/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE
SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES/
(Note: All dollar figures herein are Canadian dollars, unless
otherwise noted)
- Year-to-date revenue increased 16% to $1,149 million
- Year-to-date adjusted EBITDA increased 116% to $147 million1
HAMILTON, ON, Nov. 13, 2017 /CNW/ - Stelco Holdings Inc.
("Stelco" or the "Company"), (TSX: STLC), a low cost,
integrated and independent steelmaker with one of the newest and
most technologically advanced integrated steelmaking facilities in
North America, today announced
financial results of Stelco Inc. for the three and nine months
ended September 30, 2017. Stelco
Holdings Inc. is the 100% owner of the operating company, Stelco
Inc.
Subsequent to the end of the third quarter, the Company
completed an initial public offering ("IPO") of 13,529,750 common
shares at a price of $17.00 per share
for total gross proceeds of $230,005,750, which closed
on November 10, 2017. The shares are listed for trading on the
Toronto Stock Exchange under the symbol "STLC". The financial
results presented in this news release reflect Stelco
Inc. prior to its acquisition by the Company as part of the
pre-closing transactions relating to the IPO.
"We are extremely pleased with the financial results for the
third quarter and year-to-date, both consistent with management
expectations. A key performance driver was the blast furnace
outage taken in the third quarter, which increased production
levels to 29 heats per day from 21, or by 38%. The strong
production performance has continued into the fourth quarter as
well," said Alan Kestenbaum, Stelco
Executive Chairman and Chief Executive Officer. "With its legacy
issues addressed and a strong balance sheet, Stelco is poised to
grow organically – via increased production, product innovation,
the repatriation of former customers, and through disciplined
acquisitions. If the right opportunities present themselves, we
will be poised to act. I appreciate the support that investors gave
the IPO and share their optimism for this iconic Company's future.
We look forward to creating value to the benefit of our valued
customers, employees and shareholders."
______________________
1 See "Non-IFRS Measures" below for a reconciliation of
the foregoing non-IFRS measure to its most directly comparable
measure calculated in accordance with IFRS.
|
Third Quarter 2017 Financial Highlights
- The planned blast furnace outage was successfully executed in
the third quarter of 2017, resulting in a 38% increase in heats per
day, a measure of production volume of liquid steel
- Revenue was $336 million, a
decrease of $37 million, or 10%
year-over-year from $373 million for
the same period in 2016, largely as a result of the blast furnace
outage
- Operating profit was $0, a
decrease of $44 million
year-over-year from $44 million for
the same period in 2016
- Adjusted earnings before interest, income taxes, depreciation,
and amortization ("EBITDA") (a non-IFRS measure) was $7 million, consistent with the midpoint of the
range disclosed in the Company's final long-form supplemented PREP
prospectus dated November 2, 2017
(the "Prospectus")
Year-to-date 2017 Financial Highlights
- Revenue for the nine months ended September 30, 2017 was $1,149 million, an increase of $159 million, or 16%, year-over-year from
$990 million for the same period in
2016. Average selling price (a non-IFRS measure) for the nine
months ended September 30, 2017 was
$814 per net ton ("nt") versus
$654 per nt for the same period in
20162
- Operating profit was $61 million,
an increase of $53 million, or 663%,
year-over-year from $8 million for
the same period in 2016
- Adjusted EBITDA was $147 million,
an increase of $79 million, or 116%,
year-over-year from $68 million for
the same period in 2016
Summary Financial Table for Periods Ended September 30:
(in millions, except volume and per nt figures)
|
3-Months
Ended
|
9-Months
Ended
|
Trailing
12-
Months
Ended3
|
|
2017
|
2016
|
2017
|
2016
|
2017
|
Revenue
($)
|
336
|
373
|
1,149
|
990
|
1,461
|
Operating profit
($)
|
-
|
44
|
61
|
8
|
44
|
Adjusted EBITDA
($)
|
7
|
65
|
147
|
68
|
167
|
Average selling price
per nt ($)
|
818
|
749
|
814
|
654
|
779
|
Shipping
volume (in thousands of nt) 2
|
411
|
498
|
1,411
|
1,513
|
1,875
|
|
________________________
2 See "Non-IFRS Measures" below for a reconciliation of
the foregoing non-IFRS measure to its most directly comparable
measure calculated in accordance with IFRS.
