HAMILTON, ON, April 30 /CNW/ - Stelco Inc. (TSX:STE) ("Stelco" or the "Corporation") today reported EBITDA(x) of $13 million and a loss before income tax of $35 million for the first quarter ended March 31, 2007, a substantial improvement over the negative $82 million EBITDA(x) and $145 million loss before income tax reported in the fourth quarter 2006.
First Quarter Highlights - Lake Erie Steel achieved a record monthly production during the quarter following its successful expansion. - Shipments increased to 922,000 tons and semi-finished steel production increased to 1,100,000 tons. - Net sales revenue for the quarter ended March 31, 2007 was $609 million compared to $472 million for the quarter ended December 31, 2006. - The Corporation's capital structure has been enhanced - the Corporation's asset based revolving credit facility was amended on enhanced terms and maturity extended to 2012, and subsequent to the quarter end a commitment letter was entered into to replace the existing revolving term loan credit facility on more favourable terms.
Operations
Hamilton Steel continued to incur significant losses during the first quarter, offsetting the profitability of Lake Erie Steel and HLE Mining. As previously disclosed, the 56" hot strip mill at Hamilton Steel, which has operated since 1937, will be closed in May 2007 due to its high cost of production and limited support from the marketplace. The 56" mill closure is expected to reduce employment levels by 350 people at Hamilton, and is a significant step toward transforming Hamilton Steel to become a profitable steel manufacturer. The expanded capacity at Lake Erie Steel, in combination with the reduction in fixed costs at Hamilton Steel, is expected to improve Stelco's overall efficiency, product quality, and operating costs.
Commenting on the results, Stelco's President and Chief Executive Officer, Mr. Rodney Mott stated, "We have positioned Stelco to react quickly to the changing marketplace. Our ramp up in production and shipments following our Lake Erie expansion and Hamilton blast furnace upgrade has been outstanding."
Financing
The Corporation amended and extended its $600 million asset based revolving credit facility on March 23, 2007. These amendments include extending the term of the facility from 2008 to 2012, increasing the availability under the facility, and providing an overall reduction in financing costs. In addition, on April 9, 2007, the Corporation entered into a commitment letter with GE Corporate Lending Canada relating to a proposed refinancing of Stelco's existing revolving term loan with a fully drawn U.S. dollar facility in an amount equivalent to $275 million Canadian, having a term of six years. The new facility would have significantly lower interest rate and fees compared to Stelco's existing revolving term loan. The completion of the refinancing is subject to a number of conditions which must be satisfied no later than May 11, 2007. These financing initiatives will provide a more favourable long-term debt structure, which is expected to reduce financing costs. Stelco will continue to pursue initiatives to enhance its capital structure.
Outlook
Commenting on the second quarter, Mr. Mott said, "With our continued strong production and shipping performance and the apparent strength of the market, we expect improved operating results for the second quarter. High shipping levels are expected throughout the quarter and previously announced price increases will be realized.
"Our Lake Erie Steel operation is now positioned as one of the industry's most competitive, and will enable us to expand our market position. We will continue to pursue initiatives to make Hamilton Steel a profitable operation, and a further review of its facilities and cost structure is underway," commented Mr. Mott.
Stelco's financial and operational summary (unaudited), as well as its consolidated statements of financial position and cash flow summary (unaudited), are attached. These materials should be reviewed in conjunction with the Corporation's unaudited interim financial statements, including the notes thereto, and the related management's discussion and analysis, a copy of which can be viewed on the Corporation's Web site at www.stelco.ca or on SEDAR at www.sedar.com.
(x) EBIDTA is a non-Canadian GAAP measure which may not be comparable to
measures used by other companies. Please refer to the note regarding
Non-GAAP Financial Measures in the accompanying financial and
operational summary of the Corporation.
Conference call
The Corporation will conduct a conference call on first quarter results on Tuesday, May 1 at 11:00 am EDT. The webcast will be available on Stelco's Web site at www.stelco.ca. Please choose "Investor Centre" and select "Webcasts". Please log in at least 15 minutes prior to the call.
About Stelco
Stelco is one of Canada's largest steel companies. It is focused on its two Ontario-based integrated steel businesses located in Hamilton and in Nanticoke. These operations produce high quality value-added hot rolled, cold rolled, coated sheet and bar products. To learn more about Stelco and its businesses, please refer to our Web site at www.stelco.ca.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This press release contains "forward-looking information" that is based on Stelco's expectations, estimates and projections as of the date of this press release or as of the date which such information is identified to be given. This forward-looking information includes, among other things, factors relating to the business, financial position, operations and prospects of Stelco, including: Stelco's strategies and plans to reduce costs and the anticipated outcome of such strategies and plans; anticipated productivity levels and profitability; labour matters related to Stelco's predominantly unionized workforce; pension matters; consolidation in the steel industry; Stelco's energy and raw material costs and the availability of such materials; the volatility of selling prices for steel; international trade matters, including increases in steel imports into Canada; employee matters, including staffing levels, the retention of the skills and knowledge of Stelco's employees and the ability to attract and retain new employees; changes to environmental laws and regulations concerned with, among other things, emissions into the air, discharges to water or land, noise control and the generation, handling, storage, transportation and disposal of toxic substances; new technological developments and Stelco's ability to make capital expenditures to maintain and enhance its technological ability; development of new products; planned capital expenditures; and currency fluctuations in the US dollar and their impact on the Corporation's US dollar denominated long-term debt steel pricing, and costs. Often, but not always, forward-looking information can be identified by the use of words and phrases such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or states that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.
Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Stelco to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Actual results, performance and achievements are likely to differ, and may differ materially, from those expressed or implied by the forward-looking information contained herein. Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to: exchange rates, energy and other anticipated and unanticipated costs; pension contributions and expenses; the supply and demand for, deliveries of, and the level and volatility of prices of, steel and raw materials; the continued availability of financing on appropriate terms; market competition; the impact on Stelco of various environmental regulations and initiatives; and Stelco's ongoing relations with its employees and staffing levels. While Stelco anticipates that subsequent events and developments may cause Stelco's views to change, Stelco specifically disclaims any obligation to update this forward-looking information. This forward-looking information should not be relied upon as representing Stelco's views as of any date subsequent to the date of this press release.
Stelco Inc.
Financial and Operational Summary
($ in millions, except as indicated (x)) Quarter 1, Quarter 4,
(unaudited) 2007 2006
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Net sales $ 609 $ 472
Costs 596 554
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EBITDA (1) 13 (82)
Amortization of property, plant, and equipment 31 30
Amortization of intangible assets 1 1
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Operating loss before the following: (19) (113)
Employee future benefits - workforce reduction costs - 3
Foreign exchange (gain) loss on long-term debt (3) 11
Interest on long-term debt 9 9
Other interest - net 10 9
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Loss before income tax (35) (145)
Income tax expense 4 -
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Net loss $ (39) $ (145)
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Average revenue per ton (x)$ 661 (x)$ 701
Cost per ton (x)$ 646 (x)$ 823
Semi-finished steel production (thousands of
net tons) 1,100 611
Shipments (thousands of net tons) 922 673
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(1) Non-GAAP Financial Measures
The financial information contained in this press release is presented in
accordance with Canadian GAAP. Reference is also made to "EBITDA", which
is a non-Canadian GAAP measure. "EBITDA" refers to operating earnings
(losses) before interest, income taxes, amortization and other
non-operating income and expenses such as workforce reduction costs,
foreign exchange gains and losses on long-term debt. Information
concerning EBITDA has been included in this press release because
management considers it to be, and uses it as, a meaningful indicator for
assessing the operating performance of the Corporation. EBITDA does not
represent cash generated from operations as defined by Canadian GAAP and
it is not necessarily indicative of cash available to fund cash needs.
Non-Canadian GAAP earnings measures (such as EBITDA) do not have any
standardized meaning and therefore the Corporation's use of EBITDA
measures may not be comparable to measures used by other companies. A
reconciliation to net loss, which is a Canadian GAAP measure, is
presented above in the Financial and Operational Summary.
Stelco Inc.
Consolidated Statements of Financial Position
At At
March 31 December 31
(in millions) (unaudited) 2007 2006
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Assets
Current assets
Cash and cash equivalents $ 8 $ -
Accounts receivable 307 214
Inventories 657 693
Prepaid expenses 25 28
Future income taxes 27 27
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1,024 962
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Other assets
Property, plant and equipment 1,721 1,743
Intangible assets 24 1
Other 19 32
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1,764 1,776
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Total Assets $ 2,788 $ 2,738
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Liabilities and Shareholders' Deficit
Current liabilities
Accounts payable and accrued $ 223 $ 220
Income and other taxes 9 1
Employee future benefits 58 58
Pension liability 65 65
Long-term debt due within one year 13 13
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368 357
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Other liabilities
Employee future benefits 1,257 1,254
Pension liability 311 338
Long-term debt 333 342
Revolving term loans 488 383
Future income taxes 89 88
Asset retirement obligation 25 24
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2,503 2,429
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Total Liabilities 2,871 2,786
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Shareholders' Deficit
Capital stock 149 149
Contributed surplus 5 1
Warrants 3 3
Retained deficit (240) (201)
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Total Shareholders' Deficit (83) (48)
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Total Liabilities and Shareholders' Deficit $ 2,788 $ 2,738
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Stelco Inc.
Cash Flow Summary
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Quarter 1, Quarter 4,
(in millions) 2007 2006
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Cash provided by (used for):
Net loss $ (39) $ (145)
Adjustments to net loss for items not affecting
cash 8 21
Changes in operating elements of working capital (47) 174
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Operating activities (78) 50
Investing activities (9) (21)
Financing activities 95 (42)
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Net change in cash position $ 8 $ (13)
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%SEDAR: 00001549E