/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE
SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES/
Third quarter 2018 highlights include:
- Q3 2018 operating income of $137
million
- Q3 2018 revenue increased by $283
million, or 84%, from revenue of $336
million in Q3 2017
- Q3 2018 Adjusted EBITDA of $154
million and Adjusted EBITDA per ton of $263, up 2,100% and 1,447%, respectively,
compared to Q3 2017
- Industry-leading Adjusted EBITDA margin of 25% in Q3 2018,
up from 2% in Q3 2017, an increase of 1,150%
- Q3 2018 steel shipping volumes of 586,000 net tons, up 43%
compared to Q3 2017
- Q3 2018 Tariff Adjusted EBITDA of $193 million, up 2,657% from $7 million in Q3 2017, and up 4% from
$186 million from Q2 2018
- Board has approved, subject to TSX approval, a share
repurchase program (normal course issuer bid) of up to 4,440,681
shares
- Board has approved the regular quarterly Dividend of
$0.10 per share
HAMILTON, ON, Nov. 13, 2018
/CNW/ - Stelco Holdings Inc. ("Stelco Holdings" or the
"Company"), (TSX: STLC), a low cost, integrated and
independent steelmaker with one of the newest and most
technologically advanced integrated steelmaking facilities in
North America, today announced
financial results of the Company and that of Stelco Inc.
("Stelco" or "Stelco Inc.") for the three and nine
months ended September 30, 2018.
Stelco Holdings is the 100% owner of Stelco, the operating
company.
Stelco Inc. Highlights:
Selected Financial Information:
|
(in millions except
volume and per nt figures)
|
Q3
2018
|
Q3 2017
|
Change
|
Q2 2018
|
Change
|
YTD
2018
|
YTD 2017
|
Change
|
Revenue
($)
|
619
|
336
|
84%
|
711
|
(13)%
|
1,812
|
1,149
|
58%
|
Operating income
($)
|
137
|
—
|
NM
|
161
|
(15)%
|
355
|
61
|
482%
|
Net income (loss)
($)
|
123
|
(13)
|
NM
|
(12)
|
NM
|
139
|
3,563
|
(96)%
|
Adjusted EBITDA
($)*
|
154
|
7
|
NM
|
175
|
(12)%
|
399
|
147
|
171%
|
Tariff Adjusted
EBITDA*
|
193
|
7
|
NM
|
186
|
4%
|
449
|
147
|
205%
|
Adjusted net income
(loss) ($)*
|
131
|
(9)
|
NM
|
153
|
(14)%
|
333
|
(4)
|
NM
|
Average selling price
per nt ($)*
|
980
|
793
|
24%
|
898
|
9%
|
880
|
794
|
11%
|
Adjusted EBITDA per
nt ($)*
|
263
|
17
|
NM
|
234
|
12%
|
205
|
104
|
97%
|
Tariff Adjusted
EBITDA per nt ($)*
|
329
|
17
|
NM
|
249
|
32%
|
231
|
104
|
122%
|
Shipping volume* (in
thousands of nt)
|
586
|
411
|
43%
|
748
|
(22)%
|
1,947
|
1,411
|
38%
|
|
* See "Non-IFRS
measures" for a description of certain Non-IFRS measures used in
this Press Release and "Non-IFRS Measures Reconciliation" below.
Per net ton figures are now presented for steel shipments only and
prior period per net ton metrics have been restated.
|
"Stelco's strong financial performance during the first half of
the year continued into the quarter, demonstrating the strength of
our business model and our operational improvements, despite the
impact from our planned outage at our hot strip mill in September
and tariffs," said Alan Kestenbaum,
the Company's Executive Chairman and Chief Executive Officer. "Our
third quarter 2018 operating income was $137
million and adjusted EBITDA was $154
million, which represents what we believe to be the North
American industry-leading adjusted EBITDA margin1, 2 of
25%, despite being the only reporting steel company in North America subject to 232 tariffs. Our
tariff adjusted EBITDA1 (calculated by adding back
$39 million of tariffs to our
adjusted EBITDA figure), was a record high since being acquired by
Bedrock of $193 million. Our strong
financial performance was the result of improved steel selling
prices, Stelco's low cost position, and strong domestic steel
demand from our customers."
"This quarter we invested in initiatives to enhance our
operational efficiency, such as improvements at our hot strip mill,
to better enable us to participate in higher margin segments of the
steel market including auto advanced high strength steel (AHSS),
High Strength Low Alloy (HSLA) and value-added coated markets. We
are maintaining significant liquidity, financial strength, and
flexibility to drive both inorganic and organic growth through
accretive transactions and growth initiatives in our core steel
business. We continue to see strong demand from our customers
across all end markets. In the fourth quarter, we are expecting a
significant increase in shipments, stable pricing and higher
earnings."
