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UNITED STATES/
HAMILTON, ON, March 28, 2018 /CNW/ - Stelco Holdings Inc.
("Stelco Holdings", the "Company" or "we"), (TSX: STLC), which,
through its wholly owned operating company, Stelco Inc. ("Stelco"
or "Stelco Inc."), is a low cost, integrated and independent
steelmaker with one of the newest and most technologically advanced
integrated steelmaking facilities in North America, today provided an update on the
market and its operational performance.
Given favourable market conditions for its core steel products,
the Company is providing earnings estimates for Q1 and Q2 of
2018.1
The Company continues to experience improving market conditions
and favourable pricing trends across its key products. The Company
also has a strong order book across its hot-rolled coil,
cold-rolled coil, and coated products. The Company's order book is
subject to a lag in order entry and revenue recognition with orders
being booked today estimated to be delivered in eight to ten weeks.
As a result, the Company's Q1 2018 sales will largely reflect sales
orders booked in Q4 2017, and Q2 2018 sales are expected to largely
reflect sales orders booked in Q1 2018. In Q1 2018, shipments are
expected to be 3% to 5% higher than Q4 2017. In late Q1 2018, the
Company expanded its distribution capabilities by adding
approximately 200 rail cars to its distribution fleet and increased
its shipping capacity through its LEW dock enhancement project.
Those enhancements are expected to result in Q2 2018 shipments
increasing from Q1 2018 levels. The capital projects described in
the prospectus relating to the Company's IPO remain largely on
schedule and on budget.
The Company anticipates Q1 2018 adjusted EBITDA to be between
$60 million and $70 million, largely reflecting sales orders
booked in Q4 2017 at market prices materially below current levels
and incremental transportation costs resulting from general
shortages of trucks used to deliver products in Q1. The Company
anticipates revenue and adjusted EBITDA will improve in Q2 2018 as
legacy sales contracts from Q4 2017 roll-off and are replaced by
higher price contracts executed in Q1 2018 and as shipping volumes
and efficiencies improve. Based upon these expectations, the
Company anticipates Q2 2018 adjusted EBITDA to be between
$120 million and $150 million.
See "Forward-Looking Information".
_________________________
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1 Note:
"Q1" refers to the 3 months ended March 31 and "Q2" refers to the 3
months ended June 30.
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Reconciliation of Estimated Net Income to Estimated Adjusted
EBITDA:
The following table provides a reconciliation of estimated net
income (the most directly comparable measure calculated in
accordance with IFRS) to the noted estimated adjusted EBITDA (a
non-IFRS measure) ranges for Q1 2018 and Q2 2018, as well as the
midpoint for each respective range.
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(millions of Canadian
dollars, except where otherwise noted)
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Q1
2018
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Q2
2018
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Low
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Mid-Point
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High
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Low
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Mid-Point
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High
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Estimated net
income
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15
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20
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25
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87
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102
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117
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Add
back/(Deduct):
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Depreciation
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9
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9
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9
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9
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9
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9
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Finance
costs
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17
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17
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17
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13
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13
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13
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Loss related to
commodity based swaps(1)
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10
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10
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10
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0
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0
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0
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Restructuring
costs(2)
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3
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3
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3
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3
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3
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3
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Separation costs
related to USS support services(3)
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6
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6
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6
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8
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8
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8
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Estimated adjusted
EBITDA
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60
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65
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70
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120
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135
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150
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Notes:
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(1)
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Represents loss
related to a commodity based swap arrangement entered during the
first quarter of 2018.
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(2)
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Restructuring
expenses relates to the Companies' Creditors Arrangement Act (CCAA)
proceedings, which primarily included
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legal fees and other
related restructuring expenses. The Company implemented its CCAA
plan on June 30, 2017.
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(3)
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Includes costs
associated with Company's implementation of its own standalone
information system services as a result of its
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separation from
United States Steel Corporation, as well as shared services
arrangement costs.
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Non-IFRS Measures
This press 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
EBITDA'' 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 certain of these
non-IFRS measures refer to the "Reconciliation of Estimated Net
Income to Estimated Adjusted EBITDA" section above and the
"Non-IFRS Performance Measures" in our Management Discussion and
Analysis for the period ended December 31,
2017 available on SEDAR at www.sedar.com (the "MD&A").
For a definition of certain non-IFRS measures, refer to the
"Non-IFRS Performance Measures" section of the Company's
MD&A.
Key Assumptions Underlying Our Q1 and Q2 2018 Earnings
Estimates:
The Q1 and Q2 2018 earnings estimate ranges referenced in this
press release are based on a number of assumptions, including but
not limited to, the following material assumptions:
- that the Company's anticipated margins per net ton will
increase largely due to price and volume increases, as well as
operating efficiencies, partially offset by inflation in fixed and
variable cost structures over the period;
- steel prices will generally increase period to period
consistent with current trends and sales activities over the
period;
- increases in shipping volume as we expand our distribution
capabilities through the relevant period;
- we expect Q1 2018 and Q2 2018 product mix to be comparable to
Q4 2017, although as our trial shipments to automotive OEMs
continue to see success, we could see a gradual shift in some of
our product mix toward higher value products if such shift results
in higher margins;
- the Company's ability to attract new customers and further
develop and maintain existing customers;
- no significant additional legal or regulatory developments,
changes in economic conditions, or macro changes in the competitive
environment affecting our business activities. We note that
potential further changes to trade regulations in the United States or amendments to the North
American Free Trade Agreement could materially alter underlying
assumptions around our expected financial performance;
- future operating expenses, capital expenditures and debt
service costs;
- upgrades to existing facilities remaining on schedule and on
budget and their anticipated effect on revenue and costs;
- the Company's ability to continue to access the U.S. market
without any adverse trade restrictions;
- expectations regarding industry trends, market growth rates and
the Company's future growth rates, plans and strategies to increase
revenue and cut costs; and
- the Company's ability to increase the volume of shipments to
its customers and realize upon the increase in the market price of
hot-rolled coil and other steel products.
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 includes estimates and projections
related to the following items, some of which are non-IFRS measures
(see "Reconciliation of Estimated Net Income to Estimated Adjusted
EBITDA"), among others:
- adjusted EBITDA;
- shipments;
- net Income;
- deprecation;
- finance costs;
- loss related to commodity based swaps;
- restructuring costs; and
- separation costs.
Undue reliance should not be placed on forward-looking
information. The forward-looking information in this press release
is 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. Certain assumptions in respect of our ability to source
raw materials and other inputs; our ability to supply to new
customers and markets; our ability to effectively manage costs; our
ability to attract and retain key personnel and skilled labour; our
ability to obtain and maintain existing financing on acceptable
terms; currency exchange and interest rates; the impact of
competition; changes in laws, rule, and regulations, including
international trade regulations; and growth in steel markets and
industry trends, as well as those set out in this press release,
are material factors made in preparing the forward-looking
information and management's expectations contained in this press
release.
Forward-looking information contained in this press release is
subject to risks, 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 MD&A
and referred to under the heading "Risk Factors" in the Company's
final supplemented prep prospectus dated November 2, 2017 in respect of the Company's
initial public offering that closed on November 10, 2017 and available on SEDAR at
www.sedar.com. Forward-looking information contained in this press
release is subject to other risks, uncertainties, assumptions and
other factors not presently known to us or that we presently
believe are not material 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. 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. Stelco Holdings
disclaims any intention or obligation or undertaking to update
publicly or revise any forward-looking statements, whether written
or oral, whether as a result of new information, future events or
otherwise, except as required by law.
SOURCE Stelco