|
3 The
selected consolidated financial data for the trailing twelve months
ended September 30, 2017 has been derived from our audited
consolidated financial statements for the year ended December 31,
2016 and from our unaudited interim condensed consolidated
financial statements for the three and nine months ended September
30, 2017 by adding the financial activity from the last three
months of 2016 to the first nine months of 2017. The Company
believes this period provides useful information about the
performance of our operations.
|
|
Third Quarter 2017 Financial Results
Revenue in the third quarter of 2017 totaled approximately
$336 million, a decrease of
$37 million, or 10%, from revenue of
$373 million in the third quarter of
2016. The year-over-year revenue decrease was largely due to lower
shipping volumes, which decreased from 498 thousand nt in the third
quarter of 2016 to 411 thousand nt in the third quarter of 2017, a
17% decrease. The volume decrease was largely due to the production
impact of a planned blast furnace outage in the current quarter.
The outage, which began on August 14
and was completed on September 9,
resulted in a 38% increase in heats per day relative to heats per
day experienced prior to the outage. Partially offsetting the
shipping volume decline was an increase in average selling price
year-over-year. Average selling price in the third quarter of 2017
was $818 per nt, a 9% increase from
the $749 per nt average selling price
in the third quarter of 2016. The increase in the selling price per
nt was due to the improvement of the market price of steel.
Operating profit in the third quarter of 2017 was $0 million, a decrease of $44 million from operating profit of $44 million in the third quarter of 2016. Gross
profit decreased by $39 million, or
76%, from $51 million in the third
quarter of 2016 to $12 million in the
third quarter of 2017 due to a combination of lower revenue, higher
raw material costs, incremental outage costs, and lower cost
absorption due to lower production levels. Raw material costs
increased year-over-year due to market price increases in materials
such as metallurgical coal, scrap metal and iron ore. The
lost production due to the blast furnace outage in the current
quarter resulted in an increase in unabsorbed manufacturing cost
variances. Partially offsetting raw material price increases were
year-over-year decreases in pension and other post-employment
benefit ("OPEB") costs. Selling, general and administrative costs
increased approximately $5 million
year-over-year, from $7 million in
the third quarter of 2016 to $12
million in the third quarter of 2017, due to higher
administrative charges and repatriation of functions previously
performed by the Company's prior owner.
Adjusted EBITDA in the third quarter of 2017 totaled
$7 million, a decrease of
$58 million from adjusted EBITDA of
$65 million in the third quarter of
2016. The year-over-year change reflects the decrease in revenue,
largely due to the current year's blast furnace outage, and
increases in operating and selling, general and administrative
expenses.
Year-to-date 2017
For the nine months ended September 30, 2017, revenue
totaled $1,149 million, an increase
of $159 million, or 16%, from revenue
of $990 million in 2016, primarily
due to the improved average selling price per nt. Average selling
price per nt increased by $160 per
nt, from $654 per nt in the nine
months ended September 30, 2016, to
$814 per nt in the nine months ended
September 30, 2017. The increase in
the selling price per nt was due to the improved market price of
steel.
Operating profit for the nine months ended September 30, 2017, was $61 million, an increase of $53 million, or 663%, from operating profit of
$8 million for the same period in
2016. Gross profit increased by $96
million, or 356%, from $27
million in the nine months ended September 30, 2016 to $123
million in the nine months ended September 30, 2017 due to increases in revenue,
offset by an increase in cost of goods sold per nt. The higher cost
of goods sold was attributed to an increase in raw material costs,
unabsorbed manufacturing cost variances and incremental expenses
incurred as a result of the blast furnace outage. Raw material
costs increased year-over-year due to market price increases for
material such as metallurgical coal and scrap metal, partially
offset by decreased costs of iron ore year-over-year. In
addition, other manufacturing cost variances were higher by
approximately 22%.