Kestenbaum concluded, "I would like to express our gratitude to
the Canadian government, in particular the Prime Minister, the
Minister of Finance, the Minister for Foreign Affairs and the
Minister of Innovation, Science and Economic Development, for
introducing retaliatory tariffs and for the initiation of safeguard
measures that cover the import of a number of steel products,
including both hot rolled sheet and pre-painted sheet. The recently
implemented safeguard measures on October
25 are providing market stability by limiting the amount of
off-shore imports that threaten to be diverted to Canada as a result of the Section 232 tariffs
in the United States. With these
measures in place, we expect growth in our business related to our
recent investments, including the installation of annealing
furnaces, and the recent work on the hot strip mill, that have
enhanced our product capabilities. Our plan of action utilizing our
tactical flexibility business model is to increase margins even
further by selling higher value margin products while also reducing
our tariff costs on shipments to the
United States in 2019 to as close to zero as possible, while
the government continues its discussions on removal of the 232
tariffs."
Third Quarter 2018 Financial Review:
Q3 2018 revenue increased $283
million, or 84%, from revenue of $336
million in Q3 2017. The year-over- year revenue increase was
due primarily to a 43% increase in steel shipping volumes and a 24%
increase in average steel selling price, as well as an increase in
non-steel sales. Shipping volumes increased from 411 thousand nt in
Q3 2017 to 586 thousand nt in Q3 2018. Average selling price
increased from $793/nt in Q3 2017 to
$980/nt in Q3 2018.
Finance costs remained flat compared to Q3 2017 due to a
$4 million increase in interest on
loans and borrowings, $4 million
higher accretion expense associated with our employee benefit
commitment obligation, offset by $3
million related to the gross impact period-over-period of
foreign exchange translation on U.S. dollar denominated working
capital, $2 million remeasurement
recovery on our employee benefit commitment obligation due to a
change in timing of estimated cash flows and future funding
requirements, and $3 million lower
accretion on financial lease obligations and other interest
costs.
Net income for the quarter was $123
million, up from a net loss of $13
million in the third quarter of 2017, which benefited from
an increase in operating income of $137
million, partially offset by higher restructuring costs.
Adjusted net income1 increased $140 million year-over-year, from an adjusted net
loss of $9 million in Q3 2017 to
adjusted net income of $131 million
in Q3 2018. The improvement was largely due to higher revenue and
lower selling, general and administrative expenses, excluding the
ERP implementation costs, partly offset by higher finance costs,
excluding the adjustment for remeasurement recovery related to the
employee benefit commitments.
Adjusted EBITDA in Q3 2018 totaled $154
million, an increase of $147
million from adjusted EBITDA of $7
million in Q3 2017. Tariff adjusted EBITDA of $193 million in Q3 2018, up from $7 million compared to Q3 2017 and up from
$186 million from Q2 2018. The
year-over-year improvement reflects the increase in revenue from
increased shipping volumes and an improvement in the market price
of steel.
On a sequential basis, our financial performance was impacted by
a planned upgrade at our hot strip mill intended to provide better
gauge control and increased rolling force, and enable Stelco to
better participate in the AHSS, HSLA, and value added coated steel
markets. Were it not for the $10
million of costs related to the outage, the adjusted EBITDA
would have been even higher at $164
million and the tariff adjusted EBITDA would have been
$203 million. Revenue decreased 13%,
from $711 million in Q2 2018 to
$619 million in Q3 2018. The decrease
in revenue reflects a 22% decrease in steel shipping volumes, from
the recent record 748 thousand nt in Q2 2018 to 586 thousand nt in
Q3 2018, partially offset by a 9% increase in average selling
price, which increased from $898/nt
in Q2 2018 to $980/nt in Q3 2018, as
well as an increase in non-steel sales. Operating income decreased
to $137 million in Q3 2018, down 15%
from Q2 2018 operating income of $161
million. Adjusted EBITDA decreased to $154 million, down 12% from Q2 2018, primarily
due to lower shipping volumes, higher tariff and outage related
costs, partially offset by higher selling prices. Despite the
outage, we achieved a 25% adjusted EBITDA margin, remaining flat
compared to Q2 2018.
