancellation under the NCIB represents approximately 10% of the Company’s public float as of
Declaration of Quarterly Dividend
The regular quarterly dividend has been designated as an "eligible dividend" for purposes of the Income Tax Act (
Consolidated Financial Statements and Management’s Discussion and Analysis
The Company’s consolidated financial statements for the three and six months ended
About
Non-IFRS Measures
This press release refers to certain non-IFRS measures that are not recognized under International Financial Reporting Standards ("IFRS"), do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including "Adjusted Net Income," "Adjusted Net Income per common share," "Adjusted EBITDA," "Adjusted EBITDA per nt," "Average Selling Price per nt," and "Shipping Volume" to provide supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management uses these non-IFRS financial measures to facilitate operating performance comparisons from period-to-period, to prepare annual operating budgets and forecasts, and drive performance through our management compensation program. For a reconciliation of these non-IFRS measures, refer to the Company's "Non-IFRS Measures Reconciliation" section below. For a definition of these non-IFRS measures, refer to the Company’s MD&A for the three and six months ended
Forward-Looking Information
This release contains "forward-looking information" within the meaning of applicable securities laws. Forward-looking information may relate to our future outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategy, acquisitions, opportunities, budgets, operations, financial results, taxes, dividend policy, plans and objectives of our Company, including the transaction with Cleveland-Cliffs announced on
Forward-looking information in this press release includes: statements regarding future cash generation and delivering positive results and strong returns to stakeholders; statements regarding strategic capital deployment; statements regarding our commitment to a strong balance sheet and cost reduction initiatives; statements regarding our dividend policy and statements with respect to the Transaction and the anticipated closing of thereof.
Undue reliance should not be placed on forward-looking information. The forward-looking information in this press release is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, the possibility that the Transaction will not be completed on the terms and conditions, or on the timing, currently contemplated, or at all. Certain assumptions in respect of the utilization of and access to our production capacity; capital expenditures associated with accessing such production capacity; the ongoing impact of global conflicts on the international supply chain and economy overall; the impact of
The forward-looking information represent the Company’s expectations as of the date of this release (or as the date it is otherwise stated to be made) and are subject to change after such date. However, the Company disclaims any intention and undertakes no obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable Canadian securities laws. All of the forward-looking information contained in this release are expressly qualified by the foregoing cautionary statements. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this press release represents our expectations as of the date of this press release and are subject to change after such date. The Company disclaims any intention or obligation or undertaking to update publicly or revise any forward-looking statements, whether written or oral, whether as a result of new information, future events or otherwise, except as required by law.
Selected Financial Information
The following includes financial information prepared by management in accordance with IFRS. This financial information does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with Stelco Holdings Inc.’s Consolidated Financial Statements and MD&A for the three and six months ended
Consolidated Statements of Income (unaudited) |
||||||||||||
|
Three months ended |
Six months ended |
||||||||||
(millions of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Revenue from sale of goods |
$ |
716 |
|
$ |
841 |
|
$ |
1,462 |
|
$ |
1,528 |
|
Cost of goods sold |
|
589 |
|
|
643 |
|
|
1,206 |
|
|
1,287 |
|
Gross profit |
|
127 |
|
|
198 |
|
|
256 |
|
|
241 |
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses |
|
2 |
|
|
12 |
|
|
10 |
|
|
37 |
|
Operating income |
|
125 |
|
|
186 |
|
|
246 |
|
|
204 |
|
|
|
|
|
|
||||||||
Finance costs |
|
(34 |
) |
|
(31 |
) |
|
(70 |
) |
|
(60 |
) |
Finance and other income (loss) |
|
(4 |
) |
|
6 |
|
|
(2 |
) |
|
6 |
|
Other costs |
|
(1 |
) |
|
(4 |
) |
|
(4 |
) |
|
(6 |
) |
Share of loss from joint ventures |
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
Income before income taxes |
|
86 |
|
|
157 |
|
|
170 |
|
|
143 |
|
|
|
|
|
|
