Algoma Steel Group Q2 2026 Earnings Report

Algoma Steel Group EPS Results

• Actual EPS: -$0.64
• Consensus EPS: -$0.60
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: N/A

Algoma Steel Group Revenue Results

• Actual Revenue: $267.50 million
• Expected Revenue: $205.57 million
• Beat/Miss: Beat by +$61.93 million
• YoY Revenue Growth: N/A

Algoma Steel Group Announcement Details

• Quarter: Q2 2026
• Date: 7/29/2026
• Time: After Market Closes
• Conference Call Date: Thursday, July 30, 2026
• Conference Call Time: 11:00AM ET

Algoma Steel Group (NASDAQ:ASTL) is a North American steel producer headquartered in Sault Ste. Marie, Ontario. The company operates a modern electric arc furnace (EAF) complex and an integrated rolling mill, enabling it to transform scrap and direct reduced iron into a wide range of steel products. Algoma Steel Group returned to public markets in 2021 with listings on both the Toronto Stock Exchange and the Nasdaq under the symbol ASTL.

Founded in 1901 as Algoma Steel Corporation, the company grew to become one of Canada’s leading steelmakers before undergoing restructuring in the early 2000s. Following a period of restructuring and modernization, Algoma Steel Group has invested in advanced steelmaking technology, environmental controls and downstream processing capabilities. These investments support the company’s commitment to sustainability and to meeting the evolving specifications of its customers.

Algoma Steel Group produces a diverse portfolio of flat-rolled products, including hot-rolled plate, pickled and oiled sheet, galvanized, galvanealed and painted steel coils. These products serve key end markets such as automotive, construction, energy, rail and machinery. With an emphasis on quality, traceability and on-time delivery, Algoma Steel Group supplies customers across Canada, the United States and select export markets.

Algoma Steel Group Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Adjusted EBITDA was positive at CAD 13.8 million, in line with guidance and an improvement from a CAD 32.4 million loss in the prior-year quarter. Excluding the CAD 45 million insurance settlement and capacity-utilization adjustment, underlying results improved sequentially as pricing rose and transition costs declined.
• Positive Sentiment: Record plate shipments reached 125,000 tons, while average net sales realization increased 20% year over year to CAD 1,361 per ton. Algoma expects plate production to reach approximately 600,000 tons in 2027, supported by infrastructure, construction, and defense demand.
• Positive Sentiment: EAF Unit 1 is operating around the clock, and Unit 2 is nearing completion with first steel expected later this quarter. Management expects the transition-related capacity-utilization charge to be eliminated by the fourth quarter and sees a 1.5–2.0 million-ton annualized production rate entering 2027.
• Negative Sentiment: The company remains under pressure from the 50% U.S. steel tariff, Canadian coil oversupply, and cash losses during the ramp-up. Third-quarter shipments are expected to decline 10%–20% because of planned maintenance and Unit 2 tie-in work, while Algoma drew CAD 124.5 million under its financing facilities and used CAD 79.4 million in operating cash during the quarter.
• Neutral Sentiment: Algoma’s binding MOU with Hanwha Ocean has been suspended after Canada selected TKMS as the preferred submarine-project bidder, although management continues pursuing defense-related opportunities and a potential structural-beam business. The company also continues evaluating monetization options for its LSP asset.

Presentation

[Operator]

Greetings. Welcome to the Algoma Steel Group Inc.'s second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Laura Devoni, Vice President of Human Resources and Corporate Affairs. Thank you, Laura. You may begin.

[Laura Devoni, VP of Human Resources and Corporate Affairs at Algoma Steel]

Good morning, everyone, and welcome to Algoma Steel Group Inc.'s second quarter 2026 earnings conference call. My name is Laura Devoni, Vice President of Human Resources and Corporate Affairs, and I will be moderating today's call. Leading the prepared remarks are Rajat Marwah, our Chief Executive Officer, and Mike Moraca, our Chief Financial Officer. As a reminder, this call is being recorded and will be made available for replay later today in the Investors section of Algoma Steel's corporate website at www.algoma.com. I would like to remind you that comments made on today's call may contain forward-looking statements within the meaning of applicable securities laws, which involve assumptions and inherent risks and uncertainties. Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IFRS, which differs from U.S. GAAP. Our discussion today includes reference to certain non-IFRS financial measures.

