Stelco Reports Second Quarter 2018 Results

Revenue up 67% to $711 Million; Adjusted EBITDA up 130% to $175 million; Adjusted EBITDA Margin of 25%

Second quarter 2018 highlights include:

– Revenue of $711 million, up 67% year-over-year and up 48% sequentially

– Operating income of $161 million, up 544% year-over-year and up 182% sequentially

– Adjusted EBITDA of $175 million, up 130% year-over-year, up 150% sequentially, and above top end of guidance

– Adjusted EBITDA margin of 25%, up from 15% in Q1 2018 and from 18% in Q2 2017

– Steel shipping volumes up 49% year-over-year and 22% sequentially, and steel ASPs up 18% from Q1 2018

– Company declares special cash dividend of $150 million ($1.69 per share) in addition to regular quarterly dividend of $0.10 per share

Click here to download the complete press release.

HAMILTON, ONTARIO, July 31, 2018 - 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 ended June 30, 2018. Stelco Holdings is the 100% owner of Stelco, the operating company.

Stelco Inc. Highlights

Table of Selected

“Our second quarter results substantially exceeded the high-end of our previously issued guidance range, with adjusted EBITDA of $175 million, representing a 25% adjusted EBITDA margin despite incurring approximately $11 million of tariff related costs,” said Alan Kestenbaum, the Company’s Executive Chairman and Chief Executive Officer. ”Our second quarter performance reflects shipping volume at nearly three million tons annually and an average selling price of $898/nt, which is still below current market prices. We achieved this as a direct result of the successful implementation of enhanced shipping logistics including our newly repurposed dock and newly leased railcars that have reduced our dependency on trucks. The sharp improvement in our financial results year-over-year and sequentially reflects the improved efficiency of our operations, continuous efforts to drive down costs, strong demand throughout North America, and higher steel prices.

“Consistent with our core strategy to unlock value in all assets, we sold more than 70 thousand tons of coke related products in the second quarter and generated approximately $39 million in non-steel sales at healthy profit margins. We will continue to seek to extract more value from other underutilized assets. Our acquisition of 3,000 acres of land under and around our facilities during the second quarter should enable us to achieve at least three tangible benefits: (i) position us to extract additional value from our operating assets by enhancing operating flexibility previously unavailable to us, (ii) lowering our costs, and (iii) creating significant and previously unrealizable value for our shareholders through development of excess land and port facilities in the very strong Greater Toronto Area (“GTA”) property constrained Industrial market.

“We generated $165 million of cash flow from operations and $145 million of free cash flow during the quarter which drove our quarter end cash balance to $421 million,” Kestenbaum added. “We have a strong balance sheet, a healthy cash position, and a $375 million revolver that is completely undrawn. As a result, and consistent with our strategy to relentlessly focus on generating exceptional total shareholder returns, we are pleased to announce that we are declaring a special cash dividend of $150 million ($1.69 per share), in addition to our regular quarterly dividend of $0.10 per share. In parallel, 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.”

For Further Information

For investor enquiries: Don Newman, Chief Financial Officer, 905.577.4432, don.newman@stelco.com

For media enquiries: Trevor Harris, Vice-President, Corporate Affairs, 905.577.4447, trevor .harris@stelco.com