Algoma Steel Group Inc (ASTL) 2024 Q2 法說會逐字稿

Greetings. Welcome to Algoma Steel Group Inc. Fiscal Second Quarter 2024 Earnings Call. (Operator Instructions) Please note, this conference is being recorded.

問候。歡迎參加阿爾戈馬鋼鐵集團公司 2024 年第二季財報電話會議。 （操作員說明）請注意，本次會議正在錄製中。

I'll now turn the conference over to your host, Mike Moraca, Treasurer and Investor Relations Officer. You may begin.

現在我將會議交給東道主、財務主管兼投資者關係官 Mike Moraca。你可以開始了。

Good morning, everyone, and welcome to Algoma Steel Group, Inc. Second Quarter Fiscal 2024 Earnings Conference Call. Leading today's call are Michael Garcia, our Chief Executive Officer; and Rajat Marwah, 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.

大家早安，歡迎參加阿爾戈馬鋼鐵集團公司 2024 財年第二季財報電話會議。今天的電話會議由我們的執行長 Michael Garcia 主持；以及我們的財務長 Rajat Marwah。謹此提醒，本次電話會議正在錄音，並將於今天稍晚在阿爾戈馬鋼鐵公司網站 www.algoma.com 的投資者部分重播。

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 U.S. GAAP, and our discussion today includes references to certain non-IFRS financial measures.

我想提醒您，今天的電話會議發表的評論可能包含適用證券法含義內的前瞻性陳述，其中涉及假設以及固有的風險和不確定性。實際結果可能與今天的聲明有重大差異。此外，我們的財務報表是根據《國際財務報告準則》編製的，這與美國公認會計原則不同，我們今天的討論包括引用某些非《國際財務報告準則》財務指標。

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 2 of the accompanying earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel's Second Quarter Fiscal 2024 Management's Discussion and Analysis.

昨晚，我們發布了一份收益報告，以配合今天準備好的演講。今天電話會議的幻燈片可以在我們公司網站的投資者部分找到。考慮到這一點，我要求參加今天電話會議的所有人閱讀隨附收益演示文稿幻燈片2 上的法律免責聲明，並參考阿爾戈馬鋼鐵公司2024 年第二季度管理層討論和分析中概述的風險和假設。

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 1 to March 31, and our financial statements have been prepared for the 3 and 6 months ended September 30, 2023. 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.

請注意，我們的財務報表是使用美元作為我們的功能貨幣和加幣作為我們的列報貨幣來編制的。我們的財政年度從4 月1 日到3 月31 日，我們的財務報表已編制截至2023 年9 月30 日的3 個月和6 個月。請注意，除非另有說明，今天電話會議中提到的所有金額均以加幣為單位。在我們準備好的發言之後，我們將進行問答環節。

I will now turn the call over to our Chief Executive Officer, Michael Garcia. Mike?

我現在將把電話轉給我們的執行長邁克爾·加西亞。麥克風？

Thank you, Mike. Good morning, and thank you for joining us to discuss our fiscal second quarter results. As always, I will begin my remarks by addressing what truly matters most, the safety of all of our employees. At Algoma, we believe in safety without compromise, and our continued dedication has led to a significant improvement in our lost time injury frequency rate over the past decade. Furthermore, we bring the same focus and attention to safety as we continue progressing on the largest capital project in our history, our EAF transformation project.

謝謝你，麥克。早安，感謝您加入我們討論我們第二季的業績。像往常一樣，我將首先討論真正最重要的問題，即我們所有員工的安全。在 Algoma，我們堅信安全不妥協，我們的持續奉獻使我們在過去十年中損失時間工傷發生率得到了顯著改善。此外，在繼續推進我們歷史上最大的資本項目——電弧爐改造項目時，我們也同樣關注安全。

I want to commend the team for working 420,000 hours with no lost time injuries to date and want to emphasize the importance of safety, especially as we enter the winter months. We will continue to work diligently as we relentlessly pursue our goal of achieving 0 workplace injuries.

我要讚揚該團隊迄今為止工作了 42 萬小時，沒有發生誤工事故，並想強調安全的重要性，尤其是在我們進入冬季的時候。我們將繼續努力，不懈地追求實現零工傷的目標。

Next, I'll cover key events and milestones during our fiscal second quarter and subsequent to its end as well as update you on the progress of our transformative EAF project. I will then turn the call over to Rajat for a deeper dive into the numbers and a discussion of our strong liquidity and balance sheet before closing with an update on market conditions.

接下來，我將介紹第二財季及其結束後的關鍵事件和里程碑，並向您介紹我們變革性 EAF 專案的最新進展。然後，我會將電話轉給拉賈特，以更深入地了解這些數據，並討論我們強大的流動性和資產負債表，然後最後介紹市場狀況的最新情況。

Our results for the fiscal second quarter of 2024 were in line with our previously disclosed guidance for both shipments and adjusted EBITDA. These results reflect solid operational performance against a challenging backdrop in steel markets, where the recently resolved UAW strike at various U.S. auto making facilities impacted demand and pricing.

我們 2024 年第二財季的業績符合我們先前揭露的出貨量和調整後 EBITDA 的指引。這些結果反映了鋼鐵市場充滿挑戰的背景下穩健的營運業績，最近解決的美國汽車工人聯合會對美國各汽車製造廠的罷工影響了需求和定價。

During the quarter, we continued progress on Phase 2 of our plate mill modernization project, including commissioning and testing of the inline shear. We expect the shear to be online later this month and to ramp up plate production through the end of the year. This higher production level will allow us to capture market opportunities and to build inventory ahead of the planned outages for the implementation of the final phase of the modernization budget.

