Algoma Steel Group Inc (ASTL) Share Price

Crushed earnings, $400M share buyback, almost 50% of market cap. Divy payer too.

$3.8B sales TTM sales and a $800M market cap. $25+ stock for starters.

Full Year Fiscal 2022 Financial Results

Full year revenue totaled $3,806.0 million, up 112.0% from $1,794.9 million the prior-year. As compared with 2021, steel revenue was $3,548.8 million, up 119.7% from $1,615.1 million, and revenue per ton of steel sold was $1,657, up 94.0% from $854.

Income from operations was $1,411.0 million, compared to $84.8 million the prior-year. The year over year increase was primarily due to an increase in the selling price of steel, partially offset by an increase in the purchase price of inputs, including iron ore, scrap and alloys, as well as increases in employee profit sharing.

Net income for the year was $857.7 million, compared to a net loss of $76.1 million in 2021. The improvement was driven primarily by the factors described above under income from operations offset by listing expenses and transaction costs associated with the merger with Legato Merger Corp. and higher income taxes.

Adjusted EBITDA for the full year was $1,503.2 million, compared with $199.2 million for the prior-year. This resulted in an Adjusted EBITDA margin of 39.5%. Average realized price of steel net of freight and non-steel revenue was $1,545 per ton, up 101.2% from $768 per ton in the prior-year. Cost per ton of steel products sold was $857, up 32.7% from $646 in the prior-year. Shipments for the year increased by 9.3% to 2,297,159 tons, compared to 2,102,086 tons in the prior-year. See "Non-IFRS Measures" below for an explanation of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.

Normal Course Issuer Bid

On March 3, 2022 the Company announced the commencement of a normal course issuer bid ("NCIB") after receiving approval from the Toronto Stock Exchange ("TSX"), authorizing the Company to acquire up to a maximum of 7,397,889 shares, or 5% of its issued and outstanding shares as of February 18, 2022, subject to a maximum of 16,586 shares per day on the TSX and 300,000 on NASDAQ. The NCIB expires on March 2, 2023 if not fully exercised. No shares were repurchased under the NCIB during the fiscal year ended March 31, 2022. Subsequent to March 31, 2022, as at May 31 2022, the company has acquired and cancelled 1,089,691 shares under the NCIB. The Company will be suspending share repurchases under the NCIB until after the expiration of the proposed substantial issuer bid.

Substantial Issuer Bid

The Company announced today that it intends to commence a US$400 million substantial issuer bid ("SIB"), as part of its overall capital allocation strategy, under which the Company plans to offer to purchase for cancellation from shareholders up to US$400 million of the Company's outstanding common shares by way of a "modified Dutch auction" which will permit shareholders to choose, within the pricing range determined by the Company, the number of shares and the price at which they wish to tender such shares, with the purchase price for all tendering shareholders being the lowest purchase price per share that will enable the Company to purchase the maximum number of shares properly tendered to the offer, up to US$400 million. The Company believes that the SIB represents an equitable and efficient means of providing value to its shareholders. The pricing range of the SIB and further details will be announced separately, prior to the commencement of the SIB, which is anticipated to occur prior to the end of June.

Electric Arc Furnace

In November 2021, the Board of Directors authorized the Company to construct 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 is expected to take two years to complete and is advancing as expected. Following the transformation to EAF steelmaking, Algoma's facility is anticipated to have an annual raw steel production capacity of approximately 3.7 million tons, which would match its downstream finishing capacity, and would be expected to reduce the Company's annual carbon emissions by approximately 70%.

Quarterly Dividend

The Company's board of directors has declared a regular quarterly dividend in the amount of US$0.05 on each common share outstanding, payable on July 15, 2022 to holders of record of common shares of the Corporation as of the close of business on June 27, 2022. This dividend is designated as an "eligible dividend" for Canadian income tax purposes.