Mr. Michael Garcia reports

ALGOMA STEEL GROUP REPORTS FISCAL FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL RESULTS

Algoma Steel Group Inc. has released results for its fiscal fourth quarter and full year ended March 31, 2023.

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

• Consolidated revenue of $677.4-million, compared with $941.8-million in the prior-year quarter;
• Consolidated income from operations of $21.7-million, compared with $310.6-million in the prior-year quarter;
• Net loss of $20.4-million, compared with net income of $242.9-million in the prior-year quarter;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $47.9-million and adjusted EBITDA margin of 7.1 per cent, compared with $334.4-million and 35.5 per cent in the prior-year quarter;
• Cash flows generated from operations of $95.4-million, compared with $443.8-million in the prior-year quarter;
• Shipments of 571,647 tons, compared with 547,217 tons in the prior-year quarter;
• Paid quarterly dividend of five U.S. cents per share.

Fiscal 2023 to fiscal 2022 full-year comparisons:

• Consolidated revenue of $2,778.5-million, compared with $3,806.0-million the prior year;
• Consolidated income from operations of $290.5-million, compared with $1,411.0-million the prior year;
• Net income of $298.5-million, compared with $857.7-million the prior year;
• Adjusted EBITDA of $452.3-million and adjusted EBITDA margin of 16.3 per cent, compared with $1,503.2-million and 39.5 per cent the prior year;
• Cash flows generated from operations of $177.3-million, compared with $1,263.4-million the prior year;
• Shipments of 2,002,715 tons, compared with 2,297,159 tons the prior year.

Michael Garcia, the company's chief executive officer, commented: "Our results for the fiscal fourth quarter of 2023 were in line with our previously disclosed outlook. Following a period of dynamic commodity prices and operational improvements, the quarter saw plate and strip operations return to normal production levels. We expect to continue this momentum into fiscal 2024, with expected strong first quarter shipments and operating cash flow."

Mr. Garcia continued: "We remain focused on advancing contracting and construction of our electric arc furnace project, and have achieved two important recent milestones towards securing the power supply necessary for future EAF operations. We received conditional approval from the independent electricity system operator to connect our electric arc furnaces to the current Ontario electricity grid, and we completed the installation and commissioning of the two natural-gas-fired turbines at our Lake Superior power project upgrade. Together, the IESO-approved connection and Algoma's power upgrade are expected to provide sufficient power to run both electric arc furnaces in an alternating mode. As we enter the next phase of the project, inflationary pressures on construction costs and materials are currently estimated to increase spending on the project beyond our original budget estimates by approximately $125-million to $175-million, with the impact coming across the balance of the project. In addition, global supply chain disruptions affecting certain microprocessing chips are estimated to extend the targeted commencement of start-up activities to calendar year-end 2024."

Mr. Garcia concluded: "In fiscal 2024, we are continuing our commitment to focused execution at our existing facilities while simultaneously advancing construction of our transformative EAF project. Importantly, we continue to expect to fund the project with a combination of cash on hand, strong operating cash flows from continuing operations at normal production levels through completion of the EAF commissioning process, and available borrowings from the company's undrawn and recently upsized and extended ABL credit facility."

Algoma Steel is also pleased to announce the appointment of Mike Panzeri as senior vice-president, production. Mr. Panzeri recently joined Algoma Steel to assume responsibility for Algoma Steel's operations team, having previously served as chief operating officer of JSW Steel USA Ohio Inc. Mr. Panzeri holds a bachelor of science in materials engineering from the Rensselaer Polytechnic Institute and a master of business administration from the University of Maryland. He is based in Sault Ste. Marie and reports directly to Mr. Garcia.

Fourth quarter fiscal 2023 financial results

Fourth quarter revenue totalled $677.4-million, compared with $941.8-million in the prior-year quarter. As compared with the prior-year quarter, steel revenue was $609.2-million, compared with $879.9-million, and revenue per ton of steel sold was $1,185, compared with $1,721.

Income from operations was $21.7-million, compared with $310.6-million in the prior-year quarter. The year-over-year decrease was primarily due to a decrease in the selling price of steel, higher costs from replacing internally produced coke with purchased coke, and an increase in the purchase price of key inputs such as metallurgical coke and coal.

Net loss in the fourth quarter was $20.4-million, compared with net income of $242.9-million in the prior-year quarter. The decrease was driven primarily by the factors described above.

Adjusted EBITDA in the fourth quarter was $47.9-million, compared with $334.4-million for the prior-year quarter. This resulted in an adjusted EBITDA margin of 7.1 per cent. Average realized price of steel net of freight and non-steel revenue was $1,066 per ton, compared with $1,608 per ton in the prior-year quarter. Cost per ton of steel products sold was $934, compared with $947 in the prior-year quarter. Shipments for the fourth quarter increased by 4.5 per cent to 571,647 tons, compared with 547,217 tons in the prior-year quarter.

Full-year fiscal 2023 financial results

Revenue for fiscal year 2023 totalled 2,778.5-million, compared with $3,806.0-million the prior year. Steel revenue for fiscal year 2023 was $2,550.1-million, compared with $3,548.8-million the prior year, and revenue per ton of steel sold was $1,387, compared with $1,657 the prior year.

Income from operations for fiscal year 2023 was $290.5-million, compared with $1,411.0-million the prior year. The year-over-year decrease was primarily due to a decrease in the selling price of steel, higher costs from replacing internally produced coke with purchased coke, and an increase in the purchase price of key inputs such as metallurgical coke, coal, natural gas and alloys. In addition, new collective bargaining agreements signed last summer resulted in increased pension and postemployment benefit expenses.

