Algoma Steel Group Inc.

Greetings and welcome to Algoma Steel second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brenda Stenta, Manager of Communications and Branding. Thank you. You may begin.

Good morning, everyone, and welcome to Algoma Steel Group Incorporated's second quarter fiscal 2022 earnings conference call. Leading today's call are Michael McQuaid, our Chief Executive Officer, and Rajat Marwa, our Chief Financial Officer. As a reminder, this call is being recorded and will be made available for replay later today in the Investors section of Algoma Steel's corporate website at www.algoma.com. I would like to remind you that comments made on today's call may contain forward-looking statements within the meaning of applicable securities laws, which involve assumptions and inherent risks and uncertainties. Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IFRS, which differs from US GAAP, and our discussion today includes references to certain non-IFRS financial measures. With that in mind, I would ask everyone on today's call to read the legal disclaimers on slides two and three of the accompanying earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel's second quarter fiscal 2022 management discussion and analysis. Please note that our financial statements are prepared using the U.S. dollar as our functional currency and the Canadian dollar as our presentation currency. Our fiscal year runs from April 1st to March 31st, and our financial statements have been prepared for the three and six months ended September 30th, 2021. Please note all amounts referred to on today's call are in Canadian dollars unless otherwise noted. Following our prepared remarks, we will conduct a question and answer session. I now turn the call over to our Chief Executive Officer, Mike McQuaid. Mike?

Thank you, Brenda. Good morning. Welcome. And thank you for joining Algoma's earnings call for our second fiscal quarter ended September 30th, 2021. Our first earnings call since closing our merger with Legato and returning to the public markets. I will start my comments by addressing what truly matters most to us, the safety of our employees. At Algoma, we believe in safety without compromise. And our continued focus has resulted in substantial improvement over the last decade in our lost time injury frequency rate, which I'm proud to say was zero for the second consecutive quarter. I commend our entire team for the collective success on safety performance, a top priority for Algoma. Before we get into a discussion about our exceptional results for the quarter, let me address the two transformative announcements that we made this morning. First, we are happy to report with the approval of our board, we have reached a positive final investment decision for our proposed electric arc furnace project. This announcement marks a major milestone for the business evolution of Algoma and demonstrates our commitment to producing greener, more sustainable steel. The project entails dual furnaces that are designed for a combined annual raw steel production throughput of 3.7 million tons, matching our downstream finishing capacity. It is also expected to lower our carbon emissions by approximately 70% when fully operational. Additionally, the project adds new vacuum degassing to increase the product capability of our steel plate grates. The project is expected to increase productivity and make Algoma a more agile and profitable company. but just as importantly is expected to result in a 3 million ton per year reduction in our CO2 emissions as we drive towards a more sustainable method of steel production. The CO2 reduction would represent 11% of the federal and 100% of the provincial targets for industrial emitters as set for 2030 under the Paris Accord. The total project cost is expected to be approximately 700 million Canadian funded with previously announced financing commitments, the proceeds of a recently completed merger, and ongoing cash flows. We expect the two EAFs to come online in 2024 following a 30-month construction phase with continued transition away from blast furnace steel production to follow as increased power supply becomes available. The other strategic announcement we made this morning was that our board has approved a plan to retire all of our outstanding senior secured debt, which totals $358 million US, leaving us with an even stronger balance sheet to support critical investments like the EAF to drive growth and create additional long-term value for all of our stakeholders. We expect the process of retiring the debt to be completed by the end of next week. Combined, these two announcements mark the next great milestones in our company's evolution. Now let's turn to the quarter's results. Our strong fiscal second quarter results displayed the impressive cash generating potential of Algoma. I'll remind you again that all numbers are expressed in Canadian dollars unless otherwise noted. The results were highlighted by record net income of $280 million, quarterly adjusted EBITDA of $431 million, reflecting an EBITDA margin of 43%. as well as cash generated by operating activities of $380 million. We finished the quarter with a total liquidity of $659 million, including a cash position of $367 million and availability under our credit facility of $292 million. Rajat will expand on the numbers and give our outlook for the third fiscal quarter in a moment. Optimism continues for steelmakers across North America, Strong demand in key end markets continue, and pricing remains at near-record levels. The strong cash flows we are generating, our focus on operational efficiency, and the strategic moves made on our capital structure are positioning Algoma as a next-generation steelmaker, focused on sustainability with attributes that we believe will make Algoma successful across the steel market cycles. We have several reasons to be very optimistic about what lies ahead for Algoma. and we'll share more details later on the call. But first, I will pass it over to Rajat to go over the financial highlights of the last quarter.