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UNITED STATES/
Stelco Inc. fourth quarter 2018 highlights include:
- Q4 2018 revenue of $648
million, up 43%, compared to Q4 2017
- Q4 2018 operating income of $116
million, up 115% compared to Q4 2017
- Q4 2018 adjusted EBITDA* of $145
million and adjusted EBITDA per ton* of $215, up 110% and 84%, respectively, compared to
Q4 2017
- Industry-leading adjusted EBITDA margin of 22% in Q4 2018,
up from 15% in Q4 2017
- Q4 2018 tariff adjusted EBITDA* of $168 million, up 143% from $69 million in Q4 2017
- Q4 2018 steel shipping volumes* of 673,000 net tons, up 14%
compared to Q4 2017
- Stelco Holdings Inc. declares special cash dividend of
$100 million ($1.13 per share) in addition to regular quarterly
dividend of $0.10 per share
HAMILTON, ON, Feb. 19, 2019 /CNW/ - Stelco Holdings Inc.
("Stelco Holdings" or the "Company"), (TSX: STLC), a low cost,
integrated and independent steelmaker with one of the newest and
most technologically advanced integrated steelmaking facilities in
North America, today announced
financial results of the Company and that of Stelco Inc. ("Stelco"
or "Stelco Inc.") for the three months and full year ended
December 31, 2018. Stelco Holdings is
the 100% owner of Stelco, the operating company.
Stelco Inc. Highlights:
Selected Financial Information:
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|
|
|
|
|
|
|
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(in millions except
volume and per nt figures)
|
Q4
2018
|
Q4 2017
|
Change
|
Q3 2018
|
Change
|
2018
|
2017
|
Change
|
Revenue ($)
|
648
|
452
|
43%
|
619
|
5 %
|
2,460
|
1,601
|
54 %
|
Operating income
($)
|
116
|
54
|
115%
|
137
|
(15)%
|
471
|
115
|
310 %
|
Net income
($)
|
108
|
16
|
575%
|
123
|
(12)%
|
247
|
3,579
|
(93)%
|
Average selling price
per nt ($)*
|
917
|
718
|
28%
|
980
|
(6)%
|
889
|
772
|
15 %
|
Shipping volume* (in
thousands of nt)
|
673
|
592
|
14%
|
586
|
15 %
|
2,620
|
2,003
|
31 %
|
Adjusted net income
($)*
|
98
|
49
|
100%
|
131
|
(25)%
|
431
|
45
|
858 %
|
Adjusted EBITDA
($)*
|
145
|
69
|
110%
|
154
|
(6)%
|
544
|
216
|
152 %
|
Tariff Adjusted EBITDA
($)*
|
168
|
69
|
143%
|
193
|
(13)%
|
617
|
216
|
186 %
|
Adjusted EBITDA per nt
($)*
|
215
|
117
|
84%
|
263
|
(18)%
|
208
|
108
|
93 %
|
Tariff Adjusted EBITDA
per nt ($)*
|
250
|
117
|
114%
|
329
|
(24)%
|
235
|
108
|
118 %
|
* 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 continued to deliver strong shipping volumes and
financial results, including what we believe to be the North
American steel industry's leading adjusted EBITDA
margin1,2 of 22% in the fourth quarter and for the
full year 2018, demonstrating the benefits of the operational
improvements we continue to make in the Company," said Alan Kestenbaum, the Company's Executive
Chairman. "We are pleased with our full year financial performance
and operational resiliency. Our full year 2018 operating income of
$471 million, adjusted EBITDA of
$544 million, and tariff adjusted
EBITDA of $617 million, are a
reflection of our company's strength of operations and a testament
to Stelco's low cost position and tactical flexibility model."
