/NOT FOR DISTRIBUTION TO
- Revenue of
$445 million for the quarter, compared to$435 million for Q4 2019 - Operating income of
$7 million for the quarter, compared to an operating loss of$6 million for Q4 2019 - Adjusted EBITDA* of
$20 million for the quarter, compared to$10 million for Q4 2019 - Shipments* of 621,000 tons for the quarter, compared to 633,000 for Q4 2019
Selected Financial Information:
(in millions Canadian dollars, except volume, per share and nt figures) | Q1 2020 | Q1 2019 | Change | Q4 2019 | Change | |||||
Revenue ($) 1 | 445 | 515 | (14)% | 435 | 2% | |||||
Operating income (loss) ($) | 7 | 44 | (84)% | (6) | NM | |||||
Net income (loss) ($) | (24) | 43 | (156)% | (24) | —% | |||||
Adjusted net income (loss) ($) * | (26) | 60 | (143)% | (13) | (100)% | |||||
Net income (loss) per common share (diluted) ($) | (0.27) | 0.48 | (156)% | (0.27) | —% | |||||
Adjusted net income (loss) per common share (diluted) ($) * | (0.29) | 0.68 | (143)% | (0.15) | (93)% | |||||
Average selling price per nt ($) 1, * | 705 | 824 | (14)% | 659 | 7% | |||||
Shipping volume (in thousands of nt) * | 621 | 612 | 1% | 633 | (2)% | |||||
Adjusted EBITDA ($) * | 20 | 76 | (74)% | 10 | 100% | |||||
Adjusted EBITDA per nt ($) * | 32 | 124 | (74)% | 16 | 100% |
1 | Certain comparative results have been adjusted to conform to the Q1 2020 presentation of revenue. |
* | See "Non-IFRS measures" for a description of certain Non-IFRS measures used in this Press Release and "Non-IFRS Measures Reconciliation" below. |
"During the first quarter, our business successfully met the market headwinds and shipped close to our capacity which in turn allowed us to generate Adjusted EBITDA of
"In the months ahead, we are planning to complete our blast furnace upgrade which will increase our steelmaking capacity and improve our cost structure. Also, as announced last week, we entered into a new 8-year iron ore pellet purchase agreement with United States Steel Corporation, as well as an option agreement granting
"I also want to acknowledge the exceptional work being done by everyone to manage through the global pandemic that has had such an impact on all of our lives in recent weeks. I am grateful for the exceptional efforts of the frontline workers and all those who are providing critical services, keeping us safe and maintaining critical supply chains. I also want to express my sincere appreciation to
First Quarter 2020 Financial Review:
Q1 2020 revenue decreased
The Company realized operating income of $7 million for the quarter, compared to $44 million in Q1 2019, a decrease of $37 million due to lower gross profit of $42 million (consisting of a decrease in revenue of
Finance costs increased by
The Company realized a net loss of
Adjusted EBITDA in Q1 2020 totaled
Summary of Net Tons Shipped by Product:
(in thousands of nt)
Tons Shipped by Product | Q1 2020 | Q1 2019 | Change | Q4 2019 | Change | |||||
Hot-rolled | 447 | 517 | (14)% | 382 | 17% | |||||
Coated | 112 | 66 | 70% | 106 | 6% | |||||
Cold-rolled | 35 | 4 | NM | 40 | (13)% | |||||
Other a | 27 | 25 | 8% | 105 | (74)% | |||||
Total | 621 | 612 | 1% | 633 | (2)% | |||||
Shipments by Product (%) | ||||||||||
Hot-rolled | 72% | 84% | 60% | |||||||
Coated | 18% | 11% | 17% | |||||||
Cold-rolled | 6% | 1% | 6% | |||||||
Other a | 4% | 4% | 17% | |||||||
Total | 100% | 100% | 100% |
a |
Includes other steel products: slabs and non-prime steel sales. |
Statement of Financial Position and Liquidity:
On a consolidated basis,
(millions of Canadian dollars) | ||||
As at | ||||
ASSETS | ||||
Cash | 232 | 257 | ||
Trade and other receivables | 139 | 158 | ||
Inventories | 378 | 483 | ||
Total current assets | 762 | 914 | ||
Total assets | 1,493 | 1,594 | ||
LIABILITIES | ||||
Trade and other payables | 346 | 444 | ||
Asset-based lending facility | 12 | 8 | ||
Obligations to independent employee trusts | 34 | 35 | ||
Total current liabilities | 419 | 521 | ||
Asset-based lending facility | 122 | 90 | ||
Obligations to independent employee trusts | 474 | 472 | ||
Total non-current liabilities | 657 | 623 | ||
Total liabilities | 1,076 | 1,144 | ||
Total equity | 417 | 450 |
COVID-19 Pandemic
In
The extent to which these events may impact the Company's business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in
While it is currently unclear how quickly a broad-based market recovery from COVID-19 will take place, we are confident that as one of