Summary of Net Tons Shipped by Product:
(in thousands
of nt)
|
Tons Shipped by
Product
|
Q3
2018
|
Q3 2017
|
Change
|
Q2
2018
|
Change
|
YTD
2018
|
YTD 2017
|
Change
|
Hot-rolled
|
446
|
299
|
49%
|
590
|
(24)%
|
1,527
|
998
|
53%
|
Coated
|
82
|
78
|
5%
|
93
|
(12)%
|
259
|
302
|
(14)%
|
Cold-rolled
|
19
|
12
|
58%
|
33
|
(42)%
|
67
|
43
|
56%
|
Other
|
39
|
22
|
77%
|
32
|
22%
|
94
|
68
|
38%
|
Total
|
586
|
411
|
43%
|
748
|
(22)%
|
1,947
|
1,411
|
38%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipments by
Product (%)
|
|
|
|
|
|
|
|
|
Hot-rolled
|
76%
|
73%
|
|
79%
|
|
78%
|
71%
|
|
Coated
|
14%
|
19%
|
|
13%
|
|
13%
|
21%
|
|
Cold-rolled
|
3%
|
3%
|
|
4%
|
|
4%
|
3%
|
|
Other
|
7%
|
5%
|
|
4%
|
|
5%
|
5%
|
|
Total
|
100%
|
100%
|
|
100%
|
|
100%
|
100%
|
|
Stelco Holdings Highlights:
Stelco Holdings' consolidated statements of income primarily
include Stelco's financial results for the period. The following is
a financial summary of Stelco Holdings' results for the third
quarter of 2018 and 2017 as well as the first nine months of
2018:
Selected Financial Information:
|
(in millions except
volume and per nt figures)
|
Q3
2018
|
Q3 2017
|
Change
|
Q2 2018
|
Change
|
YTD
2018
|
Revenue
($)
|
619
|
336
|
84%
|
711
|
(13)%
|
1,812
|
Operating income
(loss) ($)
|
138
|
(17)
|
NM
|
162
|
(15)%
|
358
|
Net income (loss)
($)
|
125
|
(30)
|
NM
|
(11)
|
NM
|
143
|
Net income (loss) per
share ($)
|
1.41
|
(0.40)
|
NM
|
(0.12)
|
NM
|
1.61
|
Adjusted EBITDA
($)*
|
154
|
7
|
NM
|
174
|
(11)%
|
397
|
Tariff Adjusted
EBITDA*
|
193
|
7
|
NM
|
185
|
4%
|
447
|
Adjusted net income
(loss) ($)*
|
135
|
(11)
|
NM
|
154
|
(12)%
|
339
|
Adjusted net income
per share ($)*
|
1.52
|
(0.15)
|
NM
|
1.73
|
(12)%
|
3.82
|
Average selling price
per nt ($)*
|
980
|
793
|
24%
|
898
|
9%
|
880
|
Adjusted EBITDA per
nt ($)*
|
263
|
17
|
NM
|
233
|
13%
|
204
|
Tariff Adjusted
EBITDA per nt ($)*
|
329
|
17
|
NM
|
247
|
33%
|
230
|
Shipping volume* (in
thousands of nt)
|
586
|
411
|
43%
|
748
|
(22)%
|
1,947
|
|
* See "Non-IFRS
measures" for a description of certain Non-IFRS measures used in
this Press Release and "Non-IFRS Measures Reconciliation" below.
Per net ton figures are now presented for steel shipments only and
prior period per net ton metrics have been restated.
|
Stelco Holdings' SG&A expenses for the first nine months of
2018 in the amount of $40 million
include employee salary and benefits, enterprise resource planning
("ERP") implementation expenses relating to the separation from USS
and professional, consulting and legal fees. The incremental
SG&A expenses incurred by Stelco Holdings in the third quarter
of 2018 of $1 million ($12 million of the Stelco Holdings' SG&A
expenses was incurred directly by Stelco Inc.), relates to audit
and legal fees, insurance costs, as well as director and regulatory
fees.
Land Purchase
During the second quarter, Stelco announced the purchase of the
land, and related buildings, on which Stelco conducts its
operations (the "Lands"), as well as other developable lands and
port facilities from Legacy Land Limited Partnership (the "Land
Vehicle"). The Company believes that this transaction could enable
it to extract additional value from currently non-operating steel
making assets by enhancing flexibility previously unavailable to
it, to reduce costs, and to extract significant and previously
unrealizable value for our shareholders from development of the
excess land. To that end, we have begun hiring staff specialized in
real estate development, hired a firm to develop a Land Plan and
began marketing some of the properties for rental to the very
strong industrial market in the Greater
Toronto Area ("GTA").