"By executing our tactical flexibility model, during the fourth
quarter we reduced our tariff related costs by more than 41%
sequentially, from $39 million in the
third quarter to $23 million in the
fourth quarter," Kestenbaum added. "We are continuing with efforts
to reduce our tariff exposure into 2019 and fully support the
Canadian government's efforts to eliminate the 232 tariffs against
Canadian steel. We welcome and appreciate the Canadian government's
implementation of various measures including provisional safeguard
measures in Q4 2018, that have helped to prevent a surge of
offshore imports into the Canadian market."
"During the fourth quarter, we generated $100 million of cash flow from operations and
ended the year with a considerable cash balance of $438 million3," Kestenbaum concluded.
"As a result, consistent with our strategy and focus on generating
exceptional total shareholder returns, we are pleased to announce
we are declaring a special cash dividend of $100 million ($1.13
per share), in addition to our regular quarterly dividend of
$0.10 per share. These dividends,
coupled with the $150 million special
dividend paid in August and our four regular quarterly dividends
paid in 2018, will bring total dividends paid to our shareholders
since the beginning of 2018 to $295
million ($3.32 per share). In
addition to returning substantial capital to shareholders, we
continue to maintain healthy liquidity and a strong balance sheet,
providing flexibility to drive growth. As 2019 is getting underway,
we are beginning to see the benefits of our unique approach to
capital allocation as we both return capital to shareholders and
maintain a strong, flexible and liquid balance sheet as good,
strategic and accretive M&A growth opportunities are starting
to emerge."
Fourth Quarter 2018 Financial Review:
Q4 2018 revenue increased $196
million, or 43%, from $452
million in Q4 2017. The year-over-year increase in revenue
was due primarily to a 14% improvement in steel shipping volumes, a
28% improvement in average steel selling price, as well as an
increase in non-steel sales. Shipping volumes increased from 592
thousand nt in Q4 2017 to 673 thousand nt in Q4 2018. The average
selling price of our steel products increased from $718/nt in Q4 2017 to $917/nt in Q4 2018.
Finance costs decreased by $4
million, or 19%, from $21
million in Q4 2017 due to a $25
million gross remeasurement recovery on our employee benefit
commitment due to a change in timing of estimated cash flows and
future funding requirements, $3
million lower accretion on financial lease obligations and
other finance costs, partly offset by $17
million related to the period-over-period impact of foreign
exchange translation on U.S. dollar denominated working capital,
$4 million increase in interest on
loans and borrowings and $3 million
higher accretion expense associated with our employee benefit
commitment obligation.
Net income for the quarter was $108
million, up from $16 million
in the fourth quarter of 2017, which benefited from an increase in
operating income of $62 million,
higher finance and other income of $9
million and decrease in restructuring and other costs of
$4 million. Adjusted net
income1 increased $49
million year-over-year, from $49
million in Q4 2017 to $98
million in Q4 2018. The improvement was largely due to
higher gross profit and finance and other income, partly offset by
higher finance costs, excluding the adjustment for remeasurement
recovery related to the employee benefit commitments.
Adjusted EBITDA in Q4 2018 totaled $145
million, an increase of $76
million from adjusted EBITDA of $69
million in Q4 2017. Tariff adjusted EBITDA was $168 million in Q4 2018, up from $69 million in Q4 2017 and was down from
$193 million in Q3 2018. The
year-over-year improvement reflects the increase in revenue from
increased shipping volumes and an improvement in the market price
of steel.
Revenue increased 5%, from $619
million in Q3 2018 to $648
million in Q4 2018. The increase in revenue reflects a 15%
increase in steel shipping volumes, from 586 thousand nt in Q3 2018
to 673 thousand nt in Q4 2018, partially offset by a 6% decrease in
average selling price, which decreased from $980/nt in Q3 2018 to $917/nt in Q4 2018, as well as a decrease in
non-steel sales. Operating income decreased to $116 million in Q4 2018, down 15% from Q3 2018
operating income of $137 million.
Adjusted EBITDA decreased to $145
million, down 6% from Q3 2018, primarily due to lower
selling prices and higher cost of sales, partially offset by higher
shipping volumes and lower tariff costs.
