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Stelco Reports Preliminary Q2 2022 Adjusted EBITDA of $460–$470 Million; Q3 and Q4 Expected to Be Sequentially Lower

July 25, 2022

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Stelco Holdings Inc. (TSX: STLC) (“Stelco” or the “Company”) announced today preliminary results for the second quarter of 2022. The Company expects to report Shipping Volume of approximately 677 thousand net tons of steel in Q2 2022, in-line with prior guidance of a greater than 10% increase from the Q1 2022 Shipping Volume of 594 thousand net tons. Adjusted EBITDA for Q2 2022 is expected to be in the range of $460–$470 million, as compared to Q1 2022 Adjusted EBITDA of $402 million and Q2 2021 Adjusted EBITDA of $410 million. Prices began increasing sharply in March 2022 and then reversed course in late-April, with the benchmark CRU sheet price falling for 13 consecutive weeks from a peak of US$1,492 per net ton to US$895 per net ton currently. Stelco is also providing guidance for the third and fourth quarters of 2022 given the weakening of the steel market and falling prices over the last three months. Adjusted EBITDA in Q3 is expected to be materially below the Q2 level, and further weakening is expected in our Q4 results assuming the lower prices and shorter lead-times being experienced currently fully impact results and prevail through the remainder of 2022.

About Stelco

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 sheet 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, our 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, we understand the importance of our business reflecting the communities we serve and are committed to diversity and inclusion as a core part of our workplace culture, in part, through active participation in the BlackNorth Initiative.

Forward-Looking Information

This press release contains "forward-looking information" within the meaning of applicable Canadian 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, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of certain of our Q2 2022 results and other future results, performance, achievements, prospects or opportunities is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances.

Non-IFRS Measures

This press release refers to certain non-IFRS measures that are not recognized under International Financial Reporting Standards ("IFRS") and do not have a standardized meaning prescribed by IFRS. These measures are not recognized measures under 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 EBITDA'' 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 further information, please refer to the "Non-IFRS Performance Measures" in our Management Discussion and Analysis for the period ended March 31, 2022 available on SEDAR at www.sedar.com (the "MD&A"). For a definition of certain non-IFRS measures, refer to the "Non-IFRS Performance Measures" section of the Company's MD&A.

Key Assumptions Underlying our Q2 Shipping Volume and Adjusted EBITDA Estimates and our Q3 and Q4 Adjusted EBITDA Estimates:

The Q2 2022 Shipping Volume and Adjusted EBITDA estimates and indications regarding Q3 and Q4 2022 Adjusted EBITDA referenced in this press release are based on a number of assumptions, including, but not limited to, the following material assumptions:

  • the Company's anticipated margins per net ton will be consistent with prior periods subject to impacts from price and volume, as well as operating costs, and inflationary pressures on fixed and variable costs over the period;
  • steel prices will soften period over period consistent with current trends and sales activities in the market;
  • Shipping Volume will generally be consistent with past periods;
  • second half 2022 product mix will be comparable to first half 2022, although there are likely to be some differences between periods;
  • the Company's ability to maintain existing customers and historical order volumes from those customers;
  • no significant additional legal or regulatory developments, changes in economic conditions, or macro changes in the competitive environment affecting our business activities;
  • capital expenditures on existing facilities and equipment remaining on schedule and on budget and their anticipated effect on revenue and costs;
  • the Company's ability to continue to access the U.S. market without any adverse trade restrictions;
  • expectations regarding industry trends, market growth rates and the Company's future growth rates, and plans and strategies to manage cost pressures; and
  • the Company's ability to maintain the volume of shipments to its customers and fully realize upon the current market price of hot-rolled coil and other steel products.

We believe that our performance and our ability to achieve these forecasts depends on a number of material factors including: (i) sustained demand from our customers; (ii) continued steel production capacity curtailments in China; (iii) continued fair trade practices, particularly with respect to the North American market; (iv) the COVID-19 pandemic not having an adverse impact on North American demand for our products; and (v) stable supply and demand fundamentals in the rest of the world, other than factors related to the conflict in Eastern Europe. These factors are also subject to a number of inherent risks, challenges and assumptions.

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. Further, forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to, those described in this press release. Certain assumptions, risks and uncertainties in respect of: the utilization of and access to our production capacity; capital expenditures associated with accessing such production capacity; the impact of COVID-19 on our business and the broader market in which we operate; upgrades to our facilities and equipment; our research and development activities associated with advanced steel grades; our ability to source raw materials and other inputs; our ability to supply to new customers and markets; our ability to effectively manage costs; our ability to attract and retain key personnel and skilled labour; our ability to obtain and maintain existing financing on acceptable terms; currency exchange and interest rates; the impact of competition; changes in laws, rules, and regulations, including international trade regulations; and growth in steel markets and industry trends are material factors made in preparing the forward-looking information and management’s expectations contained in this press release and that may cause actual results to differ materially from the forward-looking information disclosed in this press release. Additional information about the risks and uncertainties of the Company’s business and material risk factors or assumptions on which information contained in forward‐looking statements is based is provided in the Company’s disclosure materials, including the Company’s most recently filed annual information form and any subsequently-filed interim management’s discussion and analysis, which are available under our profile on SEDAR at www.sedar.com.

The forward-looking information contained in this press release represents our expectations as of the date of this press release and is subject to change after such date. Stelco disclaims any intention or obligation or undertaking to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

For Further Information
For investor enquiries: Paul D. Scherzer, Chief Financial Officer, (905) 577-4432, paul.scherzer@stelco.com
For media enquiries: Trevor Harris, Vice-President, Corporate Affairs, (905) 577-4447, trevor.harris@stelco.com

Source: Stelco Holdings Inc.

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