[Laura Devoni, VP of Human Resources and Corporate Affairs at Algoma Steel]

Last evening, we posted an earnings presentation to accompany today's prepared remarks. The slides for today's call can be found in the Investors section of our corporate website. With that in mind, I would ask everyone on today's call to read the legal disclaimers on slide two of the accompanying earnings presentation, and to also refer to the risks and assumptions outlined in Algoma Steel's second quarter 2026 management's discussion and analysis. Please note that our financial statements are prepared using the U.S. dollar as our functional currency and the Canadian dollar as our presentation currency. Please also note that amounts referred to on today's call are in Canadian dollars, unless otherwise noted. Following our prepared remarks, we will conduct a question and answer session. I will now turn the call over to our Chief Executive Officer. Rajat?

[Rajat Marwah, CEO at Algoma Steel]

Thank you, Laura, and good morning, everyone. Thank you for joining us to discuss our second quarter 2026 results. As always, I want to begin with safety. The pace of activity on our site remains extraordinary. With our first EF unit running around the clock, construction on our second unit nearing completion, and commissioning activities commencing. Just as important to us as every milestone in this transformation is sending every employee home safely every day. I'm proud of the discipline our teams continue to demonstrate toward these shared goals. The second quarter demonstrated the resilience of our transformed business against a stubbornly challenging industry backdrop. Before I get into the details, I want to highlight three key themes. First, we generated positive adjusted EBITDA of CAD 13.8 million, in line with our previously announced guidance range.

[Rajat Marwah, CEO at Algoma Steel]

That result includes the benefit of a CAD 45 million final insurance settlement and a CAD 54.7 million capacity utilization adjustment, which Mike will walk you through shortly. The underlining message is clear. As transition costs are falling, realized pricing is rising, and the transition we described to you last quarter is playing out as expected. Second, we delivered a second consecutive quarter of record plate sales with plate shipments of 125,000 tons in the quarter, up from 116,000 tons in the first quarter. As Canada's only producer of discrete plate, we hold a unique competitive position and demand from infrastructure, construction, and defense end market remained healthy throughout the quarter. Our Volta brand of low-carbon steel produced through our EAF platform is delivering the same trusted performance our customers rely on and is made in Canada.

[Rajat Marwah, CEO at Algoma Steel]

Average net sales realization rose to CAD 1,361 per ton, up 20% from the prior year quarter, driven by this mix improvement. We expect plate production to continue to increase as our ramp-up progresses through 2026. Third, we are entering the final stage of the most significant transformation in Algoma's history. This quarter was our first full quarter with all liquid steel production sourced entirely from our EAF platform. A ramp-up of this scale is inherently complex. We are bringing a new steel-making platform at rated capacity while retiring more than a century of integrated operation. Our throughput is increasing daily as we work through the equipment learning curves and process stabilization that accompany our transformation of this magnitude. Unit 1 is operating on a full 24-hour schedule and quality metrics have been achieved across a broad range of plate and hot roll coil grades.

[Rajat Marwah, CEO at Algoma Steel]

Construction on our second EAF unit is nearing completion, with commissioning and testing of critical equipment underway. We expect first steel production from unit 2 later this quarter. I would also like to note that we have scheduled operational downtime in the third quarter in connection with operational time of unit 2 alongside plant maintenance activities at the melt shop and our power generation plant. As a reminder, once fully transitioned, our facility will have an annual raw steel production capacity of approximately 3.7 million tons and is projected to reduce our annual carbon emission by approximately 70% from pre-EAF levels. On the broader market environment, the 50% U.S. Section 232 tariff on steel imports from Canada continues to define the operating landscape.