Statement of Financial Position and Liquidity:
On a consolidated basis, Stelco Holdings ended Q3 2018 with cash
and cash equivalents of $347 million.
Additionally, as at September 30,
2018, Stelco had $299 million
of capacity under ABL revolver which remains completely
undrawn.
The following table shows selected information regarding the
Stelco Holdings consolidated balance sheet as at the noted
dates:
(millions of Canadian
dollars)
|
As at
|
September 30,
2018
|
December 31,
2017
|
ASSETS
|
|
|
Cash and cash
equivalents
|
347
|
250
|
Trade and other
receivables
|
182
|
204
|
Inventories
|
470
|
448
|
Total current
assets
|
1,024
|
932
|
Total
assets
|
1,449
|
1,223
|
|
|
|
LIABILITIES
|
|
|
Trade and other
payables
|
326
|
309
|
Total current
liabilities
|
464
|
374
|
Total non-current
liabilities
|
519
|
352
|
Total
liabilities
|
983
|
726
|
|
|
|
Total
equity
|
466
|
497
|
Stelco Holdings and its subsidiaries ended Q3 2018 with current
assets of $1 billion, which exceeded
current liabilities of $464 million
by $560 million. Stelco Holdings
liabilities include $601 million of
obligations to independent pension and OPEB trusts, which includes
$488 million of employee benefit
commitments and $113 million under a
mortgage note payable associated the land purchase discussed above.
Long term liabilities of $519 million
as at September 30, 2018 include
$498 million of obligations to
independent pension and OPEB trusts. Stelco Holdings consolidated
equity totaled $466 million as at
September 30, 2018.
Declaration of Quarterly Dividend
Stelco's Board of Directors approved the payment of a regular
quarterly cash dividend of $0.10 per
share. The dividend will be paid on November 28, 2018 to shareholders of record as of
the close of business on November 23,
2018.
Share Repurchase - Normal Course Issuer Bid
Stelco Holdings also announced that, subject to the approval of
the Toronto Stock Exchange ("TSX"), it intends to launch a normal
course issuer bid ("NCIB"). As of the date hereof, Stelco Holdings
has 88,813,637 common shares issued and outstanding. Under the
NCIB, Stelco Holdings is seeking approval to purchase up to
4,440,681 common shares, which is approximately 5% of the issued
and outstanding common shares. The Company will file a notice
of intention with the TSX in respect of this normal course issuer
bid.
The board of directors of Stelco Holdings believes that the
underlying value of the Company may not be reflected in the market
price of the common shares from time to time and that, accordingly,
the purchase of common shares will increase the proportionate
interest in the Company of, and be advantageous to, all remaining
shareholders of the Company.
Stelco may commence purchases under the bid, continuing for up
to one year, after the TSX has accepted the notice of intention.
Repurchases will be made through the facilities of the TSX as well
as through other designated exchanges and alternative trading
systems in Canada in accordance
with applicable regulatory requirements. The price paid for such
repurchased shares will be the market price of such shares at the
time of acquisition or such other price as may be permitted by the
TSX. All common shares repurchased under the normal course issuer
bid will be cancelled. Stelco Holdings has retained BMO Nesbitt
Burns Inc. as its broker to manage the bid.
Quarterly Results Conference Call
Stelco management will host a conference call to discuss its
results tomorrow, Wednesday, November 14,
2018 at 9:00 a.m. ET. To
access the call, please dial 1-866-548-4713 (U.S. and Canada) or 1-323-794-2093 (international) and
reference conference 2533649. The conference call will also be
webcasted live on the Investor Relations section of Stelco's web
site at https://www.stelco.com/investors. A presentation that will
accompany the conference call will also be available on the website
prior to the conference call. Following the conclusion of the live
call, a replay of the webcast will be available on the Investor
Relations section of the Company's website for at least 90 days. A
telephonic replay of the conference call will also be available
from 12:00 p.m. ET on November 14, 2018 until 11:59 p.m. ET on November
28, 2018 by dialing 1-844-512-2921 (U.S. and Canada) or 1-412-317-6671 (international) and
using the pin number 2533649.
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 period ended September 30,
2018, and Management's Discussion & Analysis 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 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'',
''tariff adjusted EBITDA'', ''tariff adjusted EBITDA per nt'',
''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
September 30, 2018 available under
the Company's profile on SEDAR at www.sedar.com.
