Rising prices and production boost Stelco earnings in first report since IPO
Hamilton – A restructured Stelco Holdings Inc. is benefiting from rising steel prices and on the hunt for acquisitions, chief executive Alan Kestenbaum said Thursday.
“Our initiatives to increase production and expand margins are starting to deliver the intended results,” he said on an earnings conference call.
The company, whose history goes back to 1910, emerged from a latest round of creditor protection last June having eliminated $3 billion of debt and about $1.4 billion of pension and other retirement obligations. It launched an initial public offering last fall.
Stelco now has every tool it would want to pursue a smart growth strategy through buying up other operations, said Kestenbaum.
The Hamilton-based company is also looking to pursue internal growth with its existing Ontario steel mills, where production has already been boosted through efficiencies and rising prices, he said.
The company’s highest shipping volumes since late 2008 helped push adjusted net income to $46 million for the fourth quarter of 2017, reversing a net loss of $47 million in the same period a year earlier and higher than the $31 million forecast average from Thomson Reuters analysts.
Fourth-quarter revenue was $452 million, a 45 per cent increase year-over-year, driven by increases in shipping volumes and average selling prices.
“We are in a very, very favourable environment in terms of rising prices, and expect the market to continue to move in that direction,” said Kestenbaum.
The global steel industry is waiting to see what action the U.S. takes in terms of duties on imports after a report found some injury to its domestic market, but Kestenbaum said he was encouraged by language that suggests Canada is not a threat to the U.S. industry.
Stelco priced its initial public offering last November at $17 a share, pulling in gross proceeds of $230 million. The stock has since climbed to $25 a share.
The company said it planned to use the money for capital investments, pension payments, and to increase its offerings in specialized steel products.
Stelco went into creditor protection in 2004 and was sold as a subsidiary to U.S. Steel Co. in 2007, then went back into creditor protection in 2014 before being sold to Bedrock Industries L.P. in late 2016.