1
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See "Non-IFRS
measures" for a description of certain Non-IFRS measures used in
this Press Release and "Non-IFRS Measures Reconciliation"
below.
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2
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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.
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3
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Refers to Stelco
Holdings on a consolidated basis.
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Full Year 2018 Financial Review:
Revenue for 2018 increased $859
million, or 54%, from revenue of $1.6
billion in 2017. The year-over-year revenue increase was due
primarily to a 31% increase in steel shipping volumes and a 15%
increase in average steel selling price, as well as an increase in
non-steel sales. Shipping volumes increased from 2.0 million nt in
2017 to 2.6 million nt in 2018. Average selling price increased
from $772/nt in 2017 to $889/ nt in 2018.
Finance costs in 2018 increased by $61
million, or 40%, from $154
million in 2017, primarily due to $160 million of higher remeasurement and
accretion expenses associated with our employee benefit commitment
obligation, partly offset by a $103
million decrease in interest on loans and borrowings mostly
related to the extinguishment of $1.8
billion of debt through the CCAA process and $10 million related to the negative impact
period-over-period of foreign exchange translation on U.S. dollar
denominated working capital. Interest on loans and borrowings
during 2018 includes finance costs associated with the company's
inventory monetization agreement and mortgage note related to the
June 2018 land purchase.
Net income for the year was $247
million, compared to net income of $3.6 billion in 2017, which benefited from a
$3.7 billion gain related to the
company's emergence from CCAA. Adjusted net income increased
$386 million year-over-year, from
$45 million in 2017, to $431 million in 2018. The improvement was largely
due to an $859 million increase in
revenue, partially offset by a $528
million increase in cost of goods sold, as well a decrease
in restructuring and other costs and lower selling, general and
administrative costs, partially offset by higher finance costs and
a decrease in finance and other income.
Adjusted EBITDA in 2018 totaled $544
million, an increase of $328
million, from $216 million in
2017. Tariff adjusted EBITDA of $617
million in 2018, was up from $216
million in 2017. The year-over-year improvement reflects the
increase in revenue from increased shipping volumes and an
improvement in the market price of steel, partially offset by
higher raw material costs, tariff costs, and unabsorbed
manufacturing costs and other expenses related a planned outage at
our hot-strip mill during the period.
Summary of Net Tons Shipped by Product:
(in thousands
of nt)
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Tons Shipped by
Product
|
Q4
2018
|
Q4
2017
|
Change
|
Q3 2018
|
Change
|
2018
|
2017
|
Change
|
Hot-rolled
|
553
|
473
|
17%
|
446
|
24%
|
2,080
|
1,471
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41%
|
Coated
|
79
|
77
|
3%
|
82
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(4)%
|
338
|
379
|
(11)%
|
Cold-rolled
|
10
|
15
|
(33)%
|
19
|
(47)%
|
77
|
58
|
33%
|
Other
|
31
|
27
|
15%
|
39
|
(21)%
|
125
|
95
|
32%
|
Total
|
673
|
592
|
14%
|
586
|
15%
|
2,620
|
2,003
|
31%
|
|
|
|
|
|
|
|
|
|
Shipments by
Product (%)
|
|
|
|
|
|
|
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|
Hot-rolled
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82%
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80%
|
|
76%
|
|
79%
|
73%
|
|
Coated
|
12%
|
13%
|
|
15%
|
|
13%
|
19%
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|
Cold-rolled
|
1%
|
3%
|
|
3%
|
|
4%
|
3%
|
|
Other
|
5%
|
4%
|
|
6%
|
|
4%
|
5%
|
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Total
|
100%
|
100%
|
|
100%
|
|
100%
|
100%
|
|
Stelco Holdings Highlights:
Stelco Holdings' consolidated statements of income primarily include Stelco's financial results for the period.
