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Oct 30, 2025 at 07:05
Algoma Steel Group Inc., a leading Canadian producer of hot and cold rolled steel sheet and plate products, today reported financial results for the three and nine months ended September 30, 2025, reflecting ongoing trade-related headwinds and continued execution of the Company’s electric arc furnace (“EAF”) transformation.
Unless otherwise specified, all amounts are in Canadian dollars.
Business Highlights and Third Quarter 2025 to Third Quarter 2024 Comparisons
- Consolidated revenue of $523.9 million, compared to $600.3 million in the prior-year quarter.
- Consolidated loss from operations of $651.5 million, including a non-cash impairment loss of $503.4 million, compared to a loss from operations of $83.6 million in the prior-year quarter.
- Net loss of $485.1 million, compared to a net loss of $106.6 million in the prior-year quarter.
- Adjusted EBITDA loss of $87.1 million and Adjusted EBITDA margin of (16.6%), compared to Adjusted EBITDA of $3.5 million and Adjusted EBITDA margin of 0.6% in the prior-year quarter (see “Non-GAAP Measures” below).
- Tariff impact on Canadian sales totaled $32 million compared to nil in the prior-year quarter and direct tariff expense totaled $89.7 million compared to nil in the prior-year quarter.
- Cash used in operating activities of $117.3 million, compared to cash generated by operating activities of $25.5 million in the prior-year quarter.
- Shipments of 419,173 tons, compared to 520,443 tons in the prior-year quarter.
Michael Garcia, the Company’s Chief Executive Officer, commented, “Our third quarter results were largely in line with our previously announced guidance as we continue to navigate a challenging steel market environment. The U.S. steel market remains largely closed to us, and broader market conditions continue to present headwinds. However, we have taken decisive action to strengthen our position during this period of uncertainty. Our focus remains on advancing our electric arc furnace transition, improving our cost structure, and positioning Algoma for sustainable profitability in the years ahead.”
Rajat Marwah, Chief Financial Officer, added, “The $500 million in liquidity support announced with the Government of Canada and the Province of Ontario will provide us with long-term financial flexibility and reinforce confidence in Algoma’s future. These facilities will strengthen our balance sheet, extend our liquidity runway, and support the continued execution of our strategic transformation as we diversify end markets and optimize the business during this transitional period.”
Michael Garcia concluded, “In response to current market dynamics, we are accelerating our transition to EAF steelmaking, expediting our evolution into one of North America’s lowest-cost green steel producers. While we cannot control macro challenges or market access issues, we remain focused on what we can control, the successful execution of our transformation strategy. We are confident that the flexibility and structural cost advantages we are building through our investment in green steelmaking technology will serve us well across market cycles and create lasting value for all stakeholders.”
Third Quarter 2025 Financial Results
Third quarter revenue totaled $523.9 million, compared to $600.3 million in the prior-year quarter. As compared with the prior-year quarter, steel revenue was $473.3 million, compared to $539.0 million, and revenue per ton of steel sold was $1,250, compared to $1,153. Lower steel shipments were the primary driver of the change in revenue, partially offset by higher net sales realizations.
Loss from operations was $651.5 million, including a non-cash impairment loss of $503.4 million recorded during the quarter as described below, versus $83.6 million in the prior-year quarter. . As of September 30, 2025, the Company identified two impairment indicators, its market capitalization falling below the carrying value of its net assets and the impact of U.S. Section 232 tariffs. Accordingly, an impairment test was performed to assess whether the recoverable amount of the cash-generating unit exceeded its carrying value. Excluding the non-cash impairment loss, the year-over-year change was primarily due to decreased revenue, partially offset by decreased cost of sales. For the third quarter of 2025, direct tariff costs were $89.7 million.
Net loss in the third quarter was $485.1 million, compared to a net loss of $106.6 million in the prior-year quarter. The change was driven primarily by the non-cash impairment loss of $503.4 million, losses from operations and foreign exchange.
