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    ASTL
    Earnings call· Jun 2026(Q2 FY26)

    Algoma Steel Group Q2 FY26 earnings call ASTL

    Jul 30, 2026 Source

    Executive summary

    Algoma Steel Group Inc. Q2 FY26 — EAF Transition Progresses, Plate Sales Record

    Algoma Steel continued its EAF transition in Q2 FY26, achieving positive adjusted EBITDA despite a challenging market and lower volumes. The company set a new record for plate sales, benefiting from a Canada-centric, plate-first strategy and improved product mix. While facing tariff headwinds and temporary volume reductions for EAF Unit 2 commissioning, management expects underlying EBITDA to improve sequentially as transition costs decline and liquidity remains robust.

    Highlights

    5

    • Generated positive adjusted EBITDA of $13.8 million, including a $45 million insurance settlement and $54.7 million capacity utilization adjustment.

    • Delivered a second consecutive quarter of record plate sales, with shipments of 125,000 tons, up from 116,000 tons in Q1 FY26.

    • Average net sales realization rose to $1,361 per ton, up 20.2% from the prior year quarter, driven by improved product mix.

    • Capacity utilization adjustment costs are on track to be fully eliminated by Q4 FY26, down from $90.2 million in Q1 FY26.

    • Total available liquidity at quarter end was approximately $437 million, including $62.6 million cash and $206.7 million unused revolver availability.

    Concerns

    5

    • Incurred $18.7 million in direct U.S. Section 232 tariff costs in the quarter, despite reduced U.S. volumes.

    • Consolidated revenue declined to $267.5 million from $589.7 million in the prior year quarter due to EAF transition and reduced shipments.

    • Cost per ton of steel products sold increased to $1,411 per ton from $1,144 per ton in the prior year, reflecting lower fixed cost absorption at reduced volumes.

    • Net loss in the quarter was $96 million, compared to $110.6 million in the prior year quarter.

    • Third quarter shipments are estimated to be directionally lower by 10% to 20% versus Q2 FY26 due to scheduled operational downtime for EAF Unit 2 tie-in and maintenance.

    Guidance & targets

    7
    CategoryTargetConfidence
    EAF Unit 2 first production
    Later this quarter
    high materiality
    High
    Annual raw steel production capacity
    Approximately 3.7 million tons
    high materiality
    High
    Annual carbon emission reduction
    Approximately 70%
    high materiality
    High
    Capacity utilization adjustment elimination
    Fully eliminated
    medium materiality
    High
    Income tax refunds
    Approximately $200 million
    high materiality
    High
    Q3 FY26 Shipments
    Directionally lower by 10% to 20% versus Q2 FY26
    medium materiality
    High
    Underlying EBITDA performance (ex-CU adjustment)
    Continue to improve sequentially
    high materiality
    High

    Operational metrics

    24
    Adjusted EBITDA
    $13.8 millionvs. loss of $32.4 million in Q2 FY25
    Q2 FY26

    Includes $45 million insurance proceeds and $54.7 million capacity utilization adjustment.

    Adjusted EBITDA (ex-insurance benefit)
    loss of $31 millionimproved by $1 million vs. prior year quarter
    Q2 FY26

    Excluding the $45 million insurance benefit.

    Adjusted EBITDA (ex-insurance & CU adjustment)
    improved by $33 millionsequentially vs. Q1 FY26
    Q2 FY26

    Excluding both the $45 million insurance benefit and the $54.7 million capacity utilization adjustment from each quarter.

    Capacity Utilization Adjustment
    $54.7 milliondown from $90.2 million in Q1 FY26
    Q2 FY26

    Tied to excess fixed costs from previous operating configuration.

    Insurance Proceeds
    $45 million
    Q2 FY26

    Final settlement for January 2024 utility corridor collapse; total recovered $145 million net of deductibles.

    Shipments
    181,000compared to 472,000 tons in Q2 FY25
    Q2 FY26

    Slightly above the high end of guidance range of 175,000 to 180,000 tons.