The following is a financial summary of Stelco Holdings' results
for the fourth quarter of 2018 and 2017 as well as the full year
of 2018:
Selected Financial Information:
|
|
|
|
|
|
|
(in millions except
volume and per nt figures)
|
Q4
2018
|
Q4 2017
|
Change
|
Q3 2018
|
Change
|
2018
|
Revenue ($)
|
648
|
452
|
43%
|
619
|
5 %
|
2,460
|
Operating income
($)
|
118
|
42
|
181%
|
138
|
(14)%
|
476
|
Net income
($)
|
110
|
15
|
633%
|
125
|
(12)%
|
253
|
Net income per share
($)
|
1.23
|
0.21
|
486%
|
1.41
|
(13)%
|
2.85
|
Adjusted EBITDA
($)*
|
144
|
69
|
109%
|
154
|
(6)%
|
541
|
Tariff Adjusted
EBITDA*
|
167
|
69
|
142%
|
193
|
(13)%
|
614
|
Adjusted net income
($)*
|
100
|
52
|
92%
|
135
|
(26)%
|
439
|
Adjusted net income per
share ($)*
|
1.13
|
0.67
|
69%
|
1.52
|
(26)%
|
4.94
|
Average selling price
per nt ($)*
|
917
|
718
|
28%
|
980
|
(6)%
|
889
|
Adjusted EBITDA per nt
($)*
|
214
|
117
|
83%
|
263
|
(19)%
|
206
|
Tariff Adjusted EBITDA
per nt ($)*
|
248
|
117
|
112%
|
329
|
(25)%
|
234
|
Shipping volume* (in
thousands of nt)
|
673
|
592
|
14%
|
586
|
15 %
|
2,620
|
* 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' selling, general and administrative expenses
for the full year of 2018 in the amount of $56 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 selling, general and administrative
expenses incurred by Stelco Holdings in the fourth quarter of 2018
of $1 million ($15 million was incurred directly by Stelco
Inc.), relates to audit and legal fees, insurance costs, as well as
director and regulatory fees.
Statement of Financial Position and Liquidity:
On a consolidated basis, Stelco Holdings ended 2018 with cash
and cash equivalents of $438 million.
Additionally, as at December 31,
2018, Stelco had $303 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
|
December 31,
2018
|
December 31,
2017
|
ASSETS
|
|
|
Cash and cash
equivalents
|
438
|
250
|
Trade and other
receivables
|
252
|
204
|
Inventories
|
468
|
448
|
Total current
assets
|
1,194
|
932
|
Total
assets
|
1,655
|
1,223
|
LIABILITIES
|
|
|
Trade and other
payables
|
436
|
309
|
Total current
liabilities
|
579
|
374
|
Total non-current
liabilities
|
508
|
352
|
Total
liabilities
|
1,087
|
726
|
|
|
|
Total
equity
|
568
|
497
|
Stelco Holdings and its subsidiaries ended 2018 with current
assets of $1.2 billion, which
exceeded current liabilities of $579
million by $615 million.
Stelco Holdings liabilities include $591
million of obligations to independent pension and OPEB
trusts, which includes $478 million
of employee benefit commitments and $113
million under a mortgage note payable associated with the
June 2018 land purchase. Long term
liabilities of $508 million as at
December 31, 2018 include
$488 million of obligations to
independent pension and OPEB trusts. Stelco Holdings consolidated
equity totaled $568 million as at
December 31, 2018.
Organization Change
Stelco Holdings' Board of Directors appointed David Cheney to the position of Chief Executive
Officer of the company effective February
20, 2019. Alan Kestenbaum
will continue in his role as Executive Chairman and oversee all
aspects of the company, while being able to increase his focus on
all areas of corporate growth, strategic planning, and maximizing
shareholder returns. In his new role, Mr. Cheney will have
executive responsibility for all aspects of the company's
day-to-day business.
"David's appointment recognizes his strong leadership role since
Bedrock acquired the Company," said Mr. Kestenbaum. "We have worked
together very closely for several years and David has earned my
full confidence and that of the Board of Directors and management,
and I am proud to transition the role of CEO of the company to him.