For the nine months ended September 30,
2017, adjusted EBITDA increased by $79 million, from $68
million in the nine months ended September 30, 2016 to $147
million, for the same period in 2017. The improvement was
largely due to improved revenue due to market steel price
increases, partially offset by higher raw material and unabsorbed
manufacturing cost variances. Adjusted EBITDA included the
following non-routine, non-recurring, and/or non-cash adjustments:
gain related to emergence from Companies' Creditor Arrangement Act
("CCAA"), restructuring costs related to CCAA, provision on pension
and other post-employment benefits, separation costs related to
previous owner support services, and acquisition related
costs.
Quarterly Results Conference Calls
The Company intends to host quarterly results investor calls
starting with its fourth quarter results. Timing of the fourth
quarter results and conference call information will be provided
closer to that time.
Consolidated Financial Statements and Management's Discussion
and Analysis
The Company's (including both Stelco Holdings Inc. and Stelco
Inc.) unaudited interim condensed consolidated financial statements
for the three and nine months ended September 30, 2017, and MD&A thereon are
available under the Company's profile on SEDAR at
www.sedar.com.
About Stelco
Stelco is a low cost, integrated and independent steelmaker with
one of the newest and most technologically advanced integrated
steelmaking facilities in North
America. Stelco produces flat-rolled value-added steels,
including premium-quality coated, cold-rolled and hot-rolled steel
products. With first-rate gauge, crown, and shape control, as
well as reliable uniformity of mechanical properties, our steel
products are supplied to customers in the construction, automotive
and energy industries across Canada and the
United States as well as to a variety of steel services
centres, which are regional distributers of steel products.
Non-IFRS Measures
This news release makes reference 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 ''EBITDA'', ''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.
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 contain
forward-looking information. Statements containing forward-looking
information are not historical facts but instead represent
management's expectations, estimates and projections regarding
future events or circumstances.
The forward-looking information includes, among other things,
statements relating to the continuation of the strong production
performance into the fourth quarter, the Company's position to grow
organically and the future actions relating thereto and the
anticipation of creating value.
This forward-looking information and other forward-looking
information are based on our opinions, estimates and assumptions in
light of our experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors that we currently believe are appropriate and
reasonable in the circumstances. Despite a careful process to
prepare and review the forward-looking information, there can be no
assurance that the underlying opinions, estimates and assumptions
will prove to be correct. 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
those described in the MD&A and referred to under the heading
"Risk Factors" in the Prospectus at www.sedar.com in respect of the
Company's initial public offering that closed on November 10, 2017.
Stelco Inc. - Supplemental Financial
Schedules
Interim condensed
consolidated statements of profit or loss
|
(In millions of
Canadian dollars)
(unaudited)
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September
30,
2017
|
September
30,
2016
|
September
30,
2017
|
September
30,
2016
|
|
$
|
$
|
$
|
$
|
Operations
|
|
|
|