本季度，我們繼續推進中厚板軋機現代化專案的第二階段，包括線上剪切機的調試和測試。我們預計剪切機將於本月稍後上線，並在年底前提高板材產量。更高的生產水平將使我們能夠抓住市場機會，並在計劃停運之前建立庫存，以實施現代化預算的最後階段。

The project team has worked through the detailed implementation steps and identified opportunities to further derisk this phase. Originally, we had planned on one outage spanning 40 days. However, we have identified advantages to splitting the outages into 2 shorter duration outages of up to 20 days, which we expect will mitigate the impact on our customer base while also reducing commissioning risk.

專案團隊已經完成了詳細的實施步驟，並確定了進一步降低此階段風險的機會。最初，我們計劃進行一次為期 40 天的停電。然而，我們已經發現將中斷分為兩次最長 20 天的較短持續時間中斷的優勢，我們預計這將減輕對客戶群的影響，同時也降低調試風險。

The first outage will be in April of next year and the second outage will be scheduled for later in the calendar year to align with our planned maintenance outages providing further advantages. We still expect the same increase in production volume over the course of the year with much less impact on our customers.

第一次停電將在明年 4 月進行，第二次停電將安排在今年晚些時候，以配合我們計劃的維護停電，從而提供更多優勢。我們仍然預計今年產量將出現同樣的成長，對客戶的影響也小得多。

Turning to other strategic initiatives. We have made significant progress on securing key raw material inputs during the quarter. We signed a 2-year extension to our existing iron ore purchase contract with U.S. Steel with an option for a third year at our sole discretion. By extending the existing contract, we now anticipate our iron ore volumes needed to make the transition to electric arc furnace steelmaking are fully covered, giving us certainty of supply and uninterrupted access.

轉向其他策略舉措。本季我們在確保關鍵原材料投入方面取得了重大進展。我們與美國鋼鐵公司簽署了將現有鐵礦石採購合約延長兩年的協議，並可自行決定延長第三年。透過延長現有合同，我們現在預計向電弧爐煉鋼過渡所需的鐵礦石量將得到完全滿足，從而使我們能夠獲得供應的確定性和不間斷的供應。

On the coking coal front, we have settled our calendar 2024 contract needs and pricing for this raw material is expected to be down low double digits in calendar 2024.

在煉焦煤方面，我們已經解決了 2024 年的合約需求，預計這種原料的價格將在 2024 年下降兩位數。

So given the certainty of labor due to the 5-year union agreement signed last year, the contract for our iron ore needs for the next few years and our coking coal contracts for calendar 2024, we have solidified our inputs and created better visibility into our cost structure for the next several quarters, positioning us to expand margins, especially as steel prices continue to improve from recent strike impacted weakness.

因此，鑑於去年簽署的 5 年期工會協議、未來幾年鐵礦石需求合約以及 2024 年煉焦煤合約帶來的勞動力確定性，我們鞏固了投入，並更好地了解了我們的情況。未來幾個季度的成本結構使我們能夠擴大利潤率，特別是隨著鋼價從近期罷工影響的疲軟中繼續改善。

We are optimistic as forward prices have hovered around USD 1,000 per ton for hot-rolled coil in recent days, reflective of the pent-up demand and low inventory levels at certain customers.

我們對此持樂觀態度，因為最近幾天熱軋捲的遠期價格徘徊在每噸 1,000 美元左右，這反映出某些客戶被壓抑的需求和較低的庫存水準。

Next, I'd like to update you on our progress during the quarter on our transformational EAF project. This will ultimately increase our throughput capacity by roughly a 1/3, from 2.8 million tons per year of liquid steelmaking capacity by conventional means today to 3.7 million tons employing dual EAF furnaces upon completion. The higher output will match our expanded downstream finishing capacity as we increase throughput at our plate mill. Importantly, this will improve overall product mix while simultaneously lowering our carbon emissions by approximately 70% when fully operational.

接下來，我想向您介紹本季 EAF 轉型專案的最新進展。這最終將使我們的產能增加約 1/3，從目前採用傳統方法的每年 280 萬噸鋼水產能增加到建成後採用雙電弧爐的 370 萬噸。隨著我們中厚板軋機產量的增加，更高的產量將與我們擴大的下游精加工能力相符。重要的是，這將改善整體產品組合，同時在全面運作時將我們的碳排放量降低約 70%。

When factoring in the makeup of our power supply when we switch to EAF operations, we expect to be one of the greenest producers of steel in North America.

當我們轉向電弧爐運作時考慮到我們的電力供應組成時，我們預計將成為北美最環保的鋼鐵生產商之一。

During the quarter, cumulative investment in the EAF project reached $456 million or 54% of our expected total project cost at the midpoint of our project budget. We have made meaningful progress since quarter end securing uncontracted portions of expected project cost. And as of today, approximately 80% of the total project budget is under contract. We expect to contract the remainder of the project budget by the end of March 2024.

本季度，EAF 專案累積投資達 4.56 億美元，占我們專案預算中點預期專案總成本的 54%。自季度末以來，我們在確保預期專案成本的未合約部分方面取得了有意義的進展。截至目前，專案總預算的約 80% 已簽訂合約。我們預計在 2024 年 3 月底前簽訂剩餘的專案預算。

Furthermore, it is important to point out that as of now, only 5% of the total contracted amount is subject to time and material adjustments, meaning the vast majority is under fixed price terms. This demonstrates significant derisking of the EAF project over the past several months as we progress towards the start of commissioning in late calendar 2024.

此外，需要指出的是，截至目前，合約總金額中只有5%受到時間和材料調整，這意味著絕大多數是固定價格條款。這表明，隨著我們在 2024 年底開始調試，過去幾個月 EAF 專案的風險已顯著降低。

As a reminder, our start-up plan continues to include normal production from our existing steelmaking facility while ramping up steel production from our EAFs in calendar 2025, followed by a complete switch to EAF production.

謹此提醒，我們的啟動計畫繼續包括現有煉鋼設施的正常生產，同時在 2025 年提高電弧爐的鋼鐵產量，然後完全轉向電弧爐生產。

I spoke earlier about our successful efforts to secure coal and iron ore inputs for our existing operations. And when you think about the inputs for EAF steelmaking, one of the most important is power. As we mentioned previously, we already have the required power to run the electric arc furnaces at our current run rate of 2.2 million to 2.4 million tons of shipments without relying on the blast furnace, utilizing on-site power generation and the current grid. We can utilize hot metal from the blast furnace opportunistically, which would provide further upside to our current capacity.

