Algoma Steel Group Inc.

Greetings and welcome to the Algoma Steel Group Inc. second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Michael Marocca, VP Corporate Development and Treasurer. Thank you. You may begin.

Good morning, everyone, and welcome to Algoma Steel Group, Inc.' 's second quarter 2025 earnings conference call. Leading today's call are Michael Garcia, 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 law. 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. Last evening, we posted an earnings presentation to accompany today's prepared remarks. The slides for today's call can be found in the Investors section of our corporate website. With that in mind, I would ask everyone on today's call to read the legal disclaimers on slide two of the accompanying earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel's second quarter 2025 management's discussion and analysis. Please note that our financial statements are prepared using the US dollar as our functional currency and the Canadian dollar as our presentation currency. Please note all amounts referred to on today's call are in Canadian dollars unless otherwise noted. Following our prepared remarks, we'll conduct a question and answer session. I would now turn the call over to our Chief Executive Officer, Michael Garcia. Mike?

Thank you, Mike, and good morning, everyone. Thank you for joining us to discuss our second quarter 2025 results. At Algoma Steel, safety continues to be our top priority. I'm proud to share that our lost time injury performance showed marked improvement throughout 2024 and we sustained this positive trend in the second quarter of 2025. This is especially important as we ramped unit one of our EAF complex towards first arc during the quarter and maintain intensive operations leading to full project completions next year. Before diving into the details, I want to highlight three important themes. First, our quarterly results reflect the continued challenging conditions across global steel markets. particularly due to tariff uncertainty, which led to lower realized prices and higher production costs. Second, we have achieved a major milestone with first steel production from our Unit 1 of our EAF project, with the second unit progressing as planned. And third, our liquidity position ended the quarter at over $400 million, and we are working with the Canadian government to further bolster our liquidity. The steel industry is experiencing unprecedented disruption as the tariff situation has significantly deteriorated since our last quarter, with the U.S. market now effectively closed to Canadian steel producers due to prohibitive 50% tariffs. These trade disruptions are reverberating globally, creating supply chain dislocations and forcing steel producers worldwide to seek alternative markets, while macroeconomic uncertainty continues to compound the headwinds facing our industry. The combination of trade barriers and broader economic volatility has fundamentally altered market dynamics, with customers across North America adjusting purchasing patterns and supply strategies in response to this unprecedented level of uncertainty and volatility. We recognize that while current conditions are challenging, markets will eventually normalize, and we remain focused on completing our transition to lower-cost, lower-carbon green steelmaking. As Canada's only major independent steel manufacturer, we are a strategic national asset and we are positioning ourselves to emerge from this cycle as a more competitive and sustainable operator. We continue managing our existing operations to respond to rapidly changing conditions, strategically adjusting our product mix between plate and coil products based on capacity and contractual obligations, while leveraging our value-added product advantages to maintain our market position during this unprecedented time of industry restructuring. Our second quarter performance was in line with our internal expectations across both shipment volumes and adjusted EBITDA metrics. These results reflect the continuation of challenging market conditions that began mid-2024 that deteriorated further with the implementation of 25% steel import tariffs from Canada in March, which were then increased to 50% in June. Consequently, we experienced lower steel shipments and realized steel pricing, as well as elevated cost pressures, resulting in year-over-year declines in both revenues and adjusted EBITDA. We continue the planned steady ramp of production at our fully modernized plate mill. For the quarter, plate shipments reached approximately 103,000 tons. up from 91,000 tons in Q1 of 2025 and 82,000 tons in Q4 of 2024, as we strategically focus on our position as Canada's only discrete plate producer. Turning to our electric arc furnace project, I'm thrilled that we've reached a truly pivotal milestone for Algoma and the Canadian steel industry. In early July, we successfully achieved first arc and first steel production from unit one of our state-of-the-art electric arc furnace complex, a moment that represents the realization of our vision that began when we broke ground in November of 2021. This achievement is particularly meaningful as it positions us at the forefront of the largest industrial decarbonization project in Canada, demonstrating our ability to execute on strategic objectives even amid challenging market conditions. The commissioning process has been methodical and thorough. With over 10 days of successful arc testing and comprehensive validation of all nine Q1 transformer modules, while we continue to operate in a difficult industry environment, we're energized by what this milestone means for our future. The ability to produce green steel with up to 70% lower carbon emissions while maintaining the performance standards our customers depend on. Despite the uncertainty that the trade war has unleashed, this achievement reinforces our confidence in our transformation strategy and our commitment to emerging as a more competitive, sustainable, and strategically valuable steel producer. As of June 30, 2025, cumulative investment in the EAF project was $880.5 million. Now let me give an update on our government relations initiatives. We continue to engage directly with the highest levels of both the provincial and federal government and believe that Algoma is being treated as a high priority in ongoing trade discussions. The strategic importance of our operations to Canada's industrial, environmental, and economic goals is clearly recognized at both the federal and provincial levels. Algoma has sufficient resources on hand to manage its liquidity over the near term. However, the risk of prolonged US tariffs present a serious threat to our business model. As such, we are reviewing multiple scenarios, including an environment in which access to the U.S. market remains severely constrained for an extended period of time. To support operations under these conditions, we have submitted an application to the Federal Large Enterprise Tariff Loan Facility Program for $500 million. This support would provide the financial flexibility needed to maintain continuity while we diversify our customer base and adapt to the evolving trade dynamics. We are also pursuing opportunities aligned with domestic demand in defense, infrastructure, and clean manufacturing, reinforcing national priorities and our role in Canada's low-carbon industrial future. We remain hopeful that timely, targeted policy support will enable Canadian steelmakers to remain competitive and resilient, With the right framework in place, Algoma is well positioned to serve as a long-term pillar of Canada's nation-building agenda. In conclusion, we have delivered solid execution during one of the most challenging periods in recent steel industry history. The successful production of first steel from our EAF Unit 1 marks a transformative milestone, validating our long-term strategy and reaffirming Algoma's role at the forefront of Canadian industrial decarbonization. We are advancing our evolution into one of North America's premier low-cost, low-carbon steel producers. This includes completing the ramp-up of our electric arc furnace complex, diversifying our customer base in response to shifting trade dynamics, and pursuing opportunities with high-priority domestic sectors such as defense, infrastructure, and clean manufacturing. At the same time, we are actively engaging with policymakers to ensure that the strategic importance of Canadian steelmaking is recognized and supported. We believe Algoma is uniquely positioned to contribute to Canada's economic strength, environmental leadership, and national resilience for decades to come. The production of our first EAF steel is not just an operational achievement. It is a defining moment in our 120-year journey. It reflects the execution of a bold transformation vision and our emergence as a more competitive, more sustainable, and more strategically valuable enterprise. I want to thank our entire team for their commitment and contribution to this historic inflection point. Together, we are laying the foundation for enduring stakeholder value as global trade relationships continue to evolve. Now I will pass the call over to Rajat to go over our financial results for the quarter. Rajat.