|
Revenue from sale of
goods
|
336
|
373
|
1,149
|
989
|
Commission
income
|
—
|
—
|
—
|
1
|
Total
revenue
|
336
|
373
|
1,149
|
990
|
|
|
|
|
|
Cost of goods
sold
|
324
|
322
|
1,026
|
963
|
Gross
profit
|
12
|
51
|
123
|
27
|
Selling, general and
administrative expenses
|
12
|
7
|
62
|
19
|
Operating profit
(loss)
|
—
|
44
|
61
|
8
|
Finance
costs
|
12
|
54
|
133
|
136
|
Finance
income
|
—
|
—
|
(1)
|
—
|
Share of loss of
joint ventures
|
—
|
—
|
1
|
—
|
Restructuring
costs
|
1
|
9
|
33
|
26
|
Gain on emergence
from CCAA
|
—
|
—
|
(3,665)
|
—
|
Other
income
|
—
|
(1)
|
(3)
|
(1)
|
Income (loss)
before income taxes
|
(13)
|
(18)
|
3,563
|
(153)
|
Income tax
expense
|
—
|
—
|
—
|
—
|
Income (loss) for
the period
|
(13)
|
(18)
|
3,563
|
(153)
|
Interim condensed
consolidated statements of comprehensive income
(loss)
|
(In millions of
Canadian dollars)
(unaudited)
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September
30,
2017
|
September
30,
2016
|
September
30,
2017
|
September
30,
2016
|
|
$
|
$
|
$
|
$
|
|
|
|
|
|
Income (loss) for
the period
|
(13)
|
(18)
|
3,563
|
(153)
|
Other
comprehensive loss – Items that will not
subsequently be
reclassified to profit or loss
|
|
|
|
|
|
Remeasurement losses
on pension benefit
obligations
|
—
|
18
|
(53)
|
(251)
|
Other
comprehensive income (loss) for the
period, net of
income taxes
|
—
|
18
|
(53)
|
(251)
|
Total
comprehensive income (loss) for the
period, net of
income taxes
|
(13)
|
—
|
3,510
|
(404)
|
Interim condensed
consolidated statements of financial position
|
(In millions of
Canadian dollars)
(unaudited)
|
|
|
|
|
|
|
|
September
30,
2017
|
December
31,
2016
|
|
$
|
$
|
|
|
|
Assets
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
22
|
188
|
Restricted
cash
|
19
|
9
|
Trade and other
receivables
|
117
|
237
|
Inventories
|
367
|
314
|
Prepaid
expenses
|
17
|
47
|
Total current
assets
|
542
|
795
|
|
|
|
Property, plant and
equipment, net
|
303
|
378
|
Investment
property
|
—
|
21
|
Investment in joint
ventures
|
5
|
6
|
Total non-current
assets
|
308
|
405
|
Total
assets
|
850
|
1,200
|
|
|
|
|
|
|
Liabilities and
equity (deficiency)
|
|
|
Current
|
|
|
Trade and other
payables
|
168
|
457
|
Current portion of
long-term debt
|
—
|
1,822
|
Other
liabilities
|
23
|
1,172
|
Employee benefit
commitment
|
41
|
—
|
Total current
liabilities
|
232
|
3,451
|
|
|
|
Long-term
debt
|
11
|
—
|
Provisions
|
5
|
5
|
Pension and other
post-employment benefits
|
—
|
1,030
|
Other
liabilities
|
31
|
1
|
Employee benefit
commitment
|
278
|
—
|
Total non-current
liabilities
|
325
|
1,036
|
Total
liabilities
|
557
|
4,487
|
|
|
|
Equity
(deficiency)
|
|
|
Common
shares
|
2,325
|
2,325
|
Contributed
surplus
|
500
|
430
|
Retained
deficit
|
(2,532)
|
(6,042)
|
Total equity
(deficiency)
|
293
|
(3,287)
|
Total liabilities
and equity
|
850
|
1,200
|
Interim condensed
consolidated statements of cash flows
(In millions of
Canadian dollars)
(unaudited)
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
September 30,
2017
|
September 30,
2016
|
|
$
|
$
|
Operating
activities
|
|
|
|
|
|
Income (loss) for the
period
|
3,563
|
(153)
|
Adjustments to
reconcile income (loss) to cash provided by (used in) operating
activities:
|
|
|
|
Depreciation
|
19
|
22
|
|
Interest expense and
foreign exchange
|
107
|
134
|
|
Share of loss of
joint ventures
|
1
|
—
|
|
Provision on pension
and other post-employment
benefits
|
26
|
36
|
|
Employee benefit
commitment
|
(6)
|
—
|
|
Payments to creditors
under CCAA (note 13)
|
(237)
|
—
|
|
Gain on emergence
from CCAA (note 13)
|
(3,665)
|
—
|
Changes in non-cash
working capital balances related to operations:
|
|
|
|
Trade and other
receivables
|
21
|
(2)
|
|
Inventories
|
(53)
|
18
|
|
Prepaid
expenses
|
30
|
5
|
|
Trade and other