Adjusted EBITDA in the third quarter was a loss of $87.1 million, compared with Adjusted EBITDA of $3.5 million for the prior-year quarter. This resulted in an Adjusted EBITDA margin of (16.6%). The average realized price of steel net of freight and non-steel revenue was $1,129 per ton, compared to $1,036 per ton in the prior-year quarter. Cost per ton of steel products sold was $1,282 compared to $1,032 in the prior-year quarter. Shipments for the third quarter were 419,173 tons, compared to 520,443 tons in the prior-year quarter.
See “Non-GAAP Measures” below for an explanation of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of net (loss) income to Adjusted EBITDA.
Electric Arc Furnace
Since achieving first arc and first steel production in early July, commissioning and ramp-up activities for Unit 1 of Algoma’s EAF project have progressed in line with expectations. The furnace and associated melt shop assets have demonstrated stable and reliable performance, achieving quality metrics across a broad range of plate and hot rolled coil product grades. The Q-One power system and other critical process components continue to perform as designed, supporting consistent metallurgical quality and process control.
During the quarter, EAF operations were maintained on a limited two-day-per-week schedule to align with prevailing market conditions and to facilitate completion of final installation and integration activities across the melt shop. The Company expects to transition to a five-day-per-week operating schedule in mid-November 2025 as it accelerates the decommissioning of its blast furnace and coke oven operations and replaces this capacity with low-carbon steel production from the new EAF facility.
Following completion of the EAF transformation, Algoma’s facility is expected to have an annual raw steel production capacity of approximately 3.7 million tons, matching its downstream finishing capacity, and is projected to reduce annual carbon emissions by approximately 70%.
Trade Environment and Strategic Response
During the quarter, Algoma continued to be impacted by U.S. trade actions, including a 50% tariff on steel imports under Section 232 of the Trade Expansion Act of 1962. These measures have significantly restricted access to the U.S. market for Canadian producers, leading to an oversupply of steel coil in Canada and substantial price compression across domestic markets.
As a result, Canadian transactional pricing during the quarter was up to 40% lower than comparable U.S. levels, reducing revenue by approximately $32 million and $62 million for the three and nine months ended September 30, 2025. Direct tariff costs totaled $89.7 million and $164.3 million for the three and nine months ended September 30, 2025, respectively, with shipments to the U.S. representing approximately half of total steel volumes.
In response to the prolonged trade disruptions, Algoma’s board of directors (the “Board”) approved a plan to accelerate the decommissioning of the Company’s blast furnace and coke oven operations, replacing this capacity with low-carbon steel production from its new EAF facility. The Company plans to focus on discrete plate production, where it holds a unique market position as Canada’s sole producer, while strategically scaling back coil production to better align with domestic demand. This shift is expected to substantially reduce tariff exposure, lower operating costs, and enhance overall cash efficiency, extending Algoma’s liquidity runway and positioning the Company to improve financial performance as market conditions stabilize.
Algoma has secured $500 million in government-backed liquidity support through the Large Enterprise Tariff Loan facility and a companion facility from the Province of Ontario (the “Government Facilities”). Algoma expects that the Government Facilities will provide near-term financial flexibility and position the Company to advance its transformation and explore new product diversification opportunities. The Company expects to be in a position to draw on the Government Facilities early in the fourth quarter of 2025, subject to the satisfaction of conditions including the completion of definitive loan documentation and the receipt of all necessary approvals under the Company’s first lien revolving facility.
Liquidity
During the quarter, the Company amended its ABL credit facility, increasing its total availability by US$75 million, further strengthening near-term liquidity and financial flexibility. At quarter end, the Company had liquidity totaling $337.1 million, including $4.5 million of cash and $332.6 million available under its ABL credit facility.
Quarterly Dividend
In July 2025, the Board suspended the regular quarterly dividend on the Company’s common shares. This decision reflects the Board’s prudent approach to capital allocation and its commitment to preserving liquidity and financial flexibility in the face of evolving market conditions. The Board will continue to evaluate future dividend declarations, if any, in the context of capital requirements, strategic priorities, overall financial performance and loan covenants.
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