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
advancement of strategic initiatives, expectations concerning the
Company's expectations on increased margins, future exposure to
tariffs, reduction of tariff costs, the expected results from the
Company's participation in higher margin segments of the steel
industry, expectations in respect of shipments, pricing and
earnings in the fourth quarter of 2018, expectations regarding the
impact of the hot strip mill outage, expectations regarding and the
declaration of a dividend. 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, TSX Approval, 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.
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 and the Company's MD&A for
the period ended September 30, 2018
available under the Company's profile on SEDAR at
www.sedar.com.
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.
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 Stelco Holdings Inc.'s and
Stelco Inc.'s Consolidated Financial Statements and MD&A for
the period ended September 30, 2018,
which is available on the Company's website and on SEDAR
(www.sedar.com).
Stelco Inc.
Consolidated statements of income
(loss)
(unaudited)
|
Three months
ended
September 30,
|
Nine months ended
September 30,
|
|
|
|
(millions of Canadian
dollars)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue from sale of
goods
|
$
|
619
|
$
|
336
|
$
|
1,812
|
$
|
1,149
|
Cost of goods
sold
|
|
470
|
|
324
|
|
1420
|
|
1026
|
Gross
profit
|
|
149
|
|
12
|
|
392
|
|
123
|
Selling, general and
administrative expenses
|
|
12
|
|
12
|
|
37
|
|
62
|
Operating
income
|
|
137
|
|
—
|
|
355
|
|
61
|
|
|
|
|
|
|
|
|
|
Other income (loss)
and (expenses)
|
|
|
|
|
|
|
|
|
Finance
costs
|
|
(12)
|
|
(12)
|
|
(198)
|
|
(133)
|
Finance and other
income (loss)
|
|
1
|
|
—
|
|
(9)
|
|
4
|
Restructuring
costs
|
|
(2)
|
|
(1)
|
|
(7)
|
|
(33)
|
Share of loss from
joint ventures
|
|
(1)
|
|
—
|
|
(2)
|
|
(1)
|
Gain on emergence from
CCAA
|
|
—
|
|
—
|
|
—
|
|
3665
|
Income (loss) before
income taxes
|
|
123
|
|
(13)
|
|
139
|
|
3,563
|
Income tax
expense
|
|
—
|
|
—
|
|
—
|
|
—
|
Net income
(loss)
|
$
|
123
|
$
|
(13)
|
$
|
139
|
$
|
3,563
|
Stelco Holdings Inc.
Consolidated statements of income (loss)
(unaudited)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September
30,
|
|
September
30,
|
(millions of Canadian
dollars)
|
|
|
2018
|
|
2017
|
|
2018
|
Revenue from sale of
goods
|
|
$
|
619
|
$
|
336
|
$
|
1,812
|
Cost of goods
sold
|
|
|
468
|
|
337
|
|
1,414
|
Gross
profit
|
|
|
151
|
|
(1)
|
|
398
|
Selling, general and
administrative expenses
|
|
|
13
|
|
16
|
|
40
|
Operating income
(loss)
|
|
|
138
|
|
(17)
|
|
358
|
|
|
|
|
|
|
|
|
Other income (loss)
and (expenses)
|
|
|
|
|
|
|
|
Finance
costs
|
|
|
(12)
|
|
(12)
|
|
(198)
|
Finance and other
income (loss)
|
|
|
3
|
|
—
|
|
(7)
|
Restructuring and
other costs
|
|
|
(3)
|
|
(1)
|
|
(8)
|
Share of loss from
joint ventures
|
|
|
(1)
|
|
—
|
|
(2)
|
Income (loss) before
income taxes
|
|
|
125
|
|
(30)
|
|
143
|
Income tax
expense
|
|
|
—
|
|
—
|
|
—
|
Net income
(loss)
|
|
$
|
125
|
$
|
(30)
|
$
|
143
|
Stelco Inc.