Organization Change
On
Quarterly Results Conference Call
Consolidated Financial Statements and Management's Discussion and Analysis
The Company's unaudited interim condensed consolidated financial statements for the period ended
About
Non-IFRS Measures
This news release refers to certain non-IFRS measures that are not recognized under International Financial Reporting Standards ("IFRS") and do not have a standardized meaning prescribed by IFRS. These measures are not recognized measures under 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 share", ''adjusted EBITDA'', ''adjusted EBITDA per nt'', ''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 period ended
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, budgets, operations, financial results, taxes, dividend policy, plans and objectives of our Company. 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'', ''scheduled'', ''estimates'', ''outlook'', ''forecasts'', ''projection'', ''prospects'', ''strategy'', ''intends'', ''anticipates'', ''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 news release includes our intention to continue making strategic investments in our business; expectations that we will ship volumes during the second quarter of 2020 that are consistent with those of the first quarter of 2020; expectations that our capital projects will be successful; expectations that the Company's willingness to invest and innovate will allow the Company to succeed; statements with respect to the completion of the first phase of an upgrade and reline project at our blast furnace facility at the Company's Lake Erie Works facility; expectations that the blast furnace will produce increased volumes of hot metal and result in reduced production costs; expectations that these capital projects will position
Such forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including: North American and global steel overcapacity; imports and trade remedies; competition from other producers, imports or alternative materials; and the availability and cost of inputs placing downward pressure on steel prices or increasing our costs; as well as those described in the Company's annual information form dated
Key Assumptions Underlying Our Shipping Volume Estimates
The estimates with respect to our future shipping volumes included in this press release are based on a number of assumptions, including, but not limited to, the following material assumptions; the Company's ability to continue to access the U.S. market without any adverse trade restrictions; consistent demands for steel in
Key Assumptions Underlying the Blast Furnace Repair
The estimated budget, schedule and production volumes with respect to the planned repair of our blast furnace at Lake Erie Works referenced in this press release are based on a number of assumptions, including, but not limited to, the following material assumptions: our ability to enter into definitive agreements with third party contractors and suppliers on terms acceptable to the Company; expectations that third party contractors and suppliers will deliver, construct and perform in accordance with agreed upon budgets and schedules; our ability to obtain any applicable regulatory approvals and permits required in connection with this project; expectations that, upon completion, our facilities will produce in accordance with anticipated design capacity; expectations that the market for steel does not experience a material adverse change in the short to medium term; expectations that our customers will continue to purchase material volumes of production upon completion of the project; the currently planned blast furnace repair proceeding on schedule and, upon completion, performing in such a manner so as to provide molten metal to meet our production needs; and expectations that we will fully realize current and future production levels at our Lake Erie Works facility. In addition, the effect that the COVID-19 pandemic may have on the Company's ability to complete the proposed blast furnace repair is highly unpredictable and is subject to many variables, including, but not limited to, the possibility that the applicable contractors' may be impeded and/or restricted from completing the work on schedule and within the budget.
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 news release and are subject to change after such date.
