Mr. Michael Garcia reports

ALGOMA STEEL GROUP REPORTS FISCAL 2023 THIRD QUARTER RESULTS

Algoma Steel Group Inc. has released results for its fiscal third quarter ended Dec. 31, 2022.

Business highlights and fiscal 2023 to fiscal 2022 third quarter comparisons:

• Consolidated revenue of $567.8-million, compared with $1.06-billion in the prior-year quarter;
• Consolidated loss from operations of $65.7-million, compared with income of $446.1-million in the prior-year quarter;
• Net loss of $69.8-million, or 64 cents per diluted share, compared with income of $123.0-million, or 92 cents per diluted share, in the prior-year quarter;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of ($35.9-million) and adjusted EBITDA margin of (6.3 per cent), compared with $457.3-million and 42.9 per cent in the prior-year quarter;
• Liquidity remained strong with a cash balance of $245-million and $239-million available under the company's ABL credit facility;
• Cash flows used in operations of $128.6-million, compared with cash generated of $318.4-million in the prior-year quarter;
• Shipments of 458,341 tons, compared with 552,544 tons in the prior-year quarter;
• Paid quarterly dividend of five U.S. cents per share.

Michael Garcia, the company's chief executive officer, commented: "I have been disappointed by the level of production and shipments in the last two quarters. As such, my management team and I have been laser-focused on rectifying these shortfalls, and we believe the challenges experienced over the prior quarters are now largely behind us, and our facilities are returning to normal production levels. Our fiscal third quarter shipments were in line with our previously disclosed guidance. We are also encouraged by the recent rebound in North American hot-rolled coil steel prices and continued robustness in plate pricing, which are supported by forward curves, reflecting an expectation of stability as global demand recovers.

"We have invested strategically to capture market upside opportunities and continue to focus on the next chapter of our company as we transition to electric arc steelmaking. We expect calendar 2023 to be more in line with our historical production levels. Our transformation to electric arc steelmaking is progressing as expected, and we will maintain our relentless focus on creating long-term value for all of our stakeholders," Mr. Garcia concluded.

Third quarter fiscal 2023 financial results

Third quarter revenue totalled $567.8-million, down 46.7 per cent from $1.06-billion in the prior-year quarter. As compared with the prior-year quarter, steel revenue was $512.0-million, down 49.3 per cent from $1.01-billion, and revenue per ton of steel sold was $1,239, down 35.7 per cent from $1,927.

Average realized price of steel net of freight and non-steel revenue was $1,116 per ton, down 38.9 per cent from $1,827 per ton in the prior-year quarter, primarily driven by weakening market conditions. Cost per ton of steel products sold was $1,157, up 22.3 per cent from $946 in the prior-year quarter, driven primarily by higher input costs associated with metallurgical coke, natural gas, alloys and scrap. Shipments for the third quarter decreased by 17.0 per cent to 458,341 tons, compared with 552,544 tons in the prior-year quarter. The year-over-year decline in shipments was largely attributable to previously disclosed plate mill modernization commissioning delays and the impact of additional maintenance.

Loss from operations was $65.7-million, compared with income of $446.1-million in the prior-year quarter. The year-over-year decrease was primarily due to a decrease in production volume and the selling price of steel, as well as an increase in the purchase price of key inputs such as metallurgical coke, natural gas, alloys and scrap as compared with the prior year.

Net loss in the third quarter was $69.8-million, or 64 cents per diluted share, compared with net income of $123.0-million, or 92 cents per diluted share in the prior-year quarter. The decrease in net income was driven primarily by the factors described above under loss from operations, and the diluted earnings per share additionally reflected the higher share count resulting from the company's merger with Legato Merger Corp. in October of 2021.

Adjusted EBITDA in the third quarter was ($35.9-million), compared with $457.3-million for the prior-year quarter. This resulted in an adjusted EBITDA margin of (6.3 per cent), compared with 42.9 per cent for the prior-year quarter.

Normal course issuer bid (share repurchase)

On March 1, 2022, the company announced the commencement of a normal course issuer bid (NCIB) after receiving approval from the Toronto Stock Exchange, authorizing the company to acquire up to a maximum of 7,397,889 shares, or 5 per cent of its issued and outstanding shares as of Feb. 18, 2022, subject to a maximum of 16,586 shares per day. The NCIB expires on March 2, 2023, if not fully exercised. The company repurchased 286,090 shares from the market under the NCIB during the fiscal quarter ended Dec. 31, 2022, at an average price of $6.25 (U.S.) per share for total consideration of $1.8-million (U.S.).

Electric arc furnace

The company has made substantial progress on the construction of two new state-of-the-art electric arc furnaces (EAF) to replace its existing blast furnace and basic oxygen steelmaking operations. The $700-million project remains both on time and on budget, with a cumulative total of approximately $220-million spent as of Dec. 31, 2022. Additionally, the company had issued letters of credit totalling $48.1-million (U.S.) related to equipment fabrication and delivery. Project management has been efficient, and all long-lead-time items have been ordered. Extensive work has been completed on the foundation, and building erection has started, with EAF start-up expected to occur in mid-2024. The EAF steelmaking facility is designed to have an annual raw steel production capacity of approximately 3.7 million tons, matching its downstream finishing capacity. The company expects to reduce its current annual carbon emissions by up to approximately 70 per cent.

Quarterly dividend

The company's board of directors has declared a regular quarterly dividend in the amount of five U.S. cents on each common share outstanding, payable on March 31, 2023, to holders of record of common shares of the corporation as of the close of business on Feb. 28, 2023. This dividend is designated as an eligible dividend for Canadian income tax purposes.

Conference call and webcast details

A webcast and conference call will be held on Tuesday, Feb. 14, 2023, at 11 a.m. Eastern Time, to review the company's fiscal third quarter results, discuss recent events, and conduct a question-and-answer session.

The live webcast and archived replay of the conference call will be available in the investors section of the company's website. For those unable to participate in the webcast, the conference call will be available domestically or internationally by dialling 877-425-9470 or 201-389-0878, respectively. Upon dialling in, please request to join the Algoma Steel third quarter conference call. To listen to the replay of the call, dial 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 13735595.

Consolidated financial statements and management's discussion and analysis

The company's unaudited condensed interim consolidated financial statements for the three months ended Dec. 31, 2022, and management's discussion and analysis thereon are available under the company's profile on the Securities and Exchange Commission's EDGAR website and under the company's profile on SEDAR.

About Algoma Steel Group Inc.

Based in Sault Ste. Marie, Ont., Canada, Algoma Steel is a fully integrated producer of hot- and cold-rolled steel products, including sheet and plate. Driven by a purpose to build better lives and a greener future, Algoma Steel is positioned to deliver responsive, customer-driven product solutions to applications in the automotive, construction, energy, defence and manufacturing sectors. Algoma Steel is a key supplier of steel products to customers in North America and is the only producer of discrete plate products in Canada. Its state-of-the-art direct strip production complex (DSPC) is one of the lowest-cost producers of hot-rolled sheet steel (HRC) in North America.

Algoma Steel is on a transformation journey, modernizing its plate mill and adopting electric arc technology that builds on the strong principles of recycling and environmental stewardship to significantly lower carbon emissions. Today, Algoma Steel is investing in its people and processes and working safely as a team to become one of North America's leading producers of green steel.

As a founding industry in its community, Algoma Steel is drawing on the best of its rich steelmaking tradition to deliver greater value, offering North America the comfort of a secure steel supply and a sustainable future as your partner in steel.

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