This transition will allow me to continue to oversee all aspects of
the company while allowing me more time to focus on driving the
Company's strategy and growth initiatives. Stelco has delivered
very strong results since our acquisition and I am very confident
that this executive change will bring even stronger results and
accelerated growth."
Declaration of Dividends
Stelco's Board of Directors approved the payment of a special
cash dividend of $100 million
($1.13 per share), in addition to the
regular quarterly cash dividend of $0.10 per share. The special dividend of
$1.13 per share will be paid on
March 20, 2019 to shareholders of
record as of the close of business on March
13, 2019, and the regular quarterly dividend of $0.10 per share will be paid on March 22, 2019, to shareholders of record as of
the close of business on March 13,
2019.
The special dividend and the regular quarterly dividend have been
designated as an "eligible dividend" for purposes of the Income Tax
Act (Canada).
Quarterly Results Conference Call
Stelco management will host a conference call to discuss its
results tomorrow, Wednesday February 20,
2019, at 9:00 a.m. ET. To
access the call, please dial 1-800-239-9838 (U.S. and Canada) or 1-323-794-2551 (international) and
reference conference 6187330. 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 February
20, 2019 until 11:59 p.m. ET
on March 6, 2019 by dialing
1-844-512-2921 (U.S. and Canada)
or 1-412-317-6671(international) and using the pin number
6187330.
Consolidated Financial Statements and Management's Discussion
and Analysis
The Company's (including both Stelco Holdings Inc. and Stelco
Inc.) audited consolidated financial statements for the year ended
December 31, 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 year ended December 31, 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, 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, expectations concerning
mergers and acquisitions opportunities, expectations regarding 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, 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 dated February 15, 2019 and the Company's MD&A for
the year ended December 31, 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 December 31, 2018,
which is available on the Company's website and on SEDAR
(www.sedar.com).
Stelco Inc.
Consolidated statements of
income
(unaudited)
|
Three months
ended
December 31,
|
|
|
Year ended
December 31,
|
(millions of Canadian
dollars)
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Revenue from sale of
goods
|
|
$
|
648
|
|
$
|
452
|
|
$
|
2,460
|
|
$
|
1,601
|
Cost of goods
sold
|
|
|
517
|
|
|
383
|
|
|
1,937
|
|
|
1,409
|
Gross
profit
|
|
|
131
|
|
|
69
|
|
|
523
|
|
|
192
|
Selling, general and
administrative expenses
|
|
|
15
|
|
|
15
|
|
|
52
|
|
|
77
|
Operating
income
|
|
|
116
|
|
|
54
|
|
|
471
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(loss) and (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
costs
|
|
|
(17)
|
|
|
(21)
|
|
|
(215)
|
|
|
(154)
|
Finance and other
income
|
|
|
10
|
|
|
1
|
|
|
1
|
|
|
5
|
Restructuring and
other costs
|
|
|
(1)
|
|
|
(5)
|
|
|
(8)
|
|
|
(38
|
Share of loss from
joint ventures
|
|
|
—
|
|
|
(1)
|
|
|
(2)
|
|
|
(2)
|
Gain (Loss) on
emergence from CCAA
|
|
|
—
|
|
|
(12)
|
|
|
—
|
|
|
3,653
|
Income before
income taxes
|
|
|
108
|
|
|
16
|
|
|
247
|
|
|
3,579
|
Income tax
expense
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Net
income
|
|
$
|
108
|
|
$
|
16
|
|
$
|
247
|
|
$
|
3,579
|
Stelco Holdings Inc.