我早些時候談到了我們為確保現有業務的煤炭和鐵礦石投入所做的成功努力。當您考慮電弧爐煉鋼的投入時，最重要的投入之一就是電力。正如我們之前提到的，我們已經擁有以目前 220 萬噸至 240 萬噸發貨量運行電弧爐所需的電力，無需依賴高爐，利用現場發電和現有電網。我們可以機會性地利用高爐中的鐵水，這將為我們目前的產能提供進一步的提升。

In this quarter, we received a system impact assessment for the second phase of our project, which means when the local 230 cable line is installed, we can run either EAF unit without running our on-site power plant. Also, subsequent to the quarter end, the Ontario government's announcement and issuance of an order in council to accelerate regional power infrastructure upgrades provides further assurance for our long-term power requirements for our EAF project. All in all, a significant amount of progress has been made, substantially derisking the availability and cost of the power needed for our new EAF.

本季度，我們收到了專案第二階段的系統影響評估，這意味著當安裝本地 230 電纜線路時，我們可以運行任一 EAF 裝置，而無需運行我們的現場發電廠。此外，在季度末之後，安大略省政府宣布並發布了一項加快地區電力基礎設施升級的議會命令，為我們電弧爐專案的長期電力需求提供了進一步的保證。總而言之，我們已經取得了重大進展，大大降低了新電弧爐所需電力的可用性和成本風險。

It's an exciting time in Sault Ste. Marie as our existing facilities operate normally and work on the EAF accelerates.

這是蘇聖瑪麗激動人心的時刻。瑪麗，我們現有的設施正常運行，電弧爐的工作正在加速。

I'd like to once again thank all of our employees whose execution continues to deliver solid operational and financial results safely while simultaneously driving the EAF project forward.

我要再次感謝我們所有的員工，他們的執行力繼續安全地交付可靠的營運和財務成果，同時推動 EAF 專案向前發展。

Now I will pass the call over to Rajat to go over our financial results for the quarter and give more details on the expected funding of our capital expenditures. Rajat?

現在我將把電話轉給拉賈特，以審查我們本季的財務業績，並提供有關我們資本支出的預期資金的更多詳細資訊。拉賈特？

Thanks, Mike. Good morning, and thank you all for joining the call.

謝謝，麥克。早安，感謝大家加入通話。

Our second quarter results included adjusted EBITDA of $81 million, which reflects an adjusted EBITDA margin of 11.1%. Cash generated from operating activities was $57.2 million. We finished the quarter with $213.6 million of unrestricted cash, and our USD 300 million revolving credit facility remains undrawn, representing total liquidity in excess of $500 million.

我們第二季的業績包括 8,100 萬美元的調整後 EBITDA，這反映了 11.1% 的調整後 EBITDA 利潤率。經營活動產生的現金為 5,720 萬美元。本季結束時，我們擁有 2.136 億美元的非限制性現金，且我們的 3 億美元循環信貸額度仍未提取，這意味著流動資金總額超過 5 億美元。

We have mentioned in our previous calls, and included in our strategic direction, our focus on financial discipline. We have structured our balance sheet with the only long-term debt in the form of government loans linked to our capital projects and maintained a very low leverage profile with ample liquidity to manage through market fluctuations and complete our capital initiatives.

我們在先前的電話會議中提到了我們對財務紀律的關注，並將其納入我們的策略方向。我們以與我們的資本項目相關的政府貸款形式的唯一長期債務構建了我們的資產負債表，並保持了非常低的槓桿狀況和充足的流動性，以管理市場波動並完成我們的資本計劃。

I'll now dive into the key drivers of our performance in the quarter. We shipped 549,000 net tons in the quarter, up 26.1% as compared to the prior year period. Our plate and strip operations continue to run well, and our normal seasonal maintenance is occurring as expected, including our annual steelmaking vessel reline. As a reminder, this normal seasonal maintenance typically reduces production by 20,000 to 30,000 tons. As a result, we would expect our fiscal third quarter production to be lower sequentially as compared to the fiscal second quarter.

我現在將深入探討本季業績的關鍵驅動因素。本季我們淨出貨量為 549,000 噸，年增 26.1%。我們的板材和帶材業務繼續運作良好，我們的正常季節性維護正在按預期進行，包括我們的年度煉鋼容器更換。提醒一下，這種正常的季節性維護通常會減少 20,000 至 30,000 噸產量。因此，我們預計第三財季的產量將低於第二財季。

Net sales realizations averaged $1,213 per ton, down 4.3% versus the prior year period. The decrease versus the prior year levels primarily reflects overall softer market conditions in the quarter. Plate pricing continued to enjoy a significant premium relative to hot-rolled coil during the quarter, driven by resilient demand, particularly from spending on infrastructure projects and durable goods.

淨銷售額平均實現每噸 1,213 美元，比去年同期下降 4.3%。與去年水準相比的下降主要反映了本季整體市場狀況的疲軟。在需求彈性的推動下，尤其是基礎設施項目和耐用品支出的推動下，本季中厚板價格相對於熱軋捲材繼續享有顯著溢價。

As a reminder, we are the only discrete plate mill in Canada, and we look forward to the incremental tons from the plate mill in the calendar fourth quarter and beyond as a result of the new share installation.

提醒一下，我們是加拿大唯一一家離散中厚板工廠，我們期待由於安裝新的股份而在第四季度及以後的中厚板工廠增加噸數。

Steel revenue in the quarter totaled $665.8 million, up 20.7% versus the same quarter of last year, reflecting the increase in shipments that were more than offset by lower average realization per ton of steel.