Consolidated balance sheets
(unaudited)
As at
|
September 30,
2018
|
December 31,
2017
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
168
|
$
|
45
|
Restricted
cash
|
|
9
|
|
12
|
Trade and other
receivables
|
|
182
|
|
203
|
Inventories
|
|
470
|
|
448
|
Prepaid
expenses
|
|
15
|
|
18
|
Total current
assets
|
$
|
844
|
$
|
726
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
Property, plant and
equipment, net
|
|
432
|
|
305
|
Investment in joint
ventures
|
|
5
|
|
4
|
Total non-current
assets
|
$
|
437
|
$
|
309
|
Total
assets
|
$
|
1,281
|
$
|
1,035
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Trade and other
payables
|
$
|
323
|
$
|
310
|
Other
liabilities
|
|
35
|
|
33
|
Obligations to
independent employee trusts
|
|
103
|
|
32
|
Total current
liabilities
|
$
|
461
|
$
|
375
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
Provisions
|
|
6
|
|
5
|
Pension
benefits
|
|
2
|
|
—
|
Other
liabilities
|
|
13
|
|
34
|
Obligations to
independent employee trusts
|
|
498
|
|
312
|
Total non-current
liabilities
|
$
|
519
|
$
|
351
|
Total
liabilities
|
$
|
980
|
$
|
726
|
|
|
|
|
|
EQUITY
|
|
|
|
|
Common
shares
|
|
2,175
|
|
2,325
|
Contributed
surplus
|
|
500
|
|
500
|
Retained
deficit
|
|
(2,374)
|
|
(2,516)
|
Total
equity
|
$
|
301
|
$
|
309
|
Total liabilities
and equity
|
$
|
1,281
|
$
|
1,035
|
Stelco Holdings Inc.
Consolidated balance sheets
(unaudited)
As at
|
September 30,
2018
|
December 31,
2017
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
347
|
$
|
250
|
Restricted
cash
|
|
9
|
|
12
|
Trade and other
receivables
|
|
182
|
|
204
|
Inventories
|
|
470
|
|
448
|
Prepaid
expenses
|
|
16
|
|
18
|
Total current
assets
|
$
|
1,024
|
$
|
932
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
Property, plant and
equipment, net
|
|
412
|
|
279
|
Intangible
assets
|
|
7
|
|
7
|
Investment in joint
ventures
|
|
6
|
|
5
|
Total non-current
assets
|
$
|
425
|
$
|
291
|
Total
assets
|
$
|
1,449
|
$
|
1,223
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Trade and other
payables
|
$
|
326
|
$
|
309
|
Other
liabilities
|
|
35
|
|
33
|
Obligations to
independent employee trusts
|
|
103
|
|
32
|
Total current
liabilities
|
$
|
464
|
$
|
374
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
Provisions
|
|
6
|
|
5
|
Pension
benefits
|
|
2
|
|
—
|
Other
liabilities
|
|
13
|
|
35
|
Obligations to
independent employee trusts
|
|
498
|
|
312
|
Total non-current
liabilities
|
$
|
519
|
$
|
352
|
Total
liabilities
|
$
|
983
|
$
|
726
|
|
|
|
|
|
EQUITY
|
|
|
|
|
Common
shares
|
|
512
|
|
512
|
Retained
deficit
|
|
(46)
|
|
(15)
|
Total
equity
|
$
|
466
|
$
|
497
|
Total liabilities
and equity
|
$
|
1,449
|
$
|
1,223
|
Non-IFRS Measures Results
The following tables provide a reconciliation of net income
(loss) to adjusted net income (loss) for the periods indicated:
Stelco Inc.
|
Three months
ended
September 30,
|
Nine months ended
September 30,
|
(millions of Canadian
dollars, except where otherwise noted)
|
2018
|
2017
|
|
2018
|
|
2017
|
Net income
(loss)
|
$
|
123
|
$
|
(13)
|
$
|
139
|
$
|
3,563
|
Add
back/(Deduct):
|
|
|
|
|
|
|
|
|
Remeasurement of
employee benefit commitment 1
|
|
(2)
|
|
—
|
|
159
|
|
—
|
Separation costs
related to USS support services 2
|
|
5
|
|
1
|
|
15
|
|
21
|
Restructuring and
other costs 3
|
|
2
|
|
1
|
|
7
|
|
33
|
Loss from commodity
based swaps
|
|
—
|
|
—
|
|
10
|
|
—
|
Property related idle
costs included in cost of goods sold 4
|
|
3
|
|
—
|
|
3
|
|
—
|
Acquisition related
costs 5
|
|
—
|
|
—
|
|
—
|
|
18
|
Provision on pension
and other post-employment benefits 6
|
|
—
|
|
2
|
|
—
|
|
26
|
Gain related to
emergence from CCAA 7
|
|
—
|
|
—
|
|
—
|
|
(3,665)
|
Adjusted net
income (loss)
|
$
|
131
|
$
|
(9)
|
$
|
333
|
$
|
(4)
|
1.
|
Remeasurement of
employee benefit commitment for change in the timing of estimated
cash flows and future funding requirements.
|
2.
|
Includes ERP
implementation costs associated with the process of separating from
USS, management fees and shared services arrangement
costs.
|
3.
|
Restructuring costs
relates to the CCAA proceedings, which primarily included legal
fees, financial advisor fees, court-appointed monitor fees, interim
financing fees and includes other restructuring related costs. The
Company implemented its CCAA plan on June 30, 2017
|
4.
|
Includes utility
costs incurred by Stelco for non-operating and idled assets
acquired from the Land Vehicle on June 5, 2018.
|
5.
|
Acquisition costs
related to the purchase of Stelco Inc. by Bedrock.
|
6.
|
Represents difference
between total cash funding obligation for pensions and
OPEBs.
|
7.
|
Represents the gain
from the implementation of the CCAA plan on June 30,
2017.
|
Stelco Holdings Inc.
