/NOT FOR DISTRIBUTION TO
- Revenue of
$237 million - Adjusted EBITDA* loss of
$39 million - Shipments of 334,000 tons
- Successful completion of the
Blast Furnace Upgrade Project
Selected Financial Information
(in millions Canadian dollars, except volume, per share and nt figures) | Q3 2020 | Q3 2019 | Change | Q2 2020 | Change | YTD 2020 | YTD 2019 | Change | |
Revenue ($) 1 | 237 | 464 | (49)% | 411 | (42)% | 1,093 | 1,406 | (22)% | |
Operating income (loss) ($) | (69) | 9 | (867)% | 16 | (531)% | (46) | 56 | (182)% | |
Net income (loss) ($) | (88) | — | NM2 | — | NM2 | (112) | 44 | (355)% | |
Adjusted net income (loss) ($) * | (81) | (11) | (636)% | 10 | (910)% | (97) | 55 | (276)% | |
Net income (loss) per common share (diluted) ($) | (0.99) | — | NM2 | — | NM2 | (1.26) | 0.50 | (352)% | |
Adjusted net income (loss) per common share (diluted) ($) * | (0.91) | (0.12) | (658)% | 0.11 | (927)% | (1.09) | 0.62 | (276)% | |
Average selling price per nt ($) 1, * | 683 | 688 | (1)% | 700 | (2)% | 698 | 754 | (7)% | |
Shipping volume (in thousands of nt) * | 334 | 654 | (49)% | 576 | (42)% | 1,531 | 1,811 | (15)% | |
Adjusted EBITDA (loss) ($) * | (39) | 23 | (270)% | 34 | (215)% | 15 | 131 | (89)% | |
Adjusted EBITDA (loss) per nt ($) * | (117) | 35 | (434)% | 59 | (298)% | 10 | 72 | (86)% |
1 | Certain comparative results have been adjusted to conform to the Q3 2020 presentation of revenue. | |
2 | Not meaningful | |
* | See "Non-IFRS measures" for a description of certain Non-IFRS measures used in this Press Release and "Non-IFRS Measures Reconciliation" below. |
"Our third quarter was highlighted by the successful completion and commissioning of our blast furnace upgrade project," said
"This latest achievement builds upon momentum created by our success earlier in the year," continued Kestenbaum. "To date in 2020 we have increased our penetration in value-added markets, thanks in part to our earlier investment in new state-of-the-art batch annealing technology, and we have secured a long-term, competitively priced supply of iron ore along with an option to acquire a stake in the Minntac mine. With the fulfillment of our strategic objectives in 2020, we believe
"While our strategic blast furnace upgrade project resulted in lower shipments in the quarter, we once again successfully sold out our available production capacity. Our achievements this quarter have set the stage for us to effectively deploy our tactical flexibility model and fully capitalize on the emerging recovery in the steel market where prices are now about 50% higher than we saw during the third quarter. The timing of our outage could not have been better as we completed the upgrade project during the period of lower prices in Q3, and are now poised to take full advantage of the current strong pricing and demand environment." said Kestenbaum.
Third Quarter 2020 Financial Review
Compared to Q3 2019
Q3 2020 revenue decreased $227 million, or 49%, from $464 million in Q3 2019, primarily due to a 49% decrease in steel shipping volumes. Our shipping volumes decreased 320 thousand nt, from 654 thousand nt in Q3 2019 to 334 thousand nt in Q3 2020, mainly due to the impact of the Company's now completed blast furnace upgrade project, resulting in significantly lower steel inventory available for sale during the period. The average selling price of our steel products decreased from
The Company realized an operating loss of
Finance costs increased by
The Company realized a net loss of $88 million for the quarter, compared to nil in the third quarter of 2019, a change of $88 million primarily due to the following: $78 million decrease in gross profit, $7 million in higher finance costs and $5 million lower finance and other income. Adjusted net loss increased by $70 million from $11 million in Q3 2019 to $81 million in Q3 2020.
Adjusted EBITDA loss in Q3 2020 totaled $39 million, a change of $62 million from adjusted EBITDA of $23 million in Q3 2019, which reflects the decrease in revenue from lower shipping volumes and the impact of the Company's blast furnace upgrade project during the period.
