ASTLW — Algoma Steel Group Inc.

Summary of Algoma Steel Group, Inc. Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted EBITDA: $13.8 million, with a margin of 5.2%, a significant improvement from an adjusted EBITDA loss of $32.4 million in Q2 2025.
• Revenue: $267.5 million, down from $589.7 million in the prior year quarter, primarily due to the transition to EAF operations.
• Steel Shipments: 181,000 tons, a decrease from 472,000 tons in Q2 2025, but slightly above guidance of 175,000 to 180,000 tons.
• Average Net Sales Realization: $1,361 per ton, up 20.2% from $1,132 per ton in the prior year, reflecting an improved product mix.
• Direct Tariff Costs: $18.7 million, down from $64.1 million in the prior year quarter.
• Net Loss: $96 million, compared to a loss of $110.6 million in Q2 2025.

2. Strategic Updates and Business Highlights

• Transition to Electric Arc Furnace (EAF) operations is progressing, with the first unit operating at full capacity and a second unit nearing completion.
• Record plate sales with shipments of 125,000 tons, driven by demand in infrastructure, construction, and defense sectors.
• The company is establishing a joint venture with Roshel for ballistic steel production, enhancing its position in the defense supply chain.
• The strategic relationship with Hanwha Ocean has been suspended due to the selection of a different bidder for the Canadian Petrol Submarine Program, but Algoma remains engaged in defense opportunities.

3. Forward Guidance and Outlook

• Anticipates a decline in shipments in Q3 2026 by 10% to 20% due to scheduled maintenance and operational downtime related to the second EAF unit.
• Expects significant improvements in adjusted EBITDA as capacity utilization costs decline and production ramps up.
• Forecasts a production run rate of 1.5 million to 2 million tons by the end of 2026, with a focus on plate production.
• Plans to recover approximately $200 million in income tax refunds, which will support liquidity.

4. Bad News, Challenges, or Points of Concern

• The company continues to face challenges from the U.S. Section 232 tariffs, incurring direct costs and impacting market dynamics.
• Shipments have significantly decreased due to the transition to EAF operations, which may affect revenue in the short term.
• Legal proceedings are ongoing regarding supply agreements affected by tariff conditions, which could pose risks to operations and financial performance.

5. Notable Q&A Insights

• Management confirmed that the expected decline in Q3 volumes is primarily due to maintenance activities rather than demand issues.
• The mix between plate and sheet production may slightly favor sheet in the upcoming quarter due to maintenance.
• The company remains focused on cost reduction and improving revenue to achieve cash flow breakeven, with plans to explore financing options if necessary.
• Algoma is committed to engaging with government and private sector opportunities in defense, despite the setback with Hanwha Ocean, and aims to leverage its green steel production capabilities.

Overall, Algoma Steel is navigating a significant transformation in its operations while facing external market pressures, but it remains optimistic about future growth and profitability as it completes its transition to EAF technology.