payables
|
84
|
12
|
|
Other
liabilities
|
5
|
(3)
|
|
87
|
30
|
Cash provided by
(used in) operating activities
|
(105)
|
69
|
|
|
|
Investing
activities
|
|
|
Purchases of
property, plant and equipment
|
(22)
|
(10)
|
Project
costs
|
—
|
(2)
|
Restricted
cash
|
(10)
|
1
|
Cash used in
investing activities
|
(32)
|
(11)
|
|
|
|
Financing
activities
|
|
|
Repayment of
long-term debt
|
(193)
|
—
|
Proceeds of long-term
debt
|
94
|
—
|
Proceeds from owner's
contribution
|
70
|
—
|
Cash used in
financing activities
|
(29)
|
—
|
|
|
|
Net (decrease)
increase in cash and cash equivalents
|
(166)
|
58
|
Cash and cash
equivalents, beginning of period
|
188
|
162
|
Cash and cash
equivalents, end of period
|
22
|
220
|
Non-IFRS Measures Reconciliation
The following table provides a reconciliation of income (loss)
for the period to adjusted EBITDA and certain other non-IFRS
measures for the periods indicated:
|
|
|
|
(In $ millions,
except volume and per nt)
|
Trailing
12
months
ended
September
306
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
2017
|
2017
|
2016
|
2017
|
2016
|
Income (loss) for the
period
|
3,480
|
(13)
|
(18)
|
3,563
|
(153)
|
Depreciation
|
26
|
4
|
8
|
19
|
22
|
Finance
costs
|
194
|
12
|
54
|
133
|
136
|
Finance
income
|
(2)
|
-
|
-
|
(1)
|
-
|
EBITDA
|
3,698
|
3
|
44
|
3,714
|
5
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
Gains related to
emergence from CCAA1
|
(3,665)
|
-
|
-
|
(3,665)
|
-
|
|
Acquisition related
costs2
|
18
|
-
|
-
|
18
|
-
|
|
Provision on pension
and other post-employment benefits3
|
49
|
2
|
12
|
26
|
37
|
|
Restructuring
costs4
|
43
|
1
|
9
|
33
|
26
|
|
Separation costs
related to previous owner support services5
|
24
|
1
|
-
|
21
|
-
|
Adjusted
EBITDA
|
167
|
7
|
65
|
147
|
68
|
Adjusted EBITDA as
a percentage of total revenue
|
11%
|
2%
|
17%
|
13%
|
7%
|
|
|
|
|
|
|
Selling Price per nt
(in dollars per nt)
|
779
|
818
|
749
|
814
|
654
|
Adjusted EBITDA per
nt (in dollars per nt)
|
89
|
17
|
131
|
104
|
45
|
Shipping Volume (in
thousands of nt)
|
1,875
|
411
|
498
|
1,411
|
1,513
|
|
Hot-rolled
|
1,320
|
299
|
366
|
998
|
1,124
|
|
Cold-rolled
|
51
|
12
|
4
|
43
|
6
|
|
Coated
|
407
|
78
|
105
|
302
|
307
|
|
Other
|
96
|
22
|
23
|
68
|
76
|
|
|
|
|
|
|
|
1.
|
Represents the gain
from the implementation of the CCAA plan on June 30, 2017.
Refer to note 13 of the unaudited interim condensed consolidated
financial statements of Stelco Inc. for the three and nine months
ended September 30, 2017.
|
2.
|
Acquisition costs
related to the purchase of Stelco Inc. by Bedrock.
|
3.
|
Represents difference
between total cash funding obligation for pensions and OPEBs and
amount already reflected in EBITDA.
|
4.
|
Restructuring
expenses relates to the CCAA proceedings, which primarily included
legal fees, financial advisor fees, court-appointed monitor fees,
interim financing fees and other related restructuring expenses.
The Company implemented its CCAA plan on June 30, 2017.
|
5.
|
Relates to previous
owner support service expenses incurred while the Company is in the
process of separating from the previous owner and enhancing its own
support functions.
|
6.
|
The reconciliation of
EBITDA and Adjusted EBITDA and certain other non-IFRS measures for
the trailing 12 months ended September 30, 2017 has been derived
from our audited consolidated financial statements for the year
ended December 31, 2016 and from our unaudited interim condensed
consolidated financial statements for the three and nine months
ended September 30, 2017 by adding the financial activity from the
last three months of 2016 to the first nine months of 2017. The
Company believes this period provides useful information about the
performance of our operations.
|
|
|
SOURCE Stelco