[Rajat Marwah, CEO at Algoma Steel]

We incurred CAD 18.7 million in direct tariff costs in the quarter, down from the prior quarter as we continue to reduce volumes shipped to the U.S. The Canadian market remains supply pressured. Coil pricing continued to trade lower than the U.S. benchmark pricing due to domestic oversupply. These conditions reinforce why our pivot to a Canada-centric plate first strategy is the right response. While tariff remains a structural headwind, the rise in steel pricing is encouraging. On the strategic front, our diversification initiatives continue to advance. Roshel Algoma Defence, the joint venture we formed in April with Roshel, a Canadian-owned defense manufacturer, is establishing a Canadian center of excellence for ballistic steel production with full cycle capabilities in fabrication, forming, welding and machining. This initiative positions Algoma as a strategic pillar of Canada's industrial and defense supply chain.

[Rajat Marwah, CEO at Algoma Steel]

With respect to our previously announced strategic relationship with Hanwha Ocean, the government of Canada recently selected TKMS as the preferred bidder for the Canadian Patrol Submarine Project. As a result, our binding MOU with Hanwha Ocean has been suspended in accordance with its terms. That said, our strategic rationale for pursuing a structural steel beam will remain unchanged. We continue to engage constructively with governments as we advance to potential development of the project, which we believe has the potential to strengthen Algoma's long-term role in supporting Canada's infrastructure, industrial and defense priorities. I want to recognize the continued support of the federal and the provincial governments as we complete this transition and build a stronger, more sustainable Canadian steel industry. I will now turn the call over to Mike for a closer look at the financials. Mike?

[Mike Moraca, CFO at Algoma Steel]

Thanks, Rajat. Good morning, everyone. As a reminder, all numbers are expressed in Canadian dollars unless otherwise noted. I will start off with a brief note on currency. The Canadian dollar weakened over the course of the second quarter, moving from approximately CAD 1.39 per U.S. dollar at March 31st, 2026 to CAD 1.42 per U.S. dollar at June 30th, 2026, an approximate 2% decline. Our foreign exchange gain in the quarter of CAD 18.8 million reflects the favorable impact of a weaker Canadian dollar. Comparisons between the second quarter of 2026 and the second quarter of 2025 were significantly impacted by the transition from legacy blast furnace operations to our EAF platform. In the prior year quarter, the company was producing steel exclusively through its legacy blast furnace operations, which were permanently halted on January 18th, 2026.

[Mike Moraca, CFO at Algoma Steel]

In the second quarter of 2026, all liquid steel production was sourced from our first EAF unit, which continues to ramp up. In addition, direct tariff costs were substantially lower than the prior year quarter, reflecting our deliberate reduction of U.S.-bound shipments as part of the pivot to a Canada-centric plate-first strategy. Now onto the results. We shipped 181,000 tons compared to 472,000 tons in the prior year quarter. The decline reflects the transition to EAF-only steel making and our deliberate pivot towards the Canadian plate market, and shipments were slightly above the high end of our guidance range of 175,000 tons-180,000 tons. Consolidated revenue was CAD 267.5 million, compared to CAD 589.7 million in the prior year quarter, with steel revenue of CAD 247 million.

[Mike Moraca, CFO at Algoma Steel]

Average net sales realization was CAD 1,361 per ton, up 20.2% from CAD 1,132 per ton in the prior year quarter, reflecting the improved product mix under our plate-first strategy. Cost per ton of steel products sold was CAD 1,411 per ton compared to CAD 1,144 per ton in the prior year quarter, primarily reflecting lower fixed cost absorption at reduced production volumes during the ramp-up. I want to highlight that this metric excludes the CAD 54.7 million related to capacity utilization. As volumes build with unit two startup and the elimination of legacy fixed costs, we expect this metric to improve meaningfully. Direct tariff costs in the quarter were CAD 18.7 million, down from CAD 64.1 million in the prior year quarter. Adjusted EBITDA for the quarter was CAD 13.8 million, representing an adjusted EBITDA margin of 5.2%.