本季鋼鐵收入總計 6.658 億美元，比去年同期增長 20.7%，反映出出貨量的增長被每噸鋼材平均變現的下降所抵消。

On the cost side, Algoma's cost per ton of steel products sold averaged $1,021 in the quarter, down 1.6% versus the prior year period. The main drivers of the decrease versus the prior year period include the positive impact of increased volumes. Versus the prior quarter, our cost of steel products sold were approximately 7% higher attributed to lower volumes, higher costs related to various raw materials and utility inputs, including natural gas and purchased coke.

成本方面，阿爾戈瑪本季每噸鋼材銷售成本平均為 1,021 美元，比去年同期下降 1.6%。與上年同期相比下降的主要驅動因素包括銷量增加的正面影響。與上一季相比，我們的鋼鐵產品銷售成本增加了約 7%，原因是產量減少、各種原材料和公用事業投入（包括天然氣和外購焦炭）相關成本增加。

Cash flow from operations totaled $57.2 million for the quarter compared to a use of $66.1 million in the prior year period. Our inventories at the quarter end were $822.7 million, up 8.3% during the quarter due to normal seasonal build patterns. We expect to build inventories further during the calendar fourth quarter ahead of winter as we typically do at this point in the year and to release inventories in the first half of calendar 2024, heavily weighted towards the first calendar quarter.

本季營運現金流總計 5,720 萬美元，而上年同期為 6,610 萬美元。由於正常的季節性建造模式，我們季度末的庫存為 8.227 億美元，本季成長 8.3%。我們預計將在冬季之前的第四季度進一步建立庫存，就像我們通常在今年這個時候所做的那樣，並在 2024 年上半年釋放庫存，重點是第一季。

Now I'd like to provide additional color on our funding plans for the EAF project. As previously noted, our outlook for the total cost of the project remains in the range of $825 million to $875 million. Through the end of the quarter, we had spent $456 million or 54% of the expected total cost, leaving $394 million to be spent.

現在我想對我們的漁業生態系統方法專案融資計劃提供更多說明。如前所述，我們對該項目總成本的預期仍然在 8.25 億美元至 8.75 億美元之間。截至本季末，我們已支出 4.56 億美元，佔預期總成本的 54%，尚待支出 3.94 億美元。

We are well positioned today when we look at our expected sources for those expenditures. We have cash on hand of over $200 million, another $93 million of available capacity on our federal SIF loan and approximately $150 million of cash to be generated from drawing down excess working capital with approximately 70% of this coming in the fourth fiscal quarter and the balance coming in the following fiscal year. Combined, this exceeds the remaining expected capital requirement to complete the project.

當我們審視這些支出的預期來源時，我們今天處於有利地位。我們手頭上有超過 2 億美元的現金，我們的聯邦 SIF 貸款還有 9,300 萬美元的可用能力，以及透過提取多餘的營運資金產生的約 1.5 億美元的現金，其中約 70% 來自第四財季和餘額將在下一個財政年度出現。總而言之，這超出了完成該專案的剩餘預期資本要求。

With that, I'll turn the call back to Mike Garcia for closing comments. Mike?

接下來，我會將電話轉回給麥克加西亞 (Mike Garcia)，以徵求結束意見。麥克風？

Thank you, Rajat. Looking at the state of the North American steel market, hot-rolled coil index prices fell approximately 25% in the calendar third quarter as the concerns about and the reality of a UAW strike weighed on the market. Capacity was curtailed at several North American mills as a result and inventories across distributors were drawn down. We do expect this to meaningfully impact EBITDA in the current fiscal quarter, as lower prices and lower shipments on account of our planned maintenance outages are felt.

謝謝你，拉賈特。縱觀北美鋼鐵市場狀況，由於對 UAW 罷工的擔憂和現實給市場帶來壓力，第三季熱軋捲指數價格下跌了約 25%。結果，幾家北美工廠的產能被削減，分銷商的庫存也被減少。我們確實預計這將對本財季的 EBITDA 產生重大影響，因為我們計劃的維護中斷導致價格下降和出貨量下降。

Looking further out, as labor settlements have been reached over the last few days, pricing has rapidly moved higher, and we have seen forward curve pricing climb to near $1,000 per ton, which will provide significant upside in the fourth fiscal quarter. We are also supported by the fact that plate pricing continues to demonstrate a significant premium as overall demand for plate products remains high, which in turn continues to benefit our average price realizations.

展望未來，隨著過去幾天達成勞資和解，價格迅速走高，我們看到遠期曲線價格攀升至每噸近 1,000 美元，這將為第四財季帶來顯著的上漲空間。由於對板材產品的整體需求仍然很高，板材定價繼續表現出顯著的溢價，這反過來又繼續有利於我們的平均價格實現，這一事實也為我們提供了支持。

We will relentlessly maintain our primary focus of operational excellence and maintaining prudent financial discipline regardless of volatility in our end markets. This will ensure our ability to execute our EAF project, ushering in the next phase of our company that defines the future of Algoma, provides for the long-term value creation of our stakeholders and solidifies our leadership position at the forefront of green steel production in North America.

無論終端市場如何波動，我們都將堅持不懈地保持卓越營運和審慎財務紀律的首要關注點。這將確保我們執行 EAF 專案的能力，開啟我們公司的下一階段，定義 Algoma 的未來，為我們的利益相關者創造長期價值，並鞏固我們在綠色鋼鐵生產前沿的領導地位。北美。

Thank you very much for your continued interest in Algoma Steel. At this point, we would be happy to take your questions.

非常感謝您對阿爾戈馬鋼鐵公司的持續關注。此時，我們很樂意回答您的問題。

Operator, please give the instructions for the Q&A session.

接線員，請給予問答環節的說明。

(Operator Instructions) And our first question comes from the line of David Ocampo with Cormark Securities.

（操作員說明）我們的第一個問題來自 Cormark 證券公司的 David Ocampo。

I guess my first one here is for Rajat. Based on kind of your annual buys that you have for your raw materials and your new iron ore contract, do you guys think we've hit peak raw material prices? And how should that trend into next year?

