Algoma Steel Group Inc. · NASDAQ:ASTL
Algoma Steel — SPAC Merger (May 2021)
42 slides from Algoma Steel's SPAC merger presentation, May 25, 2021
Slide 1: Proposed Transition to Making Greener Steel
Investor Presentation Proposed Transition to Making Greener Steel May 2021
Slide 2: Disclaimer (1/2)
1 Disclaimer (1/2) Disclaimer Legato Merger Corp. (“Legato”) is holding presentations for certain of its stockholders, as well as other persons who might b e i nterested in purchasing Legato’s securities, regarding its proposed merger with Algoma Steel (“Algoma” or the “Company”). EarlyBirdCapital (
Slide 3: Disclaimer (2/2)
2 Disclaimer (2/2) Market and Industry Data and Forecasts This document includes market share, ranking, industry data and forecasts that we obtained from industry publications and sur vey s, public filings and internal Company sources. Industry publications, surveys and forecasts generally state tha
Slide 4: Transaction Summary
3 Transaction Summary All figures used throughout the presentation are presented in US$ terms unless otherwise noted. (1) TEV includes 37.5 million earnout shares. Based on CY2021P EBITDA of US$901 million. Refer to pages 5 and 6 for additional de tai ls. • Algoma Steel Inc. (“Algoma”) is a leading
Slide 5: Numerous Near- and Medium-Term Catalysts
Numerous Near - and Medium - Term Catalysts • Highly Attractive Steel Market: Steel prices at all - time highs, with HRC reaching +$1,500/ton. Market is supported by demand from infrastructure, automotive and construction end markets which are driving expectations for continued strength • Expected t
Slide 6: Proposed Transaction Overview
5 (1) Cash in Trust and Pro Forma Ownership reflects 23.575m Public Shares issued during Legato’s IPO. Assumes no redemptions. (2) Reflects private placement of $100 million at $10.00/share (10 million shares) to be funded concurrently with closing. (3) Transaction structure inclusive of full earn -
Slide 7: Algoma Shareholder Contingent Consideration Aligns Incentives with Public Shareholders
6 (1) Subject to the Volume Weighted Average Price (“VWAP”) of common stock exceeding the share price target for 20 consecutive tra din g days during the period beginning with Closing and ending with the five - year anniversary of the Closing. (2) Shares issued for EBITDA performance are not “cliff”
Slide 8: Attractive Valuation Relative to North American Steel Peers
1.9x 5.4x 5.0x 4.2x 3.6x 2.6x 9.5x 8.2x 6.7x 6.8x 6.4x 7 Source: Company filings, Bloomberg. Note: Market data as of May 21, 2021. Estimates based on consensus estimates. Refer to pa ge 5 for additional details on transaction structure. (1) TEV includes 37.5 million earnout shares achieved. Refer to
Slide 9: Algoma's Transformation
8 Algoma’s Transformation Source: Company Information. Note: All figures shown in US$, projected figures converted from CAD to USD at a 1.26 FX rate an d h istorical figures converted at average exchange rate over the period. (1) At FY18 – FY20 average HRC price of $685/ton. (2) Based on FY18 – FY20
Slide 10: Key Investment Highlights
Key Investment Highlights ALGOMA — STEEL INC. —
Slide 11: Key Investment Highlights
10 Key Investment Highlights Premier Canadian Steel Producer and One of the Leading Flat Steel Producers in North America 1 Robust Steel Market Fundamentals and Favorable Long - Term Outlook Combined With Robust Go - to - Market Strategy to Enhance Shipment Potential Transformational Opportunity: En
Slide 12: Premier Canadian Steel Producer
Historical Performance (FY end March 31) $216 $473 $44 $150 +/ - $901 FY2018A FY2019A FY2020A FY2021E (Ending 3/31/21) CY2021P (Ending 12/31/21) 2,305 2,435 2,305 2,110 2,470 FY2018A FY2019A FY2020A FY2021E (Ending 3/31/21) CY2021P (Ending 12/31/21) Leading midsized North American Flat - Rolled Prod
Slide 13: One of the Leading Flat Steel Producers in North America
15% 15% 14% 16% 9% 8% 12 …and One of the Leading Flat Steel Producers in North America Source: Company information , Capital IQ, Bloomberg, Wall Street Research. (1) Represents CY2017 – CY2019. (2) Cleveland - Cliffs EBITDA Margin % based on Steel and Manufacturing Segment and is pro forma for the a
Slide 14: The Proposed EAF Mill Would Transform Algoma's Operations
13 Source: Company information. (1) Excludes BF#6 which is currently idled. The Proposed EAF Mill Would Transform Algoma’s Operations… Expected Benefits x +900k tons of incremental liquid steel capacity x ~70% fewer total CO2 emissions (3 million tonne annual reduction in CO2) x Utilizes recycled sc
Slide 15: EAF and Other Improvements Anticipated to Increase EBITDA Generation
14 Source: Company information. Note: FYE 31 March. All figures shown in US$ and converted from CAD to USD at a 1.26 FX rate. (1) Net of government support. EAF and Other Improvements Anticipated to Meaningfully Increase EBITDA Generation Through - the - Cycle $245 $44 $25 $35 $150 ($38) $460 Throug
Slide 16: Improving Performance Throughout the Steel Price Cycle
15 Source: Company information. Note: FYE 31 March. All figures shown in US$, projected figures converted from CAD to USD at a 1 .26 FX rate and historical figures converted at average exchange rate over the period. (1) FY2018 – FY2020. (2) Inclusive of $17 million Algoma cash as of March 31, 2021,
Slide 17: EAF Transition Would Materially Improve Algoma's Environmental Footprint
16 Source: Company information. Note: All years refer to calendar year unless otherwise specified. Expected environmental benefi ts from the EAF are based on projected estimates for Algoma, using published data sources for similar technologies. (1) Based on current production versus forecasted produ
Slide 18: Strategically Located on the Great Lakes
17 Strategically Located on the Great Lakes in Close Proximity to Customers and Suppliers Source: Company Information. 3 Located on Lake Superior with access to barge, rail and road transportation, including a n on - site deep - water port, Algoma has several options that allow for cost - effective
Slide 19: High-Quality Products and Diversified Blue Chip Customer Base
18 Source: Company information. (1) Automotive comprised of direct automotive customer sales and estimated service center sales to the automotive industry. (2) Represents percentage of a trailing 7 - year average HRC CRU (USA Midwest Domestic HR Coil) Index, lagged one month. (3) Represents percenta
Slide 20: Highly Experienced Management Team
19 Source: Company information. 4 Highly Experienced Management Team with Extensive Industry Experience Name Title Joined Algoma Years of Experience Bio Michael McQuade Chief Executive Officer 2019 37 • Previously served as VP, Finance and CFO of Stelco from 2007 to 2016, retiring as President in 20
Slide 21: Strong Steel Market Fundamentals
20 Strong Steel Market Fundamentals… Source: SteelBenchmarker, CME Group, Fastmarket. Note: Market data as of May 21, 2021. All years refer to calendar year unless otherwise specified. No liquid forward market exists for hot rolled plate. EBITDA and $/ ton figures shown in US$, figures converted fro
Slide 22: Favorable Long-Term Outlook
Tariffs Have Reduced Overall U.S. Imports, while Canada has Become a Larger Supplier to the US Market 21 Note: Press Releases, IHS, Baker Hughes, EIA, US Census. … and Favorable Long - Term Outlook 5 Attractive Trends in Key End Markets Strong Tariff Protection for the North American Market Energy A
Slide 23: Go-to-Market Strategy: Plate and Sheet
Algoma 73% Imports - Total 27% Target Plate Strategy: Algoma is Well Positioned to Displace Plate Imports into Canada • Market opportunity unlocked by plate mill modernization program: x Adds incremental 350k tons of plate capacity x Enhances grades and qualities – expanding end market opportunity S
Slide 24: Financial Overview
Financial Overview ALGOMA — STEEL INC. —
Slide 25: FY2021 to CY2021 EBITDA Bridge
24 Note: All figures are in USD converted from CAD to USD at a 1.26 FX rate. FY Q4 2021E performance is preliminary and subject to change. (1) Historical prices based on period average. Projections based on contract book and CRU projections / Future curve for HRC. (2) $16 million of Cost Savings alr
Slide 26: Historical and Projected Steel Shipments by Product
25 Note: FYE March 31. FY Q4 2021E performance is preliminary and subject to change. (1) Represents calendar year ending December 31, 2021. Historical and Projected Steel Shipments by Product Benchmark Prices Shipments (kt) Algoma Capacity Additions • EAF investment would provide +900kt of increment
Slide 27: Strong Medium-Term Earnings Potential
26 Note: Figures are illustrative and shown in US$, converted from CAD to USD at a 1.2 6 FX rate . ( 1 ) Illustrative metal margin is calculated as Net Sales Realization minus raw material costs. ( 2 ) Fixed Costs include Labor, Consumables & Repairs, SG&A. ( 3 ) Includes outside processing, propert
Slide 28: Projected Capital Expenditure Summary