Consolidated statements of
income
(unaudited)
|
Three months
ended
December 31,
|
|
Year ended
December 31,
|
(millions of Canadian
dollars)
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
Revenue from sale of
goods
|
|
$
|
648
|
|
$
|
452
|
|
$
|
2,460
|
Cost of goods
sold
|
|
|
514
|
|
|
379
|
|
|
1,928
|
Gross
profit
|
|
|
134
|
|
|
73
|
|
|
532
|
Selling, general and
administrative expenses
|
|
|
16
|
|
|
31
|
|
|
56
|
Operating
income
|
|
|
118
|
|
|
42
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
Other income
(loss) and (expenses)
|
|
|
|
|
|
|
|
|
|
Finance
costs
|
|
|
(17)
|
|
|
(21)
|
|
|
(215)
|
Finance and other
income
|
|
|
10
|
|
|
—
|
|
|
3
|
Restructuring and
other costs
|
|
|
(1)
|
|
|
(5)
|
|
|
(9)
|
Share of loss from
joint ventures
|
|
|
—
|
|
|
(1)
|
|
|
(2)
|
Income before
income taxes
|
|
|
110
|
|
|
15
|
|
|
253
|
Income tax
expense
|
|
|
—
|
|
|
—
|
|
|
—
|
Net
income
|
|
$
|
110
|
|
$
|
15
|
|
$
|
253
|
Stelco Inc.
Consolidated balance sheets
(unaudited)
As at
|
December 31,
2018
|
December 31,
2017
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
|
268
|
$
|
45
|
Restricted
cash
|
8
|
12
|
Trade and other
receivables
|
252
|
203
|
Inventories
|
468
|
448
|
Prepaid
expenses
|
27
|
18
|
Total current
assets
|
$
|
1,023
|
$
|
726
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment, net
|
465
|
305
|
Investment in joint
ventures
|
5
|
4
|
Total non-current
assets
|
$
|
470
|
$
|
309
|
Total
assets
|
$
|
1,493
|
$
|
1,035
|
|
|
|
LIABILITIES
|
|
|
Current
liabilities
|
|
|
Trade and other
payables
|
$
|
432
|
$
|
310
|
Other
liabilities
|
39
|
33
|
Obligations to
independent employee trusts
|
103
|
32
|
Total current
liabilities
|
$
|
574
|
$
|
375
|
|
|
|
Non-current
liabilities
|
|
|
Provisions
|
5
|
5
|
Pension
benefits
|
2
|
—
|
Other
liabilities
|
13
|
34
|
Obligations to
independent employee trusts
|
488
|
312
|
Total non-current
liabilities
|
$
|
508
|
$
|
351
|
Total
liabilities
|
$
|
1,082
|
$
|
726
|
|
|
|
EQUITY
|
|
|
Common
shares
|
2,175
|
2,325
|
Contributed
surplus
|
500
|
500
|
Retained
deficit
|
(2,264)
|
(2,516)
|
Total
equity
|
$
|
411
|
$
|
309
|
Total liabilities
and equity
|
$
|
1,493
|
$
|
1,035
|
Stelco Holdings Inc.
Consolidated balance sheets
(unaudited)
As at
|
December 31,
2018
|
December 31,
2017
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
|
438
|
$
|
250
|
Restricted
cash
|
8
|
12
|
Trade and other
receivables
|
252
|
204
|
Inventories
|
468
|
448
|
Prepaid
expenses
|
28
|
18
|
Total current
assets
|
$
|
1,194
|
$
|
932
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment, net
|
448
|
279
|
Intangible
assets
|
7
|
7
|
Investment in joint
ventures
|
6
|
5
|
Total non-current
assets
|
$
|
461
|
$
|
291
|
Total
assets
|
$
|
1,655
|
$
|
1,223
|
|
|
|
LIABILITIES
|
|
|
Current
liabilities
|
|
|
Trade and other
payables
|
$
|
436
|
$
|
309
|
Other
liabilities
|
40
|
33
|
Obligations to
independent employee trusts
|
103
|
32
|
Total current
liabilities
|
$
|
579
|
$
|
374
|
|
|
|
Non-current
liabilities
|
|
|
Provisions
|
5
|
5
|
Pension
benefits
|
2
|
—
|
Other
liabilities
|
13
|
35
|
Obligations to
independent employee trusts
|
488
|
312
|
Total non-current
liabilities
|
$
|
508
|
$
|
352
|
Total
liabilities
|
$
|
1,087
|
$
|
726
|
|
|
|
EQUITY
|
|
|
Common
shares
|
512
|
512
|
Treasury
shares
|
(1)
|
—
|
Retained earnings
(deficit)
|
57
|
(15)
|
Total
equity
|
$
|
568
|
$
|
497
|
Total liabilities
and equity
|
$
|
1,655
|
$
|
1,223
|
Non-IFRS Measures Results
The following tables provide a reconciliation of net income to
adjusted net income for the periods indicated:
Stelco Inc.
