Algoma Steel Group Inc. · NASDAQ:ASTL
Algoma Steel — Q1 FY2022 Earnings Presentation
18 slides from Algoma Steel's earnings presentation, Aug 20, 2021
Slide 1: Earnings Call Presentation
Earnings Call Presentation For the Quarter ending June 30, 2021 August 20th, 2021 in Canadian dollars unless otherwise noted
Slide 2: Disclaimer (1/2)
Disclaimer (1/2) ADDITIONAL INFORMATION AND WHERE TO FIND IT This presentation is not a proxy statement or solicitation of a proxy, consent or authorization with respect to any securities or in respect of the transaction and does not constitute an offer to sell, buy or exchange or the solicitation o
Slide 3: Disclaimer (2/2)
Disclaimer (2/2) Given these risks, uncertainties and other factors, readers should not place undue reliance on forward‐looking statements or information as a prediction of actual results. The forward‐looking statements and information reflects management’s current expectations and beliefs regarding
Slide 4: Earnings Call Agenda
Earnings Call Agenda Safety Performance / COVID-19 Update Key Performance Highlights Today’s Presenters: Financial Overview Michael McQuade Chief Executive Officer Market Outlook Guidance Rajat Marwah Strategic Update Chief Financial Officer EAF Transformation Opportunity Proposed Transaction Questi
Slide 5: Safety Without Compromise
Safety Without Compromise Continued Focus and Improvement in Lost Time Injury Frequency Rate (LTIFR) Health & Safety Performance 1.30 • Ongoing commitment to superior Health & Safety performance has led to sustained improvement of safety metrics over time • Health & safety remains our highest priori
Slide 6: Key Performance Highlights
Key Performance Highlights Q1 FY 2022 - Ended June 30, 2021 • Shipment volume was 610 kNT in Q1 FY 2022, down 2% from 622 kNT in Q4 FY 2021 and up 47% from 416 kNT in Q1 FY 2021 • Steel Revenue: was $765 million in Q1 FY 2022, up 21% from $633 million in Q4 FY 2021 and up 124% from $342 million in Q
Slide 7: First Quarter Financial Highlights
First Quarter Financial Highlights1 Q1 Q1 Change % Q4 FY 2021 FY 2022 YoY YoY FY 2021 Shipping volume (‘000s tons) 416 610 194 47% 622 Net Sales Realization per ton ($/ton) 746 1,185 439 59% 942 Steel Revenue($ million) 342 765 423 124% 633 Cost of Steel Products Sold ($/ton) 673 695 22 (3%) 643 Adj
Slide 8: Overview of Net Working Capital Seasonality
Overview of Net Working Capital Seasonality Total Working Capital $M1 $ 639 $ 716 $ 738 $ 585 $ 594 $ 644 $ 639 $ 573 $ 584 $ 606 $ 607 $ 595 $ 681 $850 $750 $650 $550 486 509 470 384 495 415 $450 473 452 543 437 490 ($ millions) 489 525 $350 $250 $150 292 302 286 313 211 209 212 223 259 182 149 175
Slide 9: Market Update
Market Update North American HRC and Plate prices at all-time highs due to increased demand for construction, automotive and other end markets Historical Hot Rolled Coil and As Rolled Plate Prices (US$/ton) Attractive Trends in Key End Markets $2,000 • Automotive markets are recovering from impact o
Slide 10: Second Quarter Outlook
Second Quarter Outlook Shipments ('000s kNT) Second Quarter FY 2022 directional guidance: 700 600 Shipments (NT) 600K+ 500 400 Net Sales Realization per ton 300 + Adjusted EBITDA $400M+/- 200 100 Cash1 $300M+ - Q1 Q2 Q1 Q2 Guidance FY 2021 FY 2022 Net Sales Realization per ton ($/ton) Adjusted EBITD
Slide 11: Strategic Update
Strategic Update Strategic Direction FY2022 Initiatives • Plate Mill Modernization on track to Strategic deliver improved product capability and Capital quality Spending • Proposed EAF conversion on track for final investment decision STRENGTHEN BUILD THE CORE GROWTH People & PLATFORMS • 200+ projec
Slide 12: Summary of the Proposed Algoma EAF Transformation
Summary of the Proposed Algoma EAF Transformation Expected Benefits of EAF 2022-2024 2024-2025 2026 Long-Term EAF Startup ~US$150mm annual Adjusted EBITDA uplift expected by Construction 2024/2025 Period Product Commission Blast Furnace 7 Certification Adds ~700kt of finished steel Ramp (BF7) BF
Slide 13: Proposed Transaction Overview
Proposed Transaction Overview Assumes full earnout is realized based on expectation for US$1,100+ million of Adjusted EBITDA Estimated Sources & Uses (US$mm) Illustrative Pro Forma Valuation (US$mm, except per share) Sources: Share Price: $10.00 Shares Issued to Algoma Shareholders $1,125 Estimated
Slide 14: Canadian Government to Provide Attractive Green Steel Financing
Canadian Government to Provide Attractive “Green Steel Financing” to Support the EAF Investment • Algoma has secured, subject to negotiation and execution of definitive documentation, a commitment from two Canadian government entities to provide financial support for the transformative EAF investmen
Slide 15: EAF Transformation Expected to Be Fully Funded Pro Forma
EAF Transformation Expected to Be Fully Funded Pro Forma for the Merger and Government Financing Pro Forma Capital Structure(1) xCY2021P Transaction xCY2021P Current Adjusted Adjustment Adjusted US$mm (6/30/21A) EBITDA (+ / -) Pro Forma EBITDA Effective Rate Maturity ABL Revolver ($250.0) -- -- -- -
Slide 16: Attractive Valuation Relative to North American Steel Peers
Attractive Valuation Relative to North American Steel Peers TEV / EBITDA Algoma Steel EAF Producers Blast Furnace Steel Producers (1) (TEV / CY’2021P) Averages 2021E 2022E 2021E 2022E EAF 4.3x 6.4x Blast Furnace 2.8x 4.4x All Peers 3.4x 5.2x 7.0x 5.8x Legato Share Price(5) 4.5x 4.5x 4.5x 4.0x 4.3x 3
Slide 17: Significant Anticipated 2021 Cash Flows Would Reduce Total Enterprise Value
Significant Anticipated 2021 Cash Flows Would Reduce Total Enterprise Value and Implied Valuation 1.5x TEV / CY2021P EBITDA 0.9x $664 TEV / CY2021P Production ($/t) $386 $2,000 1 $1,800 $1,633 $1,600 $1,400 $1,200 $1,000 $949 0.5 $800 ($684) $600 $400 $200 $0 0 (2) TEV (1) Expected Cash Flow Expecte
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