我想我在這裡的第一個是給 Rajat 的。根據你們每年購買原料和新鐵礦石合約的情況，你們認為我們已經達到了原料價格的峰值嗎？明年的趨勢該如何？

Yes. So for -- for coal, definitely, it comes down and I don't know how you see how the index fluctuates. So that affects to some extent as we have 2 contracts right now running. But I would say that you're right that we should see cost coming down in the future. Normally, the winter months have some challenges, primarily based on high cost of utilities, natural gas, power that goes through. But other raw materials should start coming down as we go into the next year.

是的。因此，對於煤炭來說，它肯定會下降，我不知道您如何看待該指數的波動。因此，這在一定程度上會產生影響，因為我們現在有 2 份合約正在運行。但我想說，你是對的，我們應該看到未來成本會下降。通常，冬季會面臨一些挑戰，主要是由於公用事業、天然氣、電力的成本高昂。但隨著進入明年，其他原料應該會開始下降。

Okay. And then I guess just sticking with you, Rajat. I mean, if I take a look at your inventory levels, they're still a little bit elevated. They actually saw an uptick in the quarter. Can you just walk us through how those raw materials just or finished product begins to unwind? And how much cash we can expect to unlock in the next several quarters?

好的。然後我想就跟你在一起吧，拉賈特。我的意思是，如果我看一下你們的庫存水平，它們仍然有點高。他們實際上看到了本季的成長。您能否向我們介紹一下這些原料或成品是如何開始分解的呢？我們預計在接下來的幾季可以釋放多少現金？

Sure. So we normally build during December and this is typical and then we'll release in March, and then we'll do the same next year. But when you look at March to March, or March end to March end, we should release around $100 million in working capital. And I say working capital, it is -- it includes inventories and some other on the payable side as they go hand in hand.

當然。因此，我們通常在 12 月進行構建，這是典型的情況，然後我們將在 3 月發布，然後明年我們也會這樣做。但當你看看3月份到3月份，或是3月底到3月底時，我們應該釋放大約1億美元的營運資金。我說的是營運資金，它包括庫存和應付方面的其他一些資​​金，因為它們是並行的。

So you'll see that happening. And then there is another $50-odd million that we should see in the following year. So we should see that $150 million coming down. It's taking a little longer, as I had mentioned earlier as well that we have inventories, which are -- which will take a little bit longer to run down, and this is primarily on the raw material side.

所以你會看到這種情況發生。接下來的一年我們應該會看到另外 50 多萬美元的收入。所以我們應該看到 1.5 億美元會減少。這需要更長的時間，正如我之前提到的，我們有庫存，這將需要更長的時間才能耗盡，這主要是在原材料方面。

On the finished goods and WIP side, as cost comes down, we should see that improving. But from a tonnage perspective, we should see some optimization happening.

在成品和 WIP 方面，隨著成本下降，我們應該會看到情況有所改善。但從噸位的角度來看，我們應該會看到一些優化正在發生。

Got it. And then my last one, it could be for whoever wants to take it. But you typically set your annual contracts around this time, at least that 10% that you typically hold out on. Was this done before the resolution of the UAW strike or post the strike when we saw much better pricing conditions?

知道了。然後是我的最後一個，可能是給任何想要的人的。但你通常會在這個時間左右制定年度合同，至少是你通常堅持的 10%。這是在 UAW 罷工解決之前完成的，還是在罷工後我們看到更好的定價條件時完成的？

David, this is Mike. I think it's happened throughout. It's still happening now. So it really depends on the specific customer and kind of the historical time frame. But we definitely began it on the cusp of the strike, but it's continuing to happen as we're speaking.

大衛，這是麥克。我認為這件事自始至終都在發生。現在仍然在發生。因此，這實際上取決於特定的客戶和歷史時間範圍的類型。但我們確實是在罷工的風口浪尖上開始的，但就在我們說話的時候，這種情況仍在繼續發生。

Our next question comes from the line of Katja Jancic with BMO Capital Markets.

我們的下一個問題來自 BMO 資本市場的 Katja Jancic。

First, maybe on the plate side. I think you mentioned that the demand environment remains healthy and prices elevated, but what we're seeing in the U.S. that one of your peers has actually announced that they are reducing prices, and it seems that the demand environment is softening. Can you talk a bit more, are you seeing a different environment in Canada? And how much are you selling into the U.S. market?

首先，也許在盤子一側。我想你提到需求環境仍然健康，價格上漲，但我們在美國看到，你的一位同行實際上已經宣布他們正在降低價格，而且需求環境似乎正在疲軟。能多說一點嗎，你在加拿大看到了不同的環境嗎？你們向美國市場銷售了多少？

Thanks, Katja. This is Mike. So when you think of our plate book of business, it's -- the majority of it is in Canada. It's roughly a 70-30 split between Canada and the U.S. And again, I think as reflected in the spread, which still remains large and actually opened up a bit this week, we're still seeing pretty robust demand for our plate business.

謝謝，卡佳。這是麥克。因此，當您想到我們的業務簿時，它的大部分都在加拿大。加拿大和美國之間的比例大約是70-30。我認為，正如價差所反映的那樣，價差仍然很大，而且本週實際上有所擴大，我們仍然看到對我們的板材業務的相當強勁的需求。

I think there's some segments of the plate market that are maybe under a little bit more pressure than others. I'm sure you saw the cancellation of the wind tower projects, but that's not a segment that we're in. So we still feel relatively confident about the plate spread and where our book of business is.

我認為板材市場的某些部分可能比其他部分承受更大的壓力。我相信您已經看到了風塔專案的取消，但這不是我們所處的領域。因此，我們仍然對板塊分佈和我們的業務狀況相對有信心。

Is that helpful?

有幫助嗎？

Okay, maybe -- yes. No, that's super helpful. And then just on near-term cost side, given that the production level is going to be lower this quarter, how should we think about cost per ton? Should they be higher? Or what are some of puts and takes there?

