"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 $0.75 per share. When paid, this increased dividend will bring the total amount returned to shareholders to almost $2.2 billion since our IPO in 2017 – a track record that is unmatched by our North American reporting peers when considered as a percentage of market capitalization."

Second Quarter 2024 Financial Review

Compared to Q2 2023

Q2 2024 revenue decreased $125 million, or 15%, from $841 million in Q2 2023 to $716 million in Q2 2024, primarily due to an 11% decrease in Average Selling Price per net ton and a 3% decrease in Shipping Volume. The Average Selling Price of our steel products decreased from $1,217 per nt in Q2 2023 to $1,085 per nt in Q2 2024. Our Shipping Volume decreased 19 thousand nt to 634 thousand nt from 653 thousand nt in Q2 2023. Also impacting revenue were non-steel sales which decreased to $28 million in Q2 2024, from $46 million in Q2 2023.

The Company realized operating income of $125 million for the quarter, compared to $186 million in Q2 2023, a decrease of $61 million consisting of lower revenue of $125 million, partly offset by a decrease in cost of goods sold of $54 million and lower selling, general and administrative expenses of $10 million.

Finance costs increased by $3 million, from $31 million in Q2 2023 to $34 million in Q2 2024, primarily due to the following: $3 million connected to the period-over-period impact of foreign exchange translation on U.S. dollar denominated working capital, $1 million related to remeasurement impact of employee benefit commitment obligation and $1 million increase in asset-based lending facility interest expense, partly offset by $3 million lower accretion expense associated with our employee benefit commitment obligation.

The Company realized net income of $67 million for the quarter, compared to $117 million in the second quarter of 2023, a decrease of $50 million primarily due to the following: $61 million decrease in operating income, $10 million change in finance income and other losses, and $3 million increase in finance costs, partly offset by $17 million change in deferred taxes, $4 million decrease in current tax expense, and $3 million decrease in other costs. Adjusted Net Income totaled $71 million in Q2 2024, a decrease of $52 million from $123 million in Q2 2023.

Adjusted EBITDA in Q2 2024 totaled $147 million, a decrease of $68 million from $215 million in Q2 2023, which mostly reflects a decrease in Average Selling Price per net ton and the impact of lower Shipping Volume, partly offset by lower cost of goods sold during the period.

Compared to Q1 2024

Q2 2024 revenue decreased $30 million, or 4%, from $746 million in Q1 2024 to $716 million in Q2 2024, primarily due to a 4% decrease in Average Selling Price per net ton. The Average Selling Price of our steel products decreased from $1,129 per nt in Q1 2024 to $1,085 per nt in Q2 2024. Our Shipping Volume decreased from 636 thousand nt in Q1 2024 to 634 thousand nt in Q2 2024.

The Company realized operating income of $125 million in Q2 2024 compared to $121 million in Q1 2024, and Adjusted EBITDA of $147 million compared to $153 million during Q1 2024, which mostly reflects the impact from a decrease in Average Selling Price per net ton, partly offset by lower cost of goods sold during the period.

Summary of Net Tons Shipped by Product

(in thousands of nt)

Statement of Financial Position and Liquidity

On a consolidated basis, the Company ended the period with total liquidity of $884 million, comprised of cash of $657 million and $227 million of availability under its revolving credit facility as at June 30, 2024. The following table shows selected information regarding the consolidated balance sheet as at the noted dates:

Stelco Holdings and its subsidiaries ended Q2 2024 with current assets of $1,664 million, which exceeded current liabilities of $900 million by $764 million. Non-current assets include the derivative asset representing the fair value of Stelco's option to purchase a 25% ownership interest in the Minntac mine. Stelco Holdings' liabilities include $349 million of obligations to independent pension and OPEB trusts, which includes $224 million of employee benefit commitments, and $125 million of payables, specifically a note and a mortgage. Non-current liabilities of $838 million as at June 30, 2024 include $306 million of the aforementioned obligations to independent pension and OPEB trusts, as well as property and power generating equipment lease and other related obligations. Stelco Holdings' consolidated equity totaled $1,345 million at June 30, 2024. Total equity is calculated after giving effect to $130 million of comprehensive income for the six months ended June 30, 2024, $55 million of common share dividends declared and paid and $26 million of shares repurchased and cancelled.

Normal Course Issuer Bid

The Company received approval from the Toronto Stock Exchange ("TSX") to commence a normal course issuer bid ("NCIB") effective February 28, 2024. Under the terms of the NCIB, the Company is eligible to purchase up to 3,344,684 common shares. The NCIB expires on February 27, 2025, or such earlier date as Stelco may complete its purchases under the terms approved by the TSX.

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 February 21, 2024, as calculated in accordance with the rules of the TSX. The average daily trading volume for the six months ended January 31, 2024 ("ADTV"), calculated in accordance with the rules of the TSX for purposes of the NCIB, was 214,539 common shares. Under the rules of the TSX, Stelco is entitled to repurchase, during each trading day, up to 25% of the ADTV, or 53,634 common shares (excluding purchases made pursuant to the block purchase exception), through the TSX. Repurchases in the first half of 2024 under the NCIB were 680,306 shares.

Declaration of Quarterly Dividend

Stelco Holdings' Board of Directors approved the payment of a regular quarterly dividend of $0.75 per common share which will be paid on August 26, 2024, to shareholders of record as of the close of business on August 19, 2024.

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

Consolidated Financial Statements and Management’s Discussion and Analysis

The Company’s consolidated financial statements for the three and six months ended June 30, 2024, and Management’s Discussion & Analysis (MD&A) thereon are available under the Company’s profile on SEDAR+ at www.sedarplus.ca.

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 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, 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.

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 June 30, 2024 available under the Company’s profile on SEDAR+ at www.sedarplus.ca.

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 July 15, 2024 (the "Transaction"). 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", "goal", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates" or "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 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 China's economic performance; the impact from government infrastructure spending globally; the impact of central banks' policy responses to global price inflation; the impact from inflationary cost pressures from energy prices and certain other high demand commodities; upgrades to our facilities and equipment; our research and development activities associated with advanced steel grades; impacts from higher interest rates; our ability to manage future costs relating to environmental compliance without such costs having a material adverse effect on our financial position; expectations that any increase in production capacity will not be affected by applicable environmental requirements, including air emissions requirements; our ability to source raw materials and other inputs at competitive rates; our ability to supply to new and existing 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 environmental and international trade regulations; our ability to effectively mitigate the impact of any labour disputes; and growth in steel markets and industry trends, as well as those set out in this press release, are material factors made in preparing the forward-looking information and management's expectations contained in this press release.

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 June 30, 2024, which is available on the Company’s website and on SEDAR+ (www.sedarplus.com).

Non-IFRS Measures Reconciliation

The following table provides a reconciliation of net income to Adjusted Net Income for the periods indicated:

The following table provides a reconciliation of net income to Adjusted EBITDA for the periods indicated:

 

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Contacts

For Further Information
For investor enquiries: Paul D. Scherzer, Chief Financial Officer, 905-577-4432, [email protected]
For media enquiries: Trevor Harris, Vice-President, Corporate Affairs, 905-577-4447, [email protected]