Compared to Q2 2020
Q3 2020 revenue decreased $174 million, or 42%, from
The Company realized an operating loss of
Summary of Net Tons Shipped by Product
(in thousands of nt) Tons Shipped by Product Q3 2020 Q3 2019 Change Q2 2020 Change YTD 2020 YTD 2019 Change Hot-rolled 211 425 (50)% 423 (50)% 1,081 1,317 (18)% Coated 76 87 (13)% 109 (30)% 297 220 35% Cold-rolled 16 26 (38)% 15 7% 66 49 35% Other 1 31 116 (73)% 29 7% 87 225 (61)% Total 334 654 (49)% 576 (42)% 1,531 1,811 (15)% Shipments by Product (%) Hot-rolled 63% 65% 73% 71% 73% Coated 23% 13% 19% 19% 12% Cold-rolled 5% 4% 3% 4% 3% Other 1 9% 18% 5% 6% 12% Total 100% 100% 100% 100% 100% 1 Includes slabs and non-prime steel shipments.
Statement of Financial Position and Liquidity
On a consolidated basis,
(millions of Canadian dollars) | |||
As at | |||
ASSETS | |||
Cash | 106 | 257 | |
Restricted Cash | 68 | 8 | |
Trade and other receivables | 56 | 158 | |
Inventories | 470 | 483 | |
Total current assets | 710 | 914 | |
Derivative asset | 81 | — | |
Total assets | 1,603 | 1,594 | |
LIABILITIES | |||
Trade and other payables | 565 | 444 | |
Asset-based lending facility | 12 | 8 | |
Obligations to independent employee trusts | 36 | 35 | |
Total current liabilities | 645 | 521 | |
Asset-based lending facility | 87 | 90 | |
Obligations to independent employee trusts | 472 | 472 | |
Total non-current liabilities | 629 | 623 | |
Total liabilities | 1,274 | 1,144 | |
Total equity | 329 | 450 |
Cybersecurity Attack
On
Criminal cyberattacks on businesses and other organizations around the world are increasingly prevalent in the 21st century, and
In addition to the continued development of industry-leading cybersecurity practices,
Quarterly Results Conference Call
Consolidated Financial Statements and Management's Discussion and Analysis
The Company's unaudited interim condensed consolidated financial statements for the period ended
About
Non-IFRS Measures
This news 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 net income", "adjusted net income per share", ''adjusted EBITDA'', ''adjusted EBITDA per nt'', ''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 period 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, acquisition opportunities, budgets, operations, financial results, taxes, dividend policy, plans and objectives of our Company. Particularly, information regarding our expectations of 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 may be forward looking statements. Forward-looking statements are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. The forward-looking statements contained herein are presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision and strategic goals, and may not be appropriate for other purposes.
Forward-looking information in this news release includes: our ability to successfully adapt to changing market conditions; our ability to continue to operate the business as one of the lowest-cost integrated steel producers in
Key Assumptions Underlying the Anticipated Cost Savings and Increased Production Resulting From the
Statements with respect to the expected increased production volumes and cost savings regarding the upgrade and reline of our blast furnace at Lake Erie Works referenced in this press release are based on a number of assumptions, including, but not limited to, the following material assumptions: third party contractors and suppliers delivering, constructing and performing in accordance with agreed upon budgets, schedules and applicable performance guarantees; expectations that our facilities will produce in accordance with anticipated design capacity; expectations that the market for steel does not experience a material adverse change in the short to medium term; expectations that our customers will continue to purchase material volumes of production; the blast furnace performing in such a manner so as to provide molten metal to meet our production needs; and expectations that we will fully realize production levels at our Lake Erie Works facility that are equal to or better than production levels existing at our Lake Erie Works facility prior to the commencement of the blast furnace upgrade and reline project.
Such forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including: North American and global steel overcapacity; imports and trade remedies; competition from other producers, imports or alternative materials; and the availability and cost of inputs placing downward pressure on steel prices or increasing our costs; as well as those described in the Company's annual information form dated
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 news release and are subject to change after such date.