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
|
|
|
(millions of Canadian
dollars, except where otherwise noted)
|
2018
|
2017
|
|
2018
|
Net income
(loss)
|
$
|
125
|
$
|
(30)
|
$
|
143
|
Add
back/(Deduct):
|
|
|
|
|
|
|
Initial public
offering costs
|
|
—
|
|
4
|
|
—
|
Remeasurement of
employee benefit commitment 1
|
|
(2)
|
|
—
|
|
159
|
Separation costs
related to USS support services 2
|
|
5
|
|
1
|
|
15
|
Restructuring and
other costs 3
|
|
3
|
|
1
|
|
8
|
Property related idle
costs included in cost of goods sold 4
|
|
3
|
|
—
|
|
3
|
Loss from
commodity-based swaps
|
|
—
|
|
—
|
|
10
|
Secondary offering
costs
|
|
1
|
|
—
|
|
1
|
Provision on pension
and other post-employment benefits 5
|
|
—
|
|
2
|
|
—
|
Fair value impact on
acquired inventory recorded in cost of sales
6
|
|
—
|
|
11
|
|
—
|
Adjusted net
income (loss)
|
$
|
135
|
$
|
(11)
|
$
|
339
|
1.
|
Remeasurement of
employee benefit commitment for change in the timing of estimated
cash flows and future funding requirements.
|
2.
|
Includes ERP
implementation costs associated with the process of separating from
USS, management fees and shared services arrangement
costs.
|
3.
|
Restructuring costs
relates to the CCAA proceedings, which primarily included legal
fees and other restructuring related costs. Stelco Inc. implemented
its CCAA plan on June 30, 2017.
|
4.
|
Includes utility
costs incurred by Stelco for non-operating and idled assets
acquired from the Land Vehicle on June 5, 2018.
|
5.
|
Represents difference
between total cash funding obligation for pensions and
OPEBs.
|
6.
|
Represents the
difference between the fair value of inventory acquired by the
Company and book value of Stelco's inventory at the date of
acquisition.
|
The following tables provides a reconciliation of net income
(loss) to each of adjusted EBITDA and tariff adjusted EBITDA for
the periods indicated:
Stelco Inc.
|
Three months
ended
September 30,
|
Nine months ended
September 30,
|
|
|
|
(millions of Canadian
dollars, except where otherwise noted)
|
2018
|
2017
|
2018
|
2017
|
Net income
(loss)
|
$
|
123
|
$
|
(13)
|
$
|
139
|
$
|
3,563
|
Add
back/(Deduct):
|
|
|
|
|
|
|
|
|
Finance
costs
|
|
12
|
|
12
|
|
198
|
|
133
|
Depreciation
|
|
10
|
|
4
|
|
28
|
|
19
|
Separation costs
related to USS support services1
|
|
5
|
|
1
|
|
15
|
|
21
|
Restructuring and
other costs 2
|
|
2
|
|
1
|
|
7
|
|
33
|
Property related idle
costs included in cost of goods sold 3
|
|
3
|
|
—
|
|
3
|
|
—
|
Loss from commodity
based swaps
|
|
—
|
|
—
|
|
10
|
|
—
|
Finance
income
|
|
(1)
|
|
—
|
|
(1)
|
|
(1)
|
Provision on pension
and other post-employment benefits 4
|
|
—
|
|
2
|
|
—
|
|
26
|
Acquisition related
costs 5
|
|
—
|
|
—
|
|
—
|
|
18
|
Gain related to
emergence from CCAA 6
|
|
—
|
|
—
|
|
—
|
|
(3,665)
|
Adjusted
EBITDA
|
$
|
154
|
$
|
7
|
$
|
399
|
$
|
147
|
Add back: Tariff
related costs 7
|
|
39
|
|
—
|
|
50
|
|
—
|
Tariff Adjusted
EBITDA
|
$
|
193
|
$
|
7
|
$
|
449
|
$
|
147
|
Percentage of
total revenue:
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
25%
|
|
2%
|
|
22%
|
|
13%
|
Tariff Adjusted
EBITDA
|
|
31%
|
|
2%
|
|
25%
|
|
13%
|
1.