||||||||
Current income tax expense |
|
20 |
|
|
24 |
|
|
41 |
|
|
28 |
|
Deferred income tax expense (recovery) |
|
(1 |
) |
|
16 |
|
|
(1 |
) |
|
9 |
|
Net income |
$ |
67 |
|
$ |
117 |
|
$ |
130 |
|
$ |
106 |
|
Consolidated Balance Sheets (unaudited) |
||||
|
|
|
||
(millions of Canadian dollars) |
|
|
||
As at |
|
|
||
ASSETS |
|
|
||
Current assets |
|
|
||
Cash |
$ |
657 |
$ |
645 |
Restricted cash |
|
10 |
|
10 |
Trade and other receivables |
|
219 |
|
185 |
Inventories |
|
770 |
|
832 |
Prepaid expenses and deposits |
|
8 |
|
24 |
Total current assets |
$ |
1,664 |
$ |
1,696 |
|
|
|
||
Non-current assets |
|
|
||
Derivative asset |
|
49 |
|
71 |
Property, plant and equipment, net |
|
1,311 |
|
1,263 |
Intangible assets |
|
14 |
|
13 |
Investment in joint ventures |
|
19 |
|
19 |
Deferred tax asset |
|
3 |
|
3 |
Mortgage receivable |
|
23 |
|
— |
Total non-current assets |
$ |
1,419 |
$ |
1,369 |
Total assets |
$ |
3,083 |
$ |
3,065 |
|
|
|
||
LIABILITIES |
|
|
||
Current liabilities |
|
|
||
Trade and other payables |
$ |
731 |
$ |
780 |
Other liabilities |
|
76 |
|
73 |
Asset-based lending facility |
|
15 |
|
15 |
Income taxes payable |
|
35 |
|
2 |
Obligations to independent employee trusts |
|
43 |
|
45 |
Total current liabilities |
$ |
900 |
$ |
915 |
|
|
|
||
Non-current liabilities |
|
|
||
Provisions |
|
18 |
|
18 |
Pension benefits |
|
13 |
|
13 |
Other liabilities |
|
413 |
|
429 |
Asset-based lending facility |
|
31 |
|
38 |
Deferred tax liability |
|
57 |
|
58 |
Obligations to independent employee trusts |
|
306 |
|
298 |
Total non-current liabilities |
$ |
838 |
$ |
854 |
Total liabilities |
$ |
1,738 |
$ |
1,769 |
|
|
|
||
EQUITY |
|
|
||
Common shares |
|
314 |
|
318 |
Retained earnings |
|
1,031 |
|
978 |
Total equity |
$ |
1,345 |
$ |
1,296 |
Total liabilities and equity |
$ |
3,083 |
$ |
3,065 |
Non-IFRS Measures Reconciliation
The following table provides a reconciliation of net income to Adjusted Net Income for the periods indicated:
|
Three months ended |
Six months ended |
||||||||||
(millions of Canadian dollars) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Net income |
$ |
67 |
|
$ |
117 |
|
$ |
130 |
|
$ |
106 |
|
Add back (Deduct) following items: |
|
|
|
|
||||||||
Loss on derivative asset |
|
15 |
|
|
5 |
|
|
22 |
|
|
15 |
|
Share-based compensation expense (recovery) |
|
(12 |
) |
|
(3 |
) |
|
(15 |
) |
|
13 |
|
Other costs 1 |
|
1 |
|
|
4 |
|
|
4 |
|
|
6 |
|
Transaction-based and other corporate-related costs |
|
1 |
|
|
2 |
|
|
3 |
|
|
2 |
|
Remeasurement of employee benefit commitment 2 |
|
1 |
|
|
— |
|
|
1 |
|
|
— |
|
Total adjusted items before tax |
|
6 |
|
|
8 |
|
|
15 |
|
|
36 |
|
Tax impact of above items |
|
(2 |
) |
|
(2 |
) |
|
(4 |
) |
|
(9 |
) |
Total adjusted items after tax |
|
4 |
|
|
6 |
|
|
11 |
|
|
27 |
|
Adjusted Net Income |
$ |
71 |
|
$ |
123 |
|
$ |
141 |
|
$ |
133 |
|
1 |
|
Represents certain non-routine items that include, but are not limited to, strategic project-based research and development costs, the write-down of certain capital projects that are no longer being pursued by the Company such as aborted construction in progress costs without future benefit to |
2 |
Remeasurement of employee benefit commitment for change in timing of projected cash flows and future funding requirements. |
The following table provides a reconciliation of net income to Adjusted EBITDA for the periods indicated:
(millions of Canadian dollars, except where otherwise noted) |
Three months ended |
Six months ended |
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
Net income |
$ |
67 |
|
$ |
117 |
|
$ |
130 |
|
$ |
106 |
|
Add back (Deduct) following items: |
|
|
|
|
||||||||
Finance costs |
|
34 |
|
|
31 |
|
|
70 |
|
|
60 |
|
Depreciation |
|
32 |
|
|
29 |
|
|
65 |
|
|
61 |
|
Income tax expense (recovery): |
|
|
|
|
||||||||
Current |
|
20 |
|
|
24 |
|
|
41 |
|
|
28 |
|
Deferred |
|
(1 |
) |
|
16 |
|
|
(1 |
) |
|
9 |
|
Loss on derivative asset |
|
15 |
|
|
5 |
|
|
22 |
|
|
15 |
|
Finance income |
|
(10 |
) |
|
(10 |
) |
|
(19 |
) |
|
(20 |
) |
Share-based compensation expense (recovery) |
|
(12 |
) |
|
(3 |
) |
|
(15 |
) |
|
13 |
|
Other costs 1 |
|
1 |
|
|
4 |
|
|
4 |
|
|
6 |
|
Transaction-based and other corporate-related costs |
|
1 |
|
|
2 |
|
|
3 |
|
|
2 |
|
Adjusted EBITDA |
$ |
147 |
|
$ |
215 |
|
$ |
300 |
|
$ |
280 |
|
|
|
|
|
|
||||||||
Adjusted EBITDA as a percentage of total revenue |
|
21 |
% |
|
26 |
% |
|
21 |
% |
|
18 |
% |
1 |
|
Represents certain non-routine items that include, but are not limited to, strategic project-based research and development costs, the write-down of certain capital projects that are no longer being pursued by the Company such as aborted construction in progress costs without future benefit to |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240807179590/en/
For Further Information
For investor enquiries:
For media enquiries:
Source: