Algoma Steel Group Inc. · NASDAQ:ASTL
Algoma Steel — Shareholder Meeting (May 2005)
26 slides from Algoma Steel's shareholder meeting presentation, May 11, 2005
Slide 1: Committed to Value
Committed to Value
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation may contain forward-looking statements with respect to Algoma's operations and future financial results. Actual results may differ from expected results for a variety of reasons, including the factors discussed in the Management's Discussion and Analysis
Slide 3: Agenda
• Position of Strength • 2004 Results • First Quarter Performance • Strategic and Long-term Outlook • Priorities for 2005
Slide 4: A Position of Strength
A Position of Strength
Slide 5: Operating Profit - Best in Class
Operating Profit - Best in Class $250 » Highest profit per ton in NA - 2004: $200 $191 $184 Market positioning $149 Cost structure $150 $132 EBIT/ton $104 $96 $92 $100 $73 $52 $46 $50 $33 ($13) $0 * a co I NA n r * o* om SD go co co US S ISG WP AK g Ips tta l Or e Nu s elc Al Mi Do f a St ($50) * Co
Slide 6: Improved Risk Profile
Improved Risk Profile ($ Millions) $500 453 $400 $300 • $303 M net cash Cash $200 • Debt to total capitalization $100 reduced from 52% to zero $0 • Continues to strengthen LT LT Debt ($100) LT Debt Debt • $200 M Revolver available Debt ($200) 193 150 Revolver ($300) 322 ($400) Jan. 02 Dec. 03 Dec. 0
Slide 7: A Position of Strength
A Position of Strength • Step improvement in commercial and manufacturing • Record profit - $344 million • Return on equity - 38% • Strong balance sheet - $453 million of cash and short-term investments - 0% net debt to total capital
Slide 8: 2004 Results
2004 Results “Sustainability Reporting”
Slide 9: Financial Sustainability
Financial Sustainability • Product development and market repositioning • Record quality/production - ironmaking, steelshop, DSPC • Step improvement in reducing controllable costs • 62,000 tons of coke sold • Successful renegotiation of labour agreement • Cultural development – action oriented / res
Slide 10: Commitment to the Environment
Commitment to the Environment • ISO 14001 facility-wide registration • Energy Management » Reduced energy intensity » Initiated cogeneration study / submitted proposal • Water Effluent » 100% compliance » 27% reduction in amount of water discharged • Air Quality » Reduced nitrogen oxide and sulphur
Slide 11: Our Workplace and Our Community
Our Workplace and Our Community • Developing a values-based culture » “keep our word, earn our keep” • Continued organizational development and recruiting • Consecutively lower first treatment frequency levels • Employees shared in the success - $51.7 million • Broadened community involvement »Posit
Slide 12: 2004 Financial Results
Algoma 2004 Financial Results
Slide 13: Financial Highlights
Financial Highlights (CDN $ Millions) 2003 2004 Sales $1,138 $1,803 EBITDA 68 597 Net income (Loss) 8 344 Cash*/ (Bank Debt) (20) 453 Book Value Per Share $12.22 $22.54 * Includes short-term investments.
Slide 14: Margin Improvement Plan
Margin Improvement Plan • >$120 million annualized benefits $140 • Broad based gains in 2004 $120 • Focus on continuous improvement $100 $80 $60 $40 $20 $0 Q1' 03 Q2' 03 Q3' 03 Q4' 03 Q1' 04 Q2' 04 Q3' 04 Q4' 04
Slide 15: Capitalization
Capitalization Book Values: Dec-02 Dec-03 Dec-04 Bank Debt (Cash*) $ 89 $ 20 $(453) Term Loan 29 0 0 Interest Payable 20 9 0 Long-term Debt 201 164 150 Net Debt $339 $193 $ 0 Shareholders’ Equity $ 345 $ 370 $ 912 Net Debt to Total Capitalization 50% 34% 0% * Includes short-term investments.
Slide 16: First Quarter 2005
Algoma First Quarter 2005
Slide 17: Financial Highlights
Financial Highlights (CDN$ Millions) Q1-04 Q4-04 Q1-05 Sales $338 $490 $499 EBITDA 60 191 158 Net Income 22 122 89 Cash Balance - Amount * $ 76 M $453 M $602 M - Per Share $ 2 $ 11 $ 15 * Includes short-term investments.
Slide 18: Q1-2005 Competitive Performance
Q1-2005 Competitive Performance Operating Income - $US/Ton $350 • Strong performance continues $300 $288 • Further margin improvement $250 • Cost escalation in raw materials $218 $200 $189 $158 $150 $141 $125 $121 $115 $100 $90 $81 $75 $50 $28 $0 G I K S P o or * * * A n D sc go A S W IS N a o co S
Slide 19: Potential Margin Improvements
Potential Margin Improvements ($ Millions) $180 $161 $160 $140 $123 • Focus on continuous improvement $120 $100 • Over 100 individual initiatives $80 $60 • Incremental potential exceeds $160 M $40 $20 $0 Achieved - Dec. 04 Additional Opportunities
Slide 20: Outlook and Strategy
Algoma Outlook and Strategy
Slide 21: 2005 Outlook
2005 Outlook • Prices are falling / inventory overhang diminishing • Consumption in NA and China continues to be solid • Cost of major inputs up significantly • US dollar still relatively weak • Shipping costs still high We remain cautiously optimistic
Slide 22: Evaluating Alternatives
Evaluating Alternatives Sell/Merge Optimize Focused on Internal Focus Creating Value Organic Growth External Growth - acquire/build Leveraging Strengths/Opportunities
Slide 23: Strategic Decisions and Development
Strategic Decisions and Development • Clarify sell / merge alternatives • Understand reinvestment implications • Initiate the return of excess capital to shareholders • Improve legacy condition • Continue to explore options and develop alternatives
Slide 24: 2005 Priorities
Algoma 2005 Priorities
Slide 25: Staying Focused
Staying Focused • Core focus: » Margin Improvement Plan » Organizational development » Improve service levels and reliability • Launch Business Systems Renewal Project • Evaluate Strategic Alternatives » Continue review of assets, products and markets » Complete sale / merger assessment » Investigat
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