    Consolidated Revenue
    $267.5 millioncompared to $589.7 million in Q2 FY25
    Q2 FY26

    Impacted by transition to EAF-only steelmaking and pivot towards Canadian plate market.

    Steel Revenue
    $247 million
    Q2 FY26

    Component of consolidated revenue.

    Average Net Sales Realization
    $1,361up 20.2% from $1,132 per ton in Q2 FY25
    Q2 FY26

    Reflects improved product mix under plate-first strategy.

    Cost per ton of steel products sold
    $1,411compared to $1,144 per ton in Q2 FY25
    Q2 FY26

    Primarily reflecting lower fixed cost absorption at reduced production volumes during ramp-up; excludes $54.7 million related to capacity utilization.

    Direct Tariff Costs (U.S. Section 232)
    $18.7 milliondown from $64.1 million in Q2 FY25
    Q2 FY26

    Reflects deliberate reduction of U.S.-bound shipments.

    Loss from Operations
    $134.2 millioncompared to a loss of $85.1 million in Q2 FY25
    Q2 FY26

    Primarily reflecting lower shipments partially offset by improved mix and lower labor and other fixed costs.

    Net Loss
    $96 millioncompared to $110.6 million in Q2 FY25
    Q2 FY26

    Primarily reflecting $45 million in insurance proceeds (transcribed as $45.2 million) offset by higher loss from operations.

    Cash used in operating activities
    $79.4 million
    Q2 FY26

    Driven mostly by increased loss from operations, offset by a continued reduction in working capital.

    Inventory Release
    $26 million
    Q2 FY26

    Further release of inventories during the quarter as fully transitioned to EAF-based platform.

    Cash Balance
    $62.6 million
    Q2 FY26

    Part of total available liquidity.

    Unused Revolving Credit Facility
    $206.7 million
    Q2 FY26

    Part of total available liquidity.

    Available under LETL facilities
    $168 million
    Q2 FY26

    Part of total available liquidity.

    Total Available Liquidity
    $437 million
    Q2 FY26

    Comprises cash, unused revolving credit facility, and available LETL facilities.

    Drawn under LETL facilities
    $124.5 million
    Q2 FY26

    Drawn during the quarter to support operations and completion of the EAF transition.

    Plate Shipments
    125,000up from 116,000 tons in Q1 FY26
    Q2 FY26

    Second consecutive quarter of record plate sales.

    Plate Production Target
    600,000 to 700,000vs. closer to 0.5 million tons per year currently
    FY27

    Plan to grow plate production further for next year.

    EAF Production Run Rate Target
    1.5 to 2 million
    CY27

    Expected run rate when exiting 2026 and getting into 2027 calendar year.

    Foreign Exchange Gain
    $18.8 million
    Q2 FY26

    Reflects the favorable impact of a weaker Canadian dollar (CAD 1.39 to CAD 1.42 per US dollar).

    Industry KPIs

    4
    MetricValueDetails
    Safety—
    Unit cash cost$1,411CAD per ton
    Growth project CAPEX first production—
    Production sales volume by metal and by mine181,000tons

    Deals & partnerships

    2
    RochelleEstablishing a Canadian center of excellence for ballistic steel production with full cycle capabilities in fabrication, forming, welding, and machining.

    Joint venture formed in April with Rochelle, a Canadian-owned defense manufacturer.

    Hanwha OceanStrategic relationship for potential structural steel beam development.

    Binding MOU suspended as Government of Canada selected TKMS as preferred bidder for Canadian Petrol Submarine Program. Strategic rationale for pursuing structural steel beam remains unchanged.

    Capital programs

    1
    EAF Transitionunderway
    Funding: LETL facilities (partially)

    Benefit: 3.7 million tons annual raw steel production capacity; 70% carbon emission reduction

    Construction on second EAF unit nearing completion, commissioning activities commencing. First full quarter with all liquid steel production from EAF platform. Capacity utilization adjustment costs expected to be fully eliminated by Q4 FY26.