好吧，也許——是的。不，這非常有幫助。那麼就近期成本而言，考慮到本季的產量水準將會較低，我們應該如何考慮每噸成本？他們應該更高嗎？或者那裡有哪些看跌期權和看跌期權？

Yes. Katja, it will be higher just because of the volume. So when you look at puts and takes for the coming quarters, let's say, or the coming quarter, at least, is that the wall definitely will impact. Other costs are more or less very similar. Utilities might continue, which is natural gas and power with some pressure on higher pricing. So that's how the next quarter will play out quarter after getting back to normal production levels because the outages are out and then you still have the utility pressure and then you get into the summer months where you start getting into much normal situation. So that's how we see the cost playing out over the next couple of quarters.

是的。 Katja，由於數量的原因，它會更高。因此，當您考慮未來幾個季度的情況時，可以說，或至少是未來一個季度，隔離牆肯定會產生影響。其他成本或多或少非常相似。公用事業可能會繼續，其中天然氣和電力的價格上漲面臨一定壓力。因此，這就是恢復正常生產水平後下一季的情況，因為停電已經結束，然後你仍然面臨公用事業壓力，然後你進入夏季，開始進入正常情況。這就是我們對未來幾季成本影響的看法。

Our next question comes from the line of Ian Gillies with Stifel.

我們的下一個問題來自 Ian Gillies 和 Stifel 的對話。

With respect to the plate mill modernization and the new shear line being installed, if I recall correctly, I think that was supposed to be done at some point during this past quarter, and it sounds like it's still ongoing. Has there been some sort of delay there that's impacted volumes? Or am I misreading the situation?

關於中厚板軋機的現代化改造和正在安裝的新剪切線，如果我沒記錯的話，我認為這應該在上個季度的某個時候完成，而且聽起來似乎仍在進行中。是否存在某種延遲影響了銷量？還是我誤讀了情勢？

No. I think what we had mentioned before was hot commissioning was beginning in this quarter, and we're pretty much right on schedule with that project. It is a pretty involved hot commissioning exercise. And so we're still on track as we bring up that shear into more normal production in November and then consequently in December and through the first quarter of next year.

不。我認為我們之前提到的是熱調試將於本季開始，我們的專案進展順利。這是一項相當複雜的熱調試工作。因此，我們仍處於正軌，我們將在 11 月、12 月和明年第一季將這種剪切帶入更正常的生產。

Okay. That's helpful. And as you think about -- once you get past the 2 brief outages next year, do you have a good sense of where you think volumes are going to be post that? Or is that number still a bit in flux, depending on what may happen? And if you do have a good idea, would you be willing to quantify it for us?

好的。這很有幫助。正如您所想，一旦度過了明年的兩次短暫停電，您是否清楚地知道停電後的銷量會達到什麼水平？或者這個數字仍然在變化，取決於可能發生的情況？如果您確實有一個好主意，您願意為我們量化它嗎？

Well, I think what we're aiming for prior to the first outage in April is to roll in a 10% to 15% increase in our plate business and then building from there. We've -- the plate business, it's a very important market segment for us. We are spending a lot of time with customers now about -- and it's really kind of 2 pieces. It's recovering our position at some of our historical plate customers.

嗯，我認為我們的目標是在 4 月第一次停電之前將我們的板材業務增加 10% 到 15%，然後再繼續增加。我們的板材業務，對我們來說是一個非常重要的細分市場。我們現在花了很多時間與客戶打交道，這實際上是兩件事。它正在恢復我們在一些歷史板材客戶中的地位。

We had some challenging times last year with the commissioning of the -- and the start-up from Phase 1 of the project. So we had a little bit of room to recover, so to speak. But we've made the type of improvements in quality and promised performance that we believe the customers require of us. And now as we bring on more capacity steadily through next year, we'll build our business with the quality and promised performance improvements, as well as the increased flow path to handle it.

去年，我們在專案第一階段的調試和啟動過程中遇到了一些挑戰。所以可以這麼說，我們還有一點恢復的空間。但我們已經在品質和承諾的性能方面進行了改進，我們相信客戶對我們的要求。現在，隨著我們在明年穩定地增加產能，我們將透過品質和承諾的績效改進以及增加的流程來建立我們的業務。

Okay. That's helpful. If I could just squeeze in one more. With respect to what you're seeing from your customers right now and as it pertains to the rise in HRC prices, how much of it do you think of this run is due to structurally stronger demand? And how much do you think is tied to inventories being rebuilt because I know buying has been pretty weak? I know it's a tough question to answer, but any commentary there I think would be helpful.

好的。這很有幫助。如果我能再擠進一顆就好了。就您目前從客戶看到的情況以及熱軋捲價格上漲而言，您認為這次上漲有多少是由於結構性需求強勁所致？你認為有多少與重建庫存有關，因為我知道購買一直相當疲軟？我知道這是一個很難回答的問題，但我認為任何評論都會有幫助。

Yes, it is a tough question to ask. Definitely, there is an aspect of it and probably a significant aspect in the early days, the first few weeks, couple of months that is tied more to a recovery from the positions people reach during the strike. Inventories were, I think, at 2 months, which is quite low. Lead times for the mills were out at 8 weeks for the most part. So I think the initial stages of it have been a recovery from the concern and the specific outages tied to the UAW strike.

是的，這是一個很難問的問題。當然，其中有一個方面，而且可能是早期、最初幾週、幾個月的一個重要方面，這更多地與人們在罷工期間所達到的地位的恢復有關。我認為庫存只有兩個月，相當低。工廠的交貨時間大部分為 8 週。因此，我認為最初階段是從擔憂以及與 UAW 罷工相關的特定停電中恢復過來。

I think going forward is where it will really kind of demonstrate whether the rest of it, any further pricing beyond where we're reaching now will, I think, be more tied to fundamental demand and economic activity.