[Mike Moraca, CFO at Algoma Steel]

This compares to an adjusted EBITDA loss of CAD 32.4 million in the prior year quarter, which represented a margin of -5.5%. A few items I want to call out specifically. First, on capacity utilization. Adjusted EBITDA includes the benefit of a CAD 54.7 million capacity utilization adjustment tied to excess fixed costs from our previous operating configuration, down from CAD 90.2 million in the first quarter and on track to be fully eliminated by the fourth quarter. Second, on the prior year comparison, adjusted EBITDA in the quarter includes the benefit of CAD 45 million of insurance proceeds recognized in other income. This now closes out our claim related to the January 2024 utility corridor collapse in full, of which we recovered CAD 145 million net of applicable deductibles. There were no comparable insurance proceeds in the prior year quarter.

[Mike Moraca, CFO at Algoma Steel]

On an apples-to-apples basis, excluding the insurance benefit, adjusted EBITDA was a loss of approximately CAD 31 million, an improvement of approximately CAD 1 million versus the prior year quarter, despite substantially lower shipment volumes. On the sequential trajectory versus the prior quarter, excluding the insurance benefit, adjusted EBITDA was roughly in line with the first quarter. When you exclude both the insurance benefit and the capacity utilization adjustment from each quarter, results improved by approximately CAD 33 million sequentially, which reflects our improving trajectory. Loss from operations was CAD 134.2 million, compared to a loss of CAD 85.1 million in the prior year quarter, primarily reflecting lower shipments, partially offset by improved mix and lower labor and other fixed costs.

[Mike Moraca, CFO at Algoma Steel]

Net loss in the quarter was CAD 96 million, compared to CAD 110.6 million in the prior year quarter, primarily reflecting the CAD 45 million in insurance proceeds, offset by the higher loss from operations.

[Mike Moraca, CFO at Algoma Steel]

Turning to cash flow and liquidity, our CAD 79.4 million of cash used in operating activities during the quarter was driven mostly by the increased loss from operations, offset by a continued reduction in working capital. This was driven by a further release of approximately CAD 26 million of inventories during the quarter as we fully transition to our EAF-based platform. We ended the quarter with CAD 62.6 million of cash, CAD 206.7 million of unused availability under a revolving credit facility, and CAD 168 million available to draw under the LETL facilities. Total available liquidity at quarter end was approximately CAD 437 million. During the quarter, we drew CAD 124.5 million under the LETL facilities to support operations and completion of the EAF transition.

[Mike Moraca, CFO at Algoma Steel]

Looking ahead on cash flow, we continue to expect a number of positive items to benefit the company over the balance of 2026, including the recovery of approximately CAD 200 million related to income tax refunds. Combined with declining capacity utilization costs, lower capital intensity, and the Unit Two startup, we believe we have the liquidity and financial flexibility to complete the ramp-up and position the business for improved profitability. As Rajat highlighted earlier, we have scheduled operational downtime during the third quarter to complete the operational tie-in of EAF Unit Two, together with planned maintenance activities at both the melt shop and our power generation plant. As a result, we estimate that third quarter shipments will be directionally lower by 10%-20% versus the second quarter. From a volume perspective, we view this as the trough quarter of the transition.

[Mike Moraca, CFO at Algoma Steel]

That said, we expect our underlying EBITDA performance, excluding any benefit of capacity utilization adjustment, to continue to improve sequentially as we continue realizing the operational and financial benefits of our EAF platform. Finally, on legal matters. As previously disclosed, we have initiated and are responding to legal proceedings in connection with certain supply agreements, taking the position that these agreements have been frustrated by the extraordinary and unforeseen tariff environment. We believe we have valid legal remedies and defenses, and we will continue to defend our position. We are not in a position to comment further on this at this time. I'd now like to turn the call back over to Rajat for closing comments.

[Rajat Marwah, CEO at Algoma Steel]

Thanks, Mike. The second quarter showed that our transformed business can deliver, even against a difficult backdrop. We continue to ramp our first EAF unit, set a plate sales record for the second consecutive quarter. Transition costs declined meaningfully and remain on track to be eliminated by the fourth quarter. Our second EAF unit is weeks away from first steel, the final major milestone in our transformation. Our position remains clear as Canada's only producer of discrete plate. Demand across infrastructure, construction, and defense end market is healthy and growing as our EAF platform gives us a structural cost and carbon advantage that will serve us across market cycles. I want to thank our employees for their continued dedication and disciplined execution, our customers for their trust, and the federal and the provincial government for their continued partnership.