    Risks & headwinds

    4
    U.S. Section 232 TariffOngoing

    $18.7 million in direct tariff costs in Q2 FY26

    Mitigation: Reduced volumes shipped to the U.S., pivot to Canada-centric plate-first strategy.

    Canadian Market OversupplyQ2 FY26

    Coil pricing lower than US benchmark

    Mitigation: Pivot to a Canada-centric plate-first strategy.

    EAF Ramp-up ComplexityThroughout 2026

    Lower fixed cost absorption at reduced production volumes; throughput increasing daily as equipment learning curves and process stabilization occur.

    Mitigation: Unit 1 operating 24-hour schedule, quality metrics achieved. Unit 2 nearing completion, scheduled operational downtime in Q3 for tie-in and maintenance.

    Legal Proceedings on Supply AgreementsOngoing

    Not quantified

    Mitigation: Company taking position that agreements frustrated by extraordinary and unforeseen tariff environment; believes it has valid legal remedies and defenses.

    What to watch in Q3 FY26

    5

    EAF Unit 2 First Production

    Later this quarter (Q3 FY26)
    CurrentNearing completion, commissioning underway
    TargetFirst production

    Why it matters

    Marks a major milestone in the EAF transition, enabling full capacity ramp-up and improved operational efficiency.

    Construction on our second EF unit is nearing completion, with commissioning and testing of critical equipment underway. We expect first field production from Unit 2 later this quarter.

    Q&A highlights

    7

    Is the estimated 10-20% sequential volume decline in Q3 due to demand/seasonality or maintenance work?

    The decline is primarily due to scheduled maintenance activities, including work at the power plant, the first EAF unit, and tie-in activities for Unit 2, all bundled to prepare for Q4 with both units online.

    “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.”

    asked by Katja Jancic · answered by Michael Moroca

    2 min read5 chapters

    Detailed Narrative

    01

    EAF Transition Progress

    Algoma Steel is in the final stage of its EAF transition, with the first unit running 24/7 and the second unit nearing completion and commissioning. This marks a significant shift from over a century of integrated operations, aiming for an annual raw steel production capacity of approximately 3.7 million tons and a projected 70% reduction in carbon emissions from pre-EAF levels. The ramp-up is complex, involving equipment learning curves and process stabilization.

    02

    Plate-First Strategy and Market Response

    The company is executing a Canada-centric, plate-first strategy, which resulted in a second consecutive quarter of record plate sales, with shipments reaching 125,000 tons. This strategic pivot is a direct response to a challenging industry backdrop, including the persistent 50% U.S. Section 232 tariff on steel imports from Canada, which incurred $18.7 million in direct costs this quarter. The strategy aims to leverage Algoma's unique competitive position as Canada's only producer of discreet plate.

    03

    Market Conditions and Tariffs

    The Canadian market continues to experience supply pressure, leading to coil pricing trading lower than the U.S. benchmark due to domestic oversupply. The U.S. Section 232 tariff remains a structural headwind, influencing the company's decision to reduce U.S.-bound shipments. Despite these challenges, the rise in steel pricing is seen as an encouraging sign, reinforcing the validity of the plate-first strategy.

    04

    Strategic Diversification Initiatives

    Algoma Defense, a joint venture formed in April with Rochelle, is establishing a Canadian center of excellence for ballistic steel production, enhancing Canada's industrial and defense supply chain. While a binding MOU with Hanwha Ocean was suspended following the Canadian Patrol Submarine Program selection, Algoma continues to pursue structural steel beam development and engage with federal and provincial governments to support Canada's infrastructure and defense priorities.

    05

    Liquidity and Financial Outlook

    Algoma Steel ended the quarter with approximately $437 million in total available liquidity, comprising cash, unused revolving credit facilities, and available LETL facilities. Management anticipates several positive cash flow items over the remainder of 2026, including the recovery of approximately $200 million in income tax refunds. These inflows, combined with declining capacity utilization costs and lower capital intensity, are expected to bolster liquidity and improve profitability as the EAF ramp-up progresses.

    AI-generated summary of the company’s earnings call. Not investment advice.