我認為，未來將真正證明其餘部分，即超出我們現在達到的水平的任何進一步定價，我認為是否將與基本需求和經濟活動更加緊密地聯繫在一起。

And our next question comes from the line of Lucas Pipes with B. Riley Securities.

我們的下一個問題來自 Lucas Pipes 和 B. Riley Securities 的聯繫。

The first one is circling back on annual contracts. And with the decline in raw material costs in 2024, would you expect the margin on annual contracts to increase or stay the same, go down? I would appreciate your perspective on that.

第一個是回顧年度合約。隨著 2024 年原材料成本的下降，您預計年度合約的利潤會增加還是保持不變或下降？我很感激你對此的看法。

Sure. So the contracts that we do are mostly index-based, and there is a very small amount that's on fixed price, where you see that happening. But overall, we should see margins improving because costs should get optimized. And if the pricing remains at the level it is or lower, we should see higher margins. So relatively, margins will be better because the cost comes down. But our -- most of our contracts are index-based, so it's heavily based on how the pricing moves throughout the year.

當然。因此，我們所做的合約大多是基於指數的，並且有一小部分是固定價格的，你可以看到這種情況的發生。但總體而言，我們應該看到利潤率提高，因為成本應該要優化。如果定價維持在現有水準或更低，我們應該會看到更高的利潤率。因此相對而言，由於成本下降，利潤率會更好。但我們的大部分合約都是基於指數的，因此它在很大程度上取決於全年定價的變化。

Got it. And can you remind us roughly what percentage would be fixed versus floating?

知道了。您能否大致提醒我們固定與浮動的百分比是多少？

We normally do around 5% or so fixed and -- of our total book, and we normally do contracts around 50% to 60%. So 5% is fixed, and the balance is all floating based on monthly and quarterly contracts.

我們通常會做大約 5% 左右的固定訂單，我們通常會做大約 50% 到 60% 的合約。所以5%是固定的，餘額都是根據月度和季度合約浮動的。

Very helpful. And then my second question is on your coke procurement during the transition phase. Can you remind us what the strategy there is? What would you expect the mix to look like? And any possible savings on the capital side as you transition?

很有幫助。我的第二個問題是關於過渡階段焦炭採購的問題。您能提醒我們有什麼策略嗎？您希望混合效果如何？當您轉型時，資本方面是否有可能節省？

Yes, Lucas. So we're -- we continue to maximize production from our internal coke batteries. And we continue to spend critically required capital to maintain those batteries in a safe operating condition. But the fact remains, even when they're running very well, we are still short of coke. So we'll continue to purchase coke externally as we've done in the past. We always try to minimize that number, but we expect that to go forward into the future. And we've gotten a little bit of benefit here recently because the market price of coke has come down pretty significantly.

是的，盧卡斯。因此，我們繼續最大限度地提高內部焦炭電池的產量。我們繼續花費急需的資金來維持這些電池的安全運作狀態。但事實是，即使他們運作得很好，我們仍然缺乏可樂。因此，我們將像過去一樣繼續從外部購買焦炭。我們總是試圖盡量減少這個數字，但我們預計這種情況會持續到未來。最近我們在這裡得到了一些好處，因為焦炭的市場價格已經大幅下降。

But our approach remains the same. We have to maintain the batteries, even though they don't have a long life or a life for us beyond our final transition to EAF production, but we're still spending some amount of required sustaining capital to keep them safe and operating profit -- properly.

但我們的方法保持不變。我們必須維護電池，儘管它們的壽命不長，或者在我們最終過渡到電弧爐生產之後，它們的壽命也不長，但我們仍然花費一些所需的維持資本來保證它們的安全和營業利潤 - -適當地。

Does that help?

這樣有幫助嗎？

It does. I do have a follow-up question. There's talk of some potential idling of blast furnace coke making capacity in the -- sorry, blast furnace capacity in 2024. So I would think that overall, there's more coke available from a merchant basis. Is that tempting or when you kind of think about -- you just answered the question before that you want to kind of maximize your internal needs, but is there a point where that can switch and where it makes more sense to buy more coke on the merchant base?

確實如此。我確實有一個後續問題。有傳言稱，到 2024 年，高爐煉焦產能可能會出現閒置。抱歉，高爐產能可能會在 2024 年出現閒置。所以我認為，總體而言，商業上有更多焦炭可用。這很誘人嗎？或者當你想一想——你剛剛回答了之前的問題，你想最大化你的內部需求，但是有沒有一個點可以改變這一點，並且在哪裡購買更多可樂更有意義？商戶基礎？

Yes. I think at the end of the day, it comes down to economics. So we have to have a good understanding of our internal coke production cost, including the yield loss that you'll get in coke when you buy it externally and transport it here. But certainly, the economics changed significantly in that decision, internal production versus external purchase, that's something we'll be tracking and be aware of and prepared to act on it.

是的。我認為歸根結底，這取決於經濟。因此，我們必須充分了解我們內部的焦炭生產成本，包括當您從外部購買焦炭並將其運送到這裡時，焦炭的產量損失。但當然，經濟狀況在該決定中發生了重大變化，內部生產與外部採購，這是我們將追蹤、了解並準備採取行動的事情。

And how quickly could you switch (inaudible) that decision you have to kind of make once a year? Or can you be flexible as the year progresses and supply-demand changes?

您能以多快的速度改變（聽不清楚）每年必須做出一次的決定？或者您能否隨著時間的推移和供需的變化而靈活調整？

Yes. No, we can be pretty quick in that. It's not within days, but probably within months, we can switch. We don't have to wait for a year because we -- what we do is that we do contract out based on our optimum production internally. And if we have to switch that based on opportunity available in the market to buy at a price which offsets our own production, then you have -- then we have the flexibility and we can move quickly within months.