[Rajat Marwah, CEO at Algoma Steel]

We look forward to updating you on the startup of Unit 2 when we report our third quarter results this fall. Thank you for your continued interest in Algoma Steel. At this point, we are happy to take your questions. Operator, please provide the instructions for the Q&A session.

[Operator]

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Katja Jancic. If you can please proceed with your question.

[Katja Jancic, Analyst at BMO Capital Markets]

Hi. Thank you for taking my questions. Maybe starting on the volume commentary. Mike, you said sequentially in 3Q, volume's down again. Is that purely due to demand and some seasonality, or is part of that also due to the maintenance work you mentioned?

[Mike Moraca, CFO at Algoma Steel]

Morning, Katja. Yeah, I think that it's related to the maintenance activities. We're trying to put all of the maintenance activities in place ahead of Unit 2 coming online, which includes some work at our power plant that's scheduled, a routine maintenance that we will do for preventative maintenance, as well as in the steel shop at the first unit that's online, and then some tie-in activities at Unit 2. Trying to bulk all of that together so that we enter Q4 with both units online and able to move up the capacity curve.

[Katja Jancic, Analyst at BMO Capital Markets]

How should we think about the mix between plate and sheet? My understanding is that plate should continue to move higher.

[Mike Moraca, CFO at Algoma Steel]

Yeah, I think that for this quarter, there is activities that we will also do at the plate mill. It will be close, but it may be slightly less plate for this quarter as those maintenance activities happen with a little bit more volume on the sheet mill.

[Katja Jancic, Analyst at BMO Capital Markets]

Maybe one more, if I may. Given the maintenance, how should we think about costs?

[Mike Moraca, CFO at Algoma Steel]

Yeah. The capacity utilization charge is going to come down, really related to the elimination of the costs. However, we will have the fixed cost absorption with lower volume that comes into that. You should see pricing improving as we've seen in the marketplace and costs being around the same as where they were.

[Katja Jancic, Analyst at BMO Capital Markets]

Okay. Thank you.

[Operator]

Our next question is from James McGarragle with RBC. Please proceed with your question.

[James McGarragle, Analyst at RBC]

I appreciate you having me on. I just wanted to ask a question on your production capacity as the second EAF comes online. Can you just talk about what you expect your production run rate to be as you exit 2026? I guess the demand environment in the Canadian market to kind of take on that level of production, especially on the sheets side of the business.

[Rajat Marwah, CEO at Algoma Steel]

Hi, James. Our exit will be similar to what we had said in the past, 1.5 million to 2 million tons will be the run rate when we get into 2027 calendar year. We are ramping up on the plate side, and you've seen that happening, and that'll be our first priority. Sheet definitely depends on how the market plays out next year. We are looking at some other avenues as well, as I mentioned in the last call, that we are looking at supplying to other jurisdictions, because of our green steel that we have. There is that demand that's increasing of green steel, especially in Europe, and we are looking at those opportunities also for next year.

[James McGarragle, Analyst at RBC]

In terms of your cost targets, I guess, as that second EAF mill comes online, is there any change to your production targets or your cost targets versus what you've been communicating on the prior earnings calls?

[Mike Moraca, CFO at Algoma Steel]

No. As the denominator increases, we're certainly going to have a significant improvement in the costs on the fixed cost absorption side as we exit calendar Q4 into next year. Across the board, we're continuing to focus on costs and driving down our cost across the board. The volume is the biggest lever in improving that.

[James McGarragle, Analyst at RBC]

Okay. Just one last one from me before I turn it over. Any update on a potential LSP monetization and how you're viewing the opportunity and optionality surrounding that?

[Mike Moraca, CFO at Algoma Steel]

No, I think we continually feel that asset's going to be very important for us, and it's going to continue to serve us. The best way to monetize it will really be a factor of what the available revenue stream is for that facility, and we continue to work through those optionalities. We don't have an update at this time, but we really think that that asset provides us a tremendous amount of flexibility in a world where power demand is only going up.