27 Note: FYE March 31. Historical figures converted at average exchange rate over the period. Projections converted from CAD to USD at a 1.26 FX rate. Projected Capital Expenditure Summary Projected Capital Expenditure Breakdown to Support Proposed EAF Transformation ( US$ mi l l i on s , except per
Slide 29: Capital Structure Overview
28 Note: FY Q4 2021E performance is preliminary and subject to change. (1) Figures converted at a 1.26 FX rate. (2) Libor Floor of 1.5% for Secured Term Loan. Secured Term Loan includes option to PIK at L + 950. (3) Inclusive of $236 million Legato cash as of January 25, 2021 and $100 million PIPE i
Slide 30: Supplemental Materials
Supplemental Materials ALGOMA — STEEL INC. —
Slide 31: Algoma's Manufacturing Capabilities
Source: Company information. Algoma’s Manufacturing Capabilities Technical specifications Age Competitive advantage Highlights Coke Making Facilities • Comprises 3 batteries: – #7 battery (60 ovens) – #8 battery (60 ovens) – #9 battery (57 ovens) • #7 battery: ~62 years • #8 battery: ~52 years • #9
Slide 32: Flexible, Low-Cost Operations
31 Source: Company information. Note: Current Algoma Steel process flow configuration. (1) Represents percentage of a trailing 7 - year average HRC CRU (USA Midwest Domestic HR Coil) Index, lagged one month. (2) Represents percentage of a 7 trailing 7 - year average AS Rolled CRU Index, lagged one m
Slide 33: Preliminary EAF Timeline and Capital Requirements
32 Source: Company information. Note: All years refer to calendar years. All figures shown in US$, projected figures converted f rom CAD to USD at a 1.26 FX rate. Preliminary EAF Timeline and Capital Requirements Overview • The rollout of the EAF strategy would be rolled out based on availability of
Slide 34: Significant Tax Attributes
33 Source: Company information. Note: All figures converted from CAD to USD at a 1.27 FX rate as of December 31, 2020. (1) $382.2 million expire in 2038, $92.5 million expire in 2039 and $75.0 million expire in 2040. Significant Tax Attributes Available Tax Attributes as of December 31, 2020 (US$ mi
Slide 35: Algoma Then and Present
Algoma Then (circa 2015) Algoma Steel (Present) Operational Improvements ▪ Volume constraints at LMF, DSPC and Plate Mill with limited grade capability and average quality x Upgraded DSPC Segment in June 2020 and the LMF#2 in February 2021 x In the process of modernizing the Plate Mill x $44 million
Slide 36: Pension Plan Is Contractually Funded
Structured Pension Plan Is Contractually Funded as of March 1, 2021 35 Source: Company information. Estimated Solvency Funded Position by Plan (US$ millions) March 31, 2020 March 1, 2021 Hourly Salaried Hourly Salaried Assets $627 $243 $973 $381 Liabilities $880 $351 $1,102 $446 Net Funded Position
Slide 37: Sustainable Corporate Citizenship
36 Source: Company information. Algoma Remains Committed to Sustainable Corporate Citizenship Environment Community Involvement • Algoma has a demonstrated commitment to environmental protection • Published a Health, Safety and Environment Policy with a focus on continuous improvement • As the large
Slide 38: Health and Safety Performance
37 Source: Company information. Note: Lost Time Injury Frequency is calculated as ((Number of lost time injuries in the reportin g p eriod x 200,000) / Total hours worked in the reporting period). (1) F2021 YTD is as of February 2021. Continued focus and improvement in Lost Time Injury Frequency Rat
Slide 39: Historical EBITDA Reconciliation
38 Historical EBITDA Reconciliation Source: Company information. Note: US$mm figures c onverted from CAD to USD at the average historical FX rate of each respective financial period (FY2018: 1.28; FY2019: 1.31; F Y20 20: 1.33; 9Mos ending 12/31/19: 1.32; 9Mos ending 12/31/20: 1.34). 12 - month perio
Slide 40: Projected EBITDA Reconciliation
39 Projected EBITDA Reconciliation Source: Company information. Note: EBITDA reconciliation provided from Revenue to EBITDA. US$mm figures converted from CAD to USD at a 1.26 FX rate. (1) Excludes freight revenue and expense, and non - steel revenue and non - steel cost of sales (generally related t
Slide 41: Glossary of Terms
40 Term Definition Basic Oxygen Furnace (BOF) Vessel used to convert liquid hot metal from a blast furnace into steel Blast Furnace (BF) Metallurgical furnace combining fuel, ores and flux to smelt iron ore to produce pig iron, which is fed downstream into a BOF Cogeneration Also known as combined h
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