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
Consolidated Statements of Income (Loss)
(unaudited)
Three months ended | Nine months ended | ||||||||||
(millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | |||||||
Revenue from sale of goods | $ | 237 | $ | 464 | $ | 1,093 | $ | 1,406 | |||
Cost of goods sold | 297 | 446 | 1,109 | 1,315 | |||||||
Gross profit (loss) | (60) | 18 | (16) | 91 | |||||||
Selling, general and administrative expenses | 9 | 9 | 30 | 35 | |||||||
Operating income (loss) | (69) | 9 | (46) | 56 | |||||||
Other income (loss) and (expenses) | |||||||||||
Finance and other income (loss) | (4) | 1 | 2 | 6 | |||||||
Finance costs | (16) | (9) | (61) | (15) | |||||||
Share of income (loss) from joint ventures | 1 | — | (1) | (2) | |||||||
Other costs | — | (1) | (6) | (1) | |||||||
Income (loss) before income taxes | (88) | — | (112) | 44 | |||||||
Income tax expense | — | — | — | — | |||||||
Net income (loss) | $ | (88) | $ | — | $ | (112) | $ | 44 |
Consolidated Balance Sheets
(In millions of Canadian dollars) (unaudited)
As at | |||||
ASSETS | |||||
Current assets | |||||
Cash | $ | 106 | $ | 257 | |
Restricted cash | 68 | 8 | |||
Trade and other receivables | 56 | 158 | |||
Inventories | 470 | 483 | |||
Prepaid expenses | 10 | 8 | |||
Total current assets | $ | 710 | $ | 914 | |
Non-current assets | |||||
Derivative asset | 81 | — | |||
Property, plant and equipment, net | 802 | 670 | |||
Intangible assets | 8 | 7 | |||
Investment in joint ventures | 2 | 3 | |||
Total non-current assets | $ | 893 | $ | 680 | |
Total assets | $ | 1,603 | $ | 1,594 | |
LIABILITIES | |||||
Current liabilities | |||||
Trade and other payables | $ | 565 | $ | 444 | |
Other liabilities | 32 | 34 | |||
Asset-based lending facility | 12 | 8 | |||
Obligations to independent employee trusts | 36 | 35 | |||
Total current liabilities | $ | 645 | $ | 521 | |
Non-current liabilities | |||||
Provisions | 6 | 6 | |||
Pension benefits | 9 | 7 | |||
Other liabilities | 55 | 48 | |||
Asset-based lending facility | 87 | 90 | |||
Obligations to independent employee trusts | 472 | 472 | |||
Total non-current liabilities | $ | 629 | $ | 623 | |
Total liabilities | $ | 1,274 | $ | 1,144 | |
EQUITY | |||||
Common shares | 512 | 512 | |||
Accumulated deficit | (183) | (62) | |||
Total equity | $ | 329 | $ | 450 | |
Total liabilities and equity | $ | 1,603 | $ | 1,594 |
Non-IFRS Measures Results
The following table provide a reconciliation of net income (loss) to adjusted net income (loss) for the period indicated:
Three months ended Nine months ended (millions of Canadian dollars) 2020 2019 2020 2019 Net income (loss) $ (88) $ — $ (112) $ 44 Add back/(Deduct): Other costs 1 — 1 6 1 Unrealized loss from commodity-based swaps 4 — 4 — Transaction-based and other corporate-related costs 2 1 1 4 3 Share-based compensation expense (recovery) 3 2 (2) 2 1 Remeasurement of employee benefit commitment 4 — (11) (1) (27) Tariff related costs (recovery) — (1) — 19 Separation costs related to USS support services — 2 — 9 Carbon tax expense (recovery) — (2) — 1 Batch annealing facility startup related costs — — — 1 Property related idle costs included in cost of goods sold — 1 — 3 Adjusted net income (loss) $ (81) $ (11) $ (97) $ 55 1 Other costs primarily includes the write-down of certain capital projects that are no longer being pursued by the Company, representing aborted construction in progress costs without future benefit to 2 Represents certain non-routine items that include, but are not limited to, professional fees, including those connected with the acquisition of the Option during Q2 2020 and 3 Share-based compensation consists of costs connected with the Company's long-term incentive plan for certain employees (including members of the Company's executive senior leadership team), during the period. 4 Remeasurement of employee benefit commitment for change in the timing of estimated cash flows and future funding requirements.
The following table provides a reconciliation of net income (loss) to adjusted EBITDA (loss) for the periods indicated:
Three months ended Nine months ended (millions of Canadian dollars, except where otherwise noted) 2020 2019 2020 2019 Net income (loss) $ (88) $ — $ (112) $ 44 Add back/(Deduct): Finance costs 16 9 61 15 Depreciation 27 15 52 38 Other costs 1 — 1 6 1 Transaction-based and other corporate-related costs 2 1 1 4 3 Unrealized loss from commodity-based swaps 4 — 4 — Share-based compensation expense (recovery) 3 2 (2) 2 1 Finance income (1) (1) (2) (4) Tariff related costs (recovery) — (1) — 19 Separation costs related to USS support services — 2 — 9 Carbon tax expense (recovery) — (2) — 1 Property related idle costs included in cost of goods sold — 1 — 3 Batch annealing facility startup related costs — — — 1 Adjusted EBITDA (loss) $ (39) $ 23 $ 15 $ 131 Adjusted EBITDA (loss) as a percentage of total revenue (16)% 5% 1% 9% 1 Other costs primarily includes the write-down of certain capital projects that are no longer being pursued by the Company, representing aborted construction in progress costs without future benefit to 2 Represents certain non-routine items that include, but are not limited to, professional fees, including those connected with the acquisition of the Option during Q2 2020 and 3 Share-based compensation consists of costs connected with the Company's long-term incentive plan for certain employees (including members of the Company's executive senior leadership team), during the period.
SOURCE
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