|
Three months
ended
December 31,
|
Year ended December
31,
|
(millions of Canadian
dollars, except where otherwise noted)
|
2018
|
2017
|
2018
|
2017
|
Net
income
|
$
|
108
|
$
|
16
|
$
|
247
|
$
|
3,579
|
Add
back/(Deduct):
|
|
|
|
|
Remeasurement of
employee benefit commitment 1
|
(15)
|
10
|
144
|
10
|
Separation costs
related to USS support services 2
|
5
|
6
|
20
|
27
|
Loss from
commodity-based swaps
|
—
|
—
|
10
|
—
|
Restructuring and
other costs 3
|
1
|
5
|
8
|
38
|
Property related idle
costs included in cost of goods sold 4
|
2
|
—
|
5
|
—
|
Income related to
buildings finance lease termination 5
|
(3)
|
—
|
(3)
|
—
|
Acquisition related
costs 6
|
—
|
—
|
—
|
18
|
Provision on pension
and other post-employment benefits 7
|
—
|
—
|
—
|
26
|
Loss (Gain) related to
emergence from CCAA 8
|
—
|
12
|
—
|
(3,653)
|
Adjusted net
income
|
$
|
98
|
$
|
49
|
$
|
431
|
$
|
45
|
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.
|
Represents the recovery of accretion and depreciation expense in connection with the termination of buildings finance lease associated with the Lands acquisition.
|
6.
|
Acquisition costs
related to the purchase of Stelco by Bedrock.
|
7.
|
Represents difference
between total cash funding obligation for pensions
and OPEBs.
|
8.
|
Represents the loss
(gain) from the implementation of the CCAA plan on June
30, 2017.
|
Stelco Holdings Inc.
|
Three months ended
December 31,
|
Year ended
December 31,
|
(millions of Canadian
dollars, except where otherwise noted)
|
2018
|
2017
|
2018
|
Net
income
|
$
|
110
|
$
|
15
|
$
|
253
|
Add
back/(Deduct):
|
|
|
|
Remeasurement of
employee benefit commitment 1
|
(15)
|
10
|
144
|
Separation costs
related to USS support services 2
|
5
|
6
|
20
|
Restructuring and
other costs 3
|
1
|
5
|
9
|
Property related idle
costs included in cost of goods sold 4
|
2
|
—
|
5
|
Income related to
buildings finance lease termination 5
|
(3)
|
—
|
(3)
|
Loss from
commodity-based swaps
|
—
|
—
|
10
|
Secondary offering
costs
|
—
|
—
|
1
|
Initial public
offering costs
|
—
|
16
|
—
|
Adjusted net
income
|
$
|
100
|
$
|
52
|
$
|
439
|
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 the recovery of accretion and depreciation expense in connection with the termination of buildings finance lease associated with the Lands acquisition.
|
The following tables provides a reconciliation of net income to
each of adjusted EBITDA and tariff adjusted EBITDA for the periods
indicated:
Stelco Inc.