|
Includes ERP
implementation costs associated with the process of separating from
USS, management fees and shared services arrangement
costs.
|
2.
|
Restructuring costs
relates to the CCAA proceedings, which primarily included legal
fees, financial advisor fees, court-appointed monitor fees, interim
financing fees and includes other restructuring related costs. The
Company implemented its CCAA plan on June 30, 2017.
|
3.
|
Includes utility
costs incurred by Stelco for non-operating and idled assets
acquired from the Land Vehicle on June 5, 2018.
|
4.
|
Represents difference
between total cash funding obligation for pensions and
OPEBs.
|
5.
|
Acquisition costs
related to the purchase of Stelco Inc. by Bedrock.
|
6.
|
Represents the gain
from the implementation of the CCAA plan on June 30,
2017.
|
7.
|
Includes tariff and
tariff related costs connected with U.S. bound steel
shipments.
|
Stelco Holdings Inc.
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
|
|
(millions of Canadian
dollars, except where otherwise noted)
|
2018
|
2017
|
2018
|
Net income
(loss)
|
$
|
125
|
$
|
(30)
|
$
|
143
|
Add
back/(Deduct):
|
|
|
|
|
|
|
Finance
costs
|
|
12
|
|
12
|
|
198
|
Depreciation
|
|
8
|
|
6
|
|
22
|
Separation costs
related to USS support services 1
|
|
5
|
|
1
|
|
15
|
Restructuring and
other costs 2
|
|
3
|
|
1
|
|
8
|
Loss from
commodity-based swaps
|
|
—
|
|
—
|
|
10
|
Property related idle
costs included in cost of goods sold 3
|
|
3
|
|
—
|
|
3
|
Secondary offering
costs
|
|
1
|
|
—
|
|
1
|
Finance
income
|
|
(3)
|
|
—
|
|
(3)
|
Initial public
offering costs 4
|
|
—
|
|
4
|
|
—
|
Fair value impact on
acquired inventory recorded in cost of sales
5
|
|
—
|
|
11
|
|
—
|
Provision on pension
and other post-employment benefits 6
|
|
—
|
|
2
|
|
—
|
Adjusted
EBITDA
|
$
|
154
|
$
|
7
|
$
|
397
|
Add back: Tariff
related costs 7
|
|
39
|
|
—
|
|
50
|
Tariff Adjusted
EBITDA
|
$
|
193
|
$
|
7
|
$
|
447
|
|
|
|
|
|
|
|
Percentage of
total revenue:
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
25%
|
|
2%
|
|
22%
|
Tariff Adjusted
EBITDA
|
|
31%
|
|
2%
|
|
25%
|
1.
|
Includes ERP
implementation costs associated with the process of separating from
USS, management fees and shared services arrangement
costs.
|
2.
|
Restructuring costs
relates to the CCAA proceedings, which primarily included legal
fees and other restructuring related costs. Stelco Inc. implemented
its CCAA plan on June 30, 2017.
|
3.
|
Includes utility
costs incurred by Stelco for non-operating and idled assets
acquired from the Land Vehicle on June 5, 2018.
|
4.
|
Represents initial
public offering costs that relate to advisory, professional and
legal fees, as well as printing costs incurred which were not
eligible for capitalization to equity as a cost of
capital.
|
5.
|
Represents the
difference between the fair value of inventory acquired by the
Company and book value of Stelco's inventory at the date of
acquisition.
|
6.
|
Represents difference
between total cash funding obligation for pensions and
OPEBs.
|
7.
|
Includes tariff and
tariff related costs connected with U.S. bound steel
shipments.
|
__________________________
1 See."Non-IFRS measures" for a description of certain
Non-IFRS measures used in this Press Release and "Non-IFRS Measures
Reconciliation" below.
2 North American steel industry comparables are
based on public filings and press releases issued by: Steel
Dynamics Inc., Nucor Corporation, United States Steel Corporation,
AK Steel Holding Corporation, Commercial Metals Company and Timken
Steel Corporation. The information about other issuers was obtained
from public sources and has not been verified by the Company. The
comparable issuers face different risks from those applicable to
the Company. Investors are cautioned that past performance is not
indicative of future performance and the performance of the Company
may be materially different from the comparable issuers. Investors
are cautioned to not put undue reliance on the comparables.
Adjusted EBITDA is not necessarily based on the same definition
across all issuers.
SOURCE Stelco