[James McGarragle, Analyst at RBC]

No, I appreciate the call there, and I'll turn the line over. Thank you.

[Operator]

Our next question is from Ian Gillies with Stifel. Please proceed with your question.

[Ian Gillies, Analyst at Stifel]

Morning, everyone.

[Rajat Marwah, CEO at Algoma Steel]

Hey, Ian.

[Mike Moraca, CFO at Algoma Steel]

Hey, Ian.

[Ian Gillies, Analyst at Stifel]

Could you provide a bit of an update on what you think a realistic outcome is for plate production in 2027? Just given customer demands and what you're able to make versus what they want and how you're thinking about that moving into next year.

[Rajat Marwah, CEO at Algoma Steel]

Yeah, sure. Our plate production has been growing, and you see that it's closer to half a million tons a year. We can grow it further to, let's say, 600,000 tons. That's our plan to get into that kind of level for next year. The demand in Canada definitely is growing, and we would be able to cater to a lot of it in the following year. It depends on how these projects that are being launched play out from demand perspective. We feel comfortable that the demand that's available will be met by, or we will be able to meet the demand, that 600,000 tons of production for next year.

[Ian Gillies, Analyst at Stifel]

That's helpful. Maybe switching gears a little bit. Obviously, the Canadian government has gone with someone other than Hanwha for the subcontract. Can you maybe talk a little bit about how you intend to pivot and service some of this defense demand, and even though another competitor got the contract, whether you still think you might be able to participate in some way, shape, or form?

[Rajat Marwah, CEO at Algoma Steel]

Sure. We, being the Canadian producer of steel and green steel as well, do participate in all of the programs that are out there from the government perspective and otherwise as well on the private sector. That is continuing. We are talking to everybody and engaging with everybody from that perspective. Our strategy to pivot into beams is not changing because that market is there and it's available, and we will be working towards getting that initiated. On the plate side, we are supplying to defense right now. There will be more and more as we go through next year. From the new party who has got it, we will, and we are engaging with them.

[Rajat Marwah, CEO at Algoma Steel]

The steel that will be needed for submarine is one part, and then there is steel that is needed for infrastructure on both sides of the country, and that will be made in Canada if Canada can make it by that time, and that will be plate and beams. We are quite focused on ensuring that we are at least involved in all these programs that are coming out where we can, as Canadian producer, supply steel.

[Ian Gillies, Analyst at Stifel]

That's helpful. Maybe last one from me. On the LETL loan, as you work your way through that, I guess towards the end of this year or early next year, would the intention then be to move into, if you need to, the ABL or would you try and source some other version of financing, perhaps from the government to continue until there's some sort of either relief on tariff or other alternatives?

[Mike Moraca, CFO at Algoma Steel]

Yeah, I think, look, we have a number of other cash items that are going to be supportive, that are coming through the rest of this year. Well, we have the CAD 45 million of insurance settlement. It's as a receivable right now, so that will be cash that we add at this point. We have the CAD 200 million of tax refund that we're going to receive at this point. That's just filed a statutory requirement that we'll get those funds this year. Those are going to be supportive. Beyond that, we're working on driving costs down and improving the revenue to get this business to cash flow breakeven. That's goal number one. We'll look at other options on the balance sheet if required, but we're really working to get this business to cash flow breakeven is the goal.

[Ian Gillies, Analyst at Stifel]

Understood. Thanks very much. I'll turn it back over.

[Operator]

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. We've reached the end of the question and answer session. I would like to turn the floor back over to Laura Devoni for closing comments.

[Laura Devoni, VP of Human Resources and Corporate Affairs at Algoma Steel]

Thank you again for your participation in our second quarter 2026 earnings conference call and for your continued interest in Algoma Steel. We look forward to updating you on our results and progress when we report our third quarter results this fall.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Analysts

• Laura Devoni, VP of Human Resources and Corporate Affairs at Algoma Steel
• Rajat Marwah, CEO at Algoma Steel
• Mike Moraca, CFO at Algoma Steel
• Katja Jancic, Analyst at BMO Capital Markets
• James McGarragle, Analyst at RBC
• Ian Gillies, Analyst at Stifel