是的。不，我們可以很快做到這一點。這不是幾天之內，但可能在幾個月之內，我們就可以切換。我們不必等待一年，因為我們所做的是根據內部最佳生產進行外包。如果我們必須根據市場上現有的機會以抵消我們自己生產的價格進行購買，那麼我們就有靈活性，我們可以在幾個月內迅速採取行動。

And our next question comes from the line of Ahmad Shaath with Beacon Securities.

我們的下一個問題來自 Beacon Securities 的 Ahmad Shaath。

Just maybe a quick one for me on the EAF project. Did I read that right, the hybrid scenario is not on plan anymore and you guys going to start commissioning both EAFs given the -- your thoughts on the connectivity?

也許只是我對 EAF 專案的一個快速了解。我沒看錯吧，混合場景不再在計劃中，鑑於您對連接的想法，你們將開始調試兩台電弧爐？

No. I think hybrid is definitely still in play, but what we mentioned was that we wanted to emphasize that we will be able to match our current output with only running EAFs cold charge and the power that is available today and with the recent decisions by IESO and the completion of the system impact study. So there's been a full kind of understanding of the impact of our power demand and the nature of it by the operator of the grid in Ontario, and they've issued some conclusions based on that. However, we still have the optionality to continue to run our blast furnaces and take advantage of hot metal from those blast furnaces at a reduced blast furnace rate to augment our production through the EAFs if we want to increase the total amount of steel produced. And again, that will go back to the economics and how that decision looks from an economic perspective.

不。我認為混合動力肯定仍在發揮作用，但我們提到的是，我們想強調的是，我們將能夠僅通過運行 EAF 冷充和當今可用的功率以及最近的決定來匹配我們當前的輸出。 IESO 並完成系統性影響研究。因此，安大略省電網營運商對我們的電力需求的影響及其性質有了全面的了解，並據此得出了一些結論。然而，如果我們想增加鋼鐵總產量，我們仍然可以選擇繼續運行我們的高爐，並以降低的高爐產量利用這些高爐的鐵水，透過電弧爐增加我們的產量。再說一次，這將回到經濟學以及從經濟角度來看這個決定是怎麼樣的。

Got it. That's very helpful. And maybe a little bit related on that. On the carbon tax credits, I saw the -- at least from an income statement perspective, the number was a little bit higher, but it doesn't look like it had a big impact on the cash flow. So maybe that's one for Rajat. Just walk us through as we go forward, how should we think about that the blast furnaces continue to operate?

知道了。這非常有幫助。也許與此有點相關。關於碳稅抵免，我看到——至少從損益表的角度來看，這個數字有點高，但看起來對現金流沒有太大影響。所以也許這就是拉賈特的目標。就帶我們繼續前進，我們該如何看待高爐的繼續運作？

Sorry. Ahmad, Can you repeat the question?

對不起。艾哈邁德，你能重複這個問題嗎？

Yes. I'm just trying to understand the potential impact on your cash flow from the carbon tax payment because it was substantial in this quarter, somewhat [of $12] million. I haven't seen that number in a while. So maybe help us explain why it is a little bit bigger. But from a cash flow perspective, it doesn't look like it's impacted the operating cash flow. So just trying to understand [how you get] back to 2 numbers.

是的。我只是想了解碳稅支付對您的現金流的潛在影響，因為本季的碳稅金額相當大，約為 1200 萬美元。我已經有一段時間沒有看到這個數字了。所以也許可以幫助我們解釋為什麼它有點大。但從現金流的角度來看，它似乎並沒有影響經營現金流。所以只是想了解[如何得到]回到 2 個數字。

Got it. I thought [government] tax. So yes, carbon tax -- so the way to look at carbon taxes, we have roughly -- we roughly pay on 5% of our emissions, which is roughly 200,000 tons and the price for last year is -- for this year is [$50 million] and for next year, it goes up by another [$15 million]. So that's how the total cash out comes out and normally the cash outgoes in November.

知道了。我以為是[政府]稅。所以，是的，碳稅——所以看待碳稅的方式，我們大致支付了排放量的 5%，大約是 20 萬噸，去年的價格是——今年的價格是[ 5000 萬美元]，明年，又增加[1500 萬美元]。這就是總現金支出的結果，通常是 11 月份的現金支出。

From an accounting perspective, it was -- based on the estimates that come out until the time they are finalized, those estimates are looked at and the accounting happens. And that's how you see a big number coming in, in this quarter, which is the September quarter. But for -- from cash out perspective and total expense perspective, it still remains a simple math of roughly 200,000 tons on an average and the price that gets published each year on what we need to pay it on.

從會計角度來看，它是基於最終確定先前的估計，對這些估計進行審查並進行會計處理。這就是您在本季度（即九月份的季度）看到的大量數據的情況。但從現金支出和總支出的角度來看，這仍然是一個簡單的數學計算，平均約 20 萬噸，以及每年公佈的我們需要支付的價格。

That's very helpful. And last one for me. If I heard you correctly, you do expect margins to improve, but because of the volume situation in fiscal Q3, we should expect a small dip and then [beyond the] 2024 margin should start improving?

這非常有幫助。最後一張給我。如果我沒聽錯的話，您確實預期利潤率會改善，但由於第三財季的銷售情況，我們應該預期利潤率會小幅下降，然後[超越] 2024 年利潤率應該開始改善？

Correct.

正確的。

We have reached the end of the question-and-answer session. I'll now turn the call back over to CEO, Michael Garcia, for closing remarks.

我們的問答環節已經結束。現在，我將把電話轉回給執行長邁克爾·加西亞 (Michael Garcia)，讓其致閉幕詞。

Thank you again for your participation in our second quarter fiscal 2021 earnings conference call and for your continued interest in Algoma Steel. We look forward to updating you on our results and progress when we report our fiscal third quarter results scheduled for February.

再次感謝您參加我們的 2021 財年第二季財報電話會議以及您對 Algoma Steel 的持續關注。我們期待在我們計劃於 2 月報告第三財季業績時向您通報我們的業績和進展。

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

今天的會議到此結束，大家可以掛斷電話了。感謝您的參與。