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
Consolidated Statements of Income
(unaudited)
Three months ended | ||||||
(millions of Canadian dollars) | 2020 | 2019 | ||||
Revenue from sale of goods | $ | 445 | $ | 515 | ||
Cost of goods sold | 429 | 457 | ||||
Gross profit | 16 | 58 | ||||
Selling, general and administrative expenses | 9 | 14 | ||||
Operating income | 7 | 44 | ||||
Other income (loss) and (expenses) | ||||||
Finance costs | (33) | (3) | ||||
Finance and other income | 4 | 3 | ||||
Restructuring and other costs | (1) | — | ||||
Share of loss from joint ventures | (1) | (1) | ||||
Income (loss) before income taxes | (24) | 43 | ||||
Income tax expense | — | — | ||||
Net income (loss) | $ | (24) | $ | 43 |
Consolidated Balance Sheets
(In millions of Canadian dollars) (unaudited)
As at | ||||
ASSETS | ||||
Current assets | ||||
Cash | $ | 232 | $ | 257 |
Restricted cash | 7 | 8 | ||
Trade and other receivables | 139 | 158 | ||
Inventories | 378 | 483 | ||
Prepaid expenses | 6 | 8 | ||
Total current assets | $ | 762 | $ | 914 |
Non-current assets | ||||
Property, plant and equipment, net | 722 | 670 | ||
Intangible assets | 7 | 7 | ||
Investment in joint ventures | 2 | 3 | ||
Total non-current assets | $ | 731 | $ | 680 |
Total assets | $ | 1,493 | $ | 1,594 |
LIABILITIES | ||||
Current liabilities | ||||
Trade and other payables | $ | 346 | $ | 444 |
Other liabilities | 27 | 34 | ||
Asset-based lending facility | 12 | 8 | ||
Obligations to independent employee trusts | 34 | 35 | ||
Total current liabilities | $ | 419 | $ | 521 |
Non-current liabilities | ||||
Provisions | 6 | 6 | ||
Pension benefits | 8 | 7 | ||
Other liabilities | 47 | 48 | ||
Asset-based lending facility | 122 | 90 | ||
Obligations to independent employee trusts | 474 | 472 | ||
Total non-current liabilities | $ | 657 | $ | 623 |
Total liabilities | $ | 1,076 | $ | 1,144 |
EQUITY | ||||
Common shares | 512 | 512 | ||
Accumulated deficit | (95) | (62) | ||
Total equity | $ | 417 | $ | 450 |
Total liabilities and equity | $ | 1,493 | $ | 1,594 |
Non-IFRS Measures Results
The following table provides a reconciliation of net income (loss) to adjusted net income (loss) for the period indicated:
Three months ended | ||||
(millions of Canadian dollars) | 2020 | 2019 | ||
Net income (loss) | $ | (24) | $ | 43 |
Add back/(Deduct): | ||||
Restructuring and other costs 1 | 1 | — | ||
Transaction-based and other corporate-related costs 2 | 1 | — | ||
Unrealized gain on commodity-based swap | (2) | — | ||
Share-based compensation expense (recovery) 3 | (1) | 2 | ||
Remeasurement of employee benefit commitment 4 | (1) | (7) | ||
Tariff related costs | — | 13 | ||
Separation costs related to USS support services | — | 5 | ||
— | 3 | |||
Property related idle costs included in cost of goods sold | — | 1 | ||
Adjusted net income (loss) | $ | (26) | $ | 60 |
1 | Restructuring and other costs include certain building demolition costs, employee termination benefits and consulting costs. |
2 | Represents certain non-routine items that include, but are not limited to, professional fees, including those connected with |
3 | Share-based compensation consists of costs (recovery) connected with share options awarded to certain members of the Company's executive senior leadership team during the period. |
4 | Remeasurement of employee benefit commitment for change in the timing of estimated cash flows and future funding requirements. |
The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the periods indicated:
Three months ended | ||||
(millions of Canadian dollars, except where otherwise noted) | 2020 | 2019 | ||
Net income (loss) | $ | (24) | $ | 43 |
Add back/(Deduct): | ||||
Finance costs | 33 | 3 | ||
Depreciation | 13 | 8 | ||
Restructuring and other costs 1 | 1 | — | ||
Transaction-based and other corporate-related costs 2 | 1 | — | ||
Unrealized gain on commodity-based swap | (2) | — | ||
Share-based compensation 3 | (1) | 2 | ||
Finance income | (1) | (2) | ||
Tariff related costs | — | 13 | ||
Separation costs related to USS support services | — | 5 | ||
— | 3 | |||
Property related idle costs included in cost of goods sold | — | 1 | ||
Adjusted EBITDA | $ | 20 | $ | 76 |
Adjusted EBITDA as a percentage of total revenue | 4% | 15% |
1 | Restructuring and other costs include certain employee termination benefits, consulting and demolition costs. |
2 | Represents certain non-routine items that include, but are not limited to, professional fees, including those connected with |
3 | Share-based compensation consists of costs (recovery) connected with share options awarded to certain members of the Company's executive senior leadership team during the period. |
SOURCE
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