|
Three months
ended
December 31,
|
Year ended
December 31,
|
(millions of Canadian
dollars, except
where otherwise noted)
|
2018
|
2017
|
2018
|
2017
|
Net income
|
$
|
108
|
$
|
16
|
$
|
247
|
$
|
3,579
|
Add back/(Deduct):
|
|
|
|
|
Finance
costs
|
17
|
21
|
215
|
154
|
Depreciation
|
16
|
9
|
44
|
28
|
Separation costs
related to USS support services 1
|
5
|
6
|
20
|
27
|
Loss from commodity
based swaps
|
—
|
—
|
10
|
—
|
Restructuring and
other costs 2
|
1
|
5
|
8
|
38
|
Property related idle
costs included in cost of goods sold 3
|
2
|
—
|
5
|
—
|
Income related to
buildings finance lease termination 4
|
(3)
|
—
|
(3)
|
—
|
Finance
income
|
(1)
|
—
|
(2)
|
(1)
|
Provision on pension
and other post-employment benefits 5
|
—
|
—
|
—
|
26
|
Acquisition related
costs 6
|
—
|
—
|
—
|
18
|
Loss (Gain) related to
emergence from CCAA 7
|
—
|
12
|
—
|
(3,653)
|
Adjusted
EBITDA
|
$
|
145
|
$
|
69
|
$
|
544
|
$
|
216
|
Add back: Tariff
related costs 8
|
23
|
—
|
73
|
—
|
Tariff Adjusted
EBITDA
|
$
|
168
|
$
|
69
|
$
|
617
|
$
|
216
|
|
|
|
|
|
Percentage of
total revenue:
|
|
|
|
|
Adjusted
EBITDA
|
22%
|
15%
|
22%
|
13%
|
Tariff Adjusted
EBITDA
|
26%
|
15%
|
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 the recovery of accretion and depreciation expense in connection with the termination of buildings finance lease associated with the Lands acquisition.
|
5.
|
Represents difference
between total cash funding obligation for pensions
and OPEBs.
|
6.
|
Acquisition costs
related to the purchase of Stelco by Bedrock.
|
7.
|
Represents the loss
(gain) from the implementation of the CCAA plan on June
30, 2017.
|
8.
|
Includes tariff and
tariff related costs connected with U.S. bound
steel shipments.
|
Stelco Holdings Inc.
|
Three months ended
December 31,
|
Year ended
December 31,
|
(millions of Canadian
dollars, except where otherwise noted)
|
2018
|
2017
|
2018
|
Net
income
|
$
|
110
|
$
|
15
|
$
|
253
|
Add
back/(Deduct):
|
|
|
|
Finance
costs
|
17
|
21
|
215
|
Depreciation
|
13
|
6
|
35
|
Separation costs
related to USS support services 1
|
5
|
6
|
20
|
Restructuring and
other costs 2
|
1
|
5
|
9
|
Property related idle
costs included in cost of goods sold 3
|
2
|
—
|
5
|
Income related to
buildings finance lease termination 4
|
(3)
|
—
|
(3)
|
Finance
income
|
(1)
|
—
|
(4)
|
Loss from
commodity-based swaps
|
—
|
—
|
10
|
Secondary offering
costs
|
—
|
—
|
1
|
Initial public
offering costs 5
|
—
|
16
|
—
|
Adjusted
EBITDA
|
$
|
144
|
$
|
69
|
$
|
541
|
Add back: Tariff
related costs 6
|
23
|
—
|
73
|
Tariff Adjusted
EBITDA
|
$
|
167
|
$
|
69
|
$
|
614
|
|
|
|
|
Percentage of
total revenue:
|
|
|
|
Adjusted
EBITDA
|
22%
|
15%
|
22%
|
Tariff Adjusted
EBITDA
|
26%
|
15%
|
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 the recovery of accretion and depreciation expense in connection with the termination of buildings finance lease associated with the Lands acquisition.
|
5.
|
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.
|
6.
|
Includes tariff and
tariff related costs connected with U.S. bound
steel shipments.
|
SOURCE Stelco