Algoma Steel Group Q2 Earnings Call Highlights

Key Points

• Adjusted EBITDA turned positive at C$13.8 million, supported by a C$45 million insurance settlement, although excluding that benefit the company posted an adjusted EBITDA loss of about C$31 million. Revenue fell sharply year over year as EAF transition work reduced shipments.
• Plate shipments reached a second consecutive record of 125,000 tons, while average net sales realization rose 20.2% to C$1,361 per ton. Algoma is targeting roughly 600,000 tons of annual plate production by 2027, but planned third-quarter maintenance is expected to temporarily reduce volumes.
• The EAF transition is nearing completion, with the second unit expected to produce its first steel late in the third quarter; however, tie-in work and maintenance should make Q3 the volume trough, with shipments forecast 10%–20% below Q2. Algoma ended the quarter with approximately C$437 million in available liquidity and expects about C$200 million in tax refunds during the rest of 2026.

Algoma Steel Group NASDAQ: ASTL reported positive adjusted EBITDA in its second quarter of 2026 as the company continued its transition to electric arc furnace, or EAF, steelmaking, though lower shipment volumes and planned operational work remain headwinds heading into the third quarter.

Chief Executive Officer Rajat Marwah said the company generated adjusted EBITDA of C$13.8 million, within its prior guidance range. The result included a C$45 million final insurance settlement and a C$54.7 million capacity-utilization adjustment related to excess fixed costs from Algoma’s previous operating configuration.

“As transition costs are falling, realized pricing is rising, and the transition we described to you last quarter is playing out as expected,” Marwah said.

Plate Sales Set Another Record

Algoma shipped 181,000 tons during the quarter, slightly above its guidance range of 175,000 to 180,000 tons but down from 472,000 tons in the prior-year quarter. Chief Financial Officer Mike Moraca attributed the decline to the transition to EAF-only steelmaking and the company’s deliberate shift toward the Canadian plate market.

The company reported record plate shipments for a second consecutive quarter, reaching 125,000 tons, compared with 116,000 tons in the first quarter. Marwah said demand in infrastructure, construction and defense end markets remained healthy.

Average net sales realization increased 20.2% year over year to C$1,361 per ton, driven by an improved product mix under the company’s plate-first strategy. Algoma is Canada’s only producer of discrete plate, according to management.

Marwah said plate production could increase further as the EAF ramp-up progresses. During the question-and-answer session, he said the company aims to reach about 600,000 tons of plate production in 2027, up from a current annualized level approaching 500,000 tons.

However, Moraca said planned maintenance at the plate mill during the third quarter could result in slightly lower plate volumes for the period, with a somewhat greater mix of sheet production.

EAF Transition Nears Final Stage

Algoma’s first EAF unit operated on a 24-hour schedule during the quarter, marking the company’s first full quarter in which all liquid steel production came from its EAF platform. The company permanently halted its legacy blast furnace operations on Jan. 18, 2026.

Construction of Algoma’s second EAF unit is nearing completion, with commissioning and testing of critical equipment underway. Management expects the unit to produce its first steel later in the third quarter.

The third quarter will include scheduled downtime for the operational tie-in of Unit 2, as well as maintenance at the melt shop, the first EAF unit and the company’s power generation plant. Moraca said these activities are intended to position Algoma to enter the fourth quarter with both units online and able to increase output.

As a result, Algoma expects third-quarter shipments to be 10% to 20% lower than second-quarter levels. Moraca described the quarter as the expected “trough quarter” for volumes during the transition, while saying underlying EBITDA performance excluding capacity-utilization adjustments should continue to improve sequentially.

Once fully transitioned, Algoma expects its facility to have annual raw-steel capacity of about 3.7 million tons and to reduce annual carbon emissions by about 70% from pre-EAF levels. Marwah said the company expects an exit production run rate of 1.5 million to 2 million tons as it moves into calendar 2027.

Financial Results and Liquidity

Second-quarter consolidated revenue was C$267.5 million, down from C$589.7 million a year earlier, including C$247 million in steel revenue. Cost per ton of steel products sold was C$1,411, compared with C$1,144 in the prior-year quarter, primarily reflecting lower fixed-cost absorption at reduced production volumes. The cost metric excludes the C$54.7 million capacity-utilization adjustment.

Algoma recorded a C$134.2 million operating loss, compared with an C$85.1 million operating loss in the prior-year period. Its net loss narrowed to C$96 million from C$110.6 million, with the insurance proceeds partly offsetting a larger operating loss.

Excluding the C$45 million insurance benefit, adjusted EBITDA was a loss of about C$31 million, which Moraca said represented an improvement of approximately C$1 million from the prior-year quarter despite lower shipment volumes. The insurance settlement completed the company’s claim related to a January 2024 utility corridor collapse, resulting in total recovery of C$145 million net of applicable deductibles.

Cash used in operating activities totaled C$79.4 million during the quarter. Algoma ended the quarter with C$62.6 million in cash, C$206.7 million of unused availability under its revolving credit facility and C$168 million available under LETL facilities, for total available liquidity of about C$437 million. The company drew C$124.5 million under the LETL facilities during the quarter to support operations and complete the EAF transition.

Moraca said Algoma expects approximately C$200 million in income-tax refunds over the remainder of 2026. The company also expects lower capacity-utilization costs, reduced capital intensity and the startup of Unit 2 to support liquidity and progress toward cash-flow breakeven.

Tariffs and Strategic Initiatives

Algoma incurred C$18.7 million in direct costs from U.S. Section 232 tariffs during the quarter, down from C$64.1 million in the prior-year period as it reduced shipments to the U.S. The 50% tariff on Canadian steel imports remains a structural challenge, while management said Canadian coil pricing continued to trail U.S. benchmark pricing amid domestic oversupply.

The company continues to pursue a Canada-centric, plate-first strategy and is evaluating opportunities for green-steel sales in other markets, including Europe. Marwah also said Algoma is engaging with participants in Canadian defense and infrastructure programs.

Algoma’s memorandum of understanding with Hanwha Ocean was suspended after the Canadian government selected TKMS as preferred bidder for the Canadian Patrol Submarine Project. Marwah said the company’s strategy to pursue structural steel beam production remains unchanged, while its Roshel Algoma Defence joint venture continues to establish ballistic-steel capabilities in Canada.

About Algoma Steel Group (NASDAQ:ASTL)

Algoma Steel Group Inc 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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.