Net income for fiscal year 2023 was $298.5-million, compared with $857.7-million the prior year. The year-over-year decrease was driven primarily by the factors described above.

Adjusted EBITDA for fiscal year 2023 was $452.3-million, compared with $1,503.2-million for the prior year. This resulted in an adjusted EBITDA margin of 16.3 per cent. Average realized price of steel net of freight and non-steel revenue for fiscal year 2023 was $1,273 per ton, compared with $1,545 per ton in the prior year. Cost per ton of steel products sold for fiscal year 2023 was $1,004, compared with $857 in the prior year. Shipments for fiscal year 2023 decreased by 12.8 per cent to 2,002,715 tons, compared with 2,297,159 tons in the prior year.

Electric arc furnace

In November, 2021, the company's board of directors authorized the company to construct two new state-of-the-art electric arc furnaces to replace its existing blast furnace and basic oxygen steelmaking operations. The project advanced through fiscal 2023, with approximately 80 per cent of the budgeted project cost contracted and the rest uncontracted at fiscal year-end. The company estimates that the project will exceed its original budget by $125-million to $175-million due to various emerging factors, including general market pressures impacting the cost of materials, along with higher costs for skilled labour and currency fluctuations. Additionally, supply chain disruptions with certain microprocessing chips are expected to delay the start of commissioning of the first furnace to calendar year-end 2024. The revised budget and schedule are based on currently available information, including responses to requests for proposals and estimates of final pricing, and are subject to change as additional information becomes available. Management remains fully committed to addressing these challenges pro-actively to mitigate their impacts and to ensure the successful execution of the project. The company continues to expect that the completion of the EAF project will be financed with cash on hand, cash generated through operations, and available borrowings under the company's existing undrawn and recently upsized and extended ABL credit facility.

The company further announced today that it has received conditional approval of the system impact assessment (SIA) from the independent electricity system operator (IESO), confirming that Algoma Steel may connect its two new EAFs to the current 115-kilovolt electricity grid in Northern Ontario (phase 1) in combination with Algoma Steel's on-site gas-fired turbine cogeneration power plant. The SIA is a mandatory assessment conducted by the IESO to assess the impact of the connection proposal on the reliability of the integrated power system for large-scale projects. Electrical infrastructure upgrades to enable the EAF transformation will take place in three phases, with phase 1 comprising the existing 115-kilovolt transmission connection supplemented by on-site generation; phase 2a comprising the development of a new local 230-kilovolt transmission line providing access to more power on the current grid; and phase 2b comprising full power with the enhancement of the Northern Ontario electricity grid expected to be completed by 2030. The company continues to work with the IESO as it works to complete SIAs on the phase 2a and 2b configurations. The company also completed the on-time and on-budget installation and commissioning of the natural-gas-fired turbines and control systems at its Lake Superior power project, which is estimated to increase capacity to internally generate electricity by 110 to 115 megawatts.

Following the transformation to EAF steelmaking, Algoma Steel's facility is anticipated to have an annual raw steel production capacity of approximately 3.7 million tons, matching its downstream finishing capacity, which is expected to reduce the company's annual carbon emissions by approximately 70 per cent.

Plate mill modernization

Algoma Steel's plate and strip facility continues to operate at normal production levels following the phase 1 upgrades focused on quality improvements. The phase 2 upgrades, which focus on productivity and capacity increases, include the installation of a heavy gauge in-line shear and upgrades to hot mill drives. Algoma Steel is pleased to report that the shear installation is currently progressing ahead of schedule, and the company expects to be able to further increase plate production in the third calendar quarter of 2023. This higher production is expected to allow Algoma Steel to respond to market opportunities and to build inventory ahead of the planned phase 2 hot mill outage currently scheduled in April of 2024.

ABL credit facility

On May 25, 2023, the company announced that it has upsized its senior secured asset-based revolving credit facility from $250-million (U.S.) to $300-million (U.S.) and extended the term of the ABL credit facility to May, 2028. With the closing of this transaction, the company has approximately $260-million (U.S.) of unused availability on the ABL credit facility with existing usage primarily related to letters of credit. The ABL credit facility can be used to finance working capital needs, general corporate purposes and strategic growth initiatives, including the EAF project.

Quarterly dividend

The board has declared a regular quarterly dividend in the amount of five U.S. cents on each common share outstanding, payable on July 24, 2023, to holders of record of common shares of the corporation as of the close of business on July 5, 2023. This dividend is designated as an eligible dividend for Canadian income tax purposes.

Outlook

Based on current information regarding its operations and end markets, the company currently expects the following for the first quarter of fiscal 2024.

Adjusted EBITDA*:  $170-million to $180-million

Total steel shipments:  550,000 to 560,000 tons

* A non-international financial reporting standard measure.

Conference call and webcast details

A webcast and conference call will be held on Thursday, June 22, 2023, at 11 a.m. EDT, to review the company's fiscal fourth quarter and full-year results, discuss recent events, and conduct a question-and-answer session.

The live webcast and archived replay of the conference call will be available on the investors section of the company's website. For those unable to see the webcast, the conference call will be accessible domestically or internationally by dialling 877-425-9470 or 201-389-0878, respectively. Upon dialling in, please request to join the Algoma Steel fourth quarter conference call. To listen to the replay of the call, dial 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 13738985.

Consolidated financial statements and management's discussion and analysis

The company's audited consolidated financial statements for the three and 12 months ended March 31, 2023, and management's discussion and analysis thereon are available under the company's profile on the U.S. 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 is one of the lowest-cost producers of hot-rolled sheet steel 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, 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.

We seek Safe Harbor.