Any comments on the direction of Canada's only non-unionized steel company?
Third Quarter Results
Dofasco reported third quarter consolidated net income attributable to common shares of $43.6
million or 51 cents per share. This compared with third quarter 1996 results of $50.1 million net
income or 58 cents per common share. Consolidated sales for the quarter of $743.6 million were
slightly ahead of last year's results for the same period, of $732.4 million. Shipments of flat rolled
steel were comparable at 1,010,000 tons vs. 990,000 tons from a year earlier.
Dofasco's third quarter earnings were below earnings from second quarter of $61.2 million or 71
cents per common share. However, second quarter results included special items which contributed
12 cents to the earnings per share number.
Third quarter Hamilton shipments totalled 876,000 tons, down from 949,000 tons in the traditionally
stronger second quarter. Slab production from the integrated steelmaking stream was reduced in the
quarter due to planned maintenance work as well as some reduction in ironmaking. These factors
were partially compensated for by purchased steel slabs, however, the overall mix of steel slabs
available for finishing did not match short term requirements for the quarter.
Dofasco's Quebec Cartier Mining Company and Gallatin Steel, Dofasco's joint venture minimill in
Kentucky, both showed modest improvement in the third quarter.
Dofasco's new electric arc furnace facility is continuing to work through its production curve and that
facility did experience some unplanned delays related to power outages.
Commissioning of Dofasco's new Tube Mill located at its Hamilton operations is progressing well.
The Tube Mill, when it completes its commissioning phase, will provide approximately 140,000 tons
of tubular steel per year for producing automotive components and using advanced hydroforming
technology.
John Mayberry, Dofasco's President and CEO stated, ''Dofasco's performance for the third quarter
was reasonably good given that we did experience some unforeseen difficulties that affected total
shipments at our Hamilton operations. On the good news side, both Gallatin Steel and Quebec
Cartier Mining Company made some gains and in Hamilton our hot rolling operations performed at
very good levels. On the downside we did experience some planned and unplanned outages which
affected our ability to match our slab production with our commercial needs in the quarter.'' Mr.
Mayberry added, ''We see these issues as largely behind us and we anticipate a reasonably good
performance in the albeit very competitive, North American environment as we close out 1997.''
Dofasco is a leading North American flat rolled steel producer with 1996 sales of nearly three billion
dollars. Flat rolled product lines include hot rolled, cold rolled, galvanize and tinplate steels.
Dofasco's major markets include automotive, construction, package goods, appliance and tubular
market sectors.
DOFASCO INC.
Report to Shareholders
For the Period Ended September 30, 1997
DOFASCO INC.
Consolidated Statements of Income
(Unaudited)
-------------------------------------------------------------------------
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
(Dollars in Millions) 1997 1996 1997 1996
-------------------------------------------------------------------------
Sales $ 743.6 $ 732.4 $2,257.5 $2,222.5
-------------------------------------------------------------------------
Cost of sales 596.6 578.0 1,802.2 1,792.4
Depreciation 63.0 58.2 188.9 169.9
----------------------------------------
659.6 636.2 1,991.1 1,962.3
----------------------------------------
Operating income 84.0 96.2 266.4 260.2
Interest on long term debt (18.9) (20.0) (57.2) (59.3)
Interest and other income 2.2 5.9 18.4 19.5
----------------------------------------
Income before income taxes 67.3 82.1 227.6 220.4
Income tax expense (23.5) (25.5) (77.5) (73.1)
----------------------------------------
Net income 43.8 56.6 150.1 147.3
Preferred share dividends (.2) (6.5) (11.3) (19.5)
-------------------------------------------------------------------------
Net income attributable to
common shares $ 43.6 $ 50.1 $ 138.8 $ 127.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share $ .51 $ .58 $ 1.62 $ 1.49
Raw steel production and
purchased semi-finished
steel processed
(net tons 000's) 1,182 1,022 3,406 3,149
Steel shipments
(net tons 000's) 1,010 990 3,028 3,046
DOFASCO INC.
Consolidated Balance Sheets
(Unaudited)
-------------------------------------------------------------------------
As at September 30
(Dollars in Millions) 1997 1996
-------------------------------------------------------------------------
Current assets:
Cash and short term
investments $ 162.1 $ 401.9
Accounts receivable 421.4 409.6
Income and other taxes
recoverable .3 -
Inventories 712.1 679.5
Deferred income taxes 7.5 7.4
--------------------------
1,303.4 1,498.4
--------------------------
Fixed assets 2,060.6 2,223.9
Investments and other
assets 65.7 64.3
--------------------------
2,126.3 2,288.2
-------------------------------------------------------------
Total assets $ 3,429.7 $ 3,786.6
-------------------------------------------------------------
-------------------------------------------------------------
Current liabilities:
Bank borrowings $ 36.4 $ 67.6
Accounts payable and
accrued charges 373.5 329.4
Income and other taxes
payable - 8.6
Dividends payable 21.6 23.6
Current requirements
on long term debt 78.4 59.7
--------------------------
509.9 488.9
--------------------------
Long term liabilities:
Long term debt 720.3 811.5
Accruals for:
Relining blast furnaces
and other 5.7 57.7
Pension and other post-
employment benefits 158.8 162.3
--------------------------
884.8 1,031.5
--------------------------
Deferred income taxes 301.2 329.8
--------------------------
Shareholders' equity:
Preferred shares 12.9 331.2
Common shares 907.7 898.5
Retained earnings 813.2 706.7
--------------------------
1,733.8 1,936.4
-------------------------------------------------------------
Total liabilities and
shareholders' equity $ 3,429.7 $ 3,786.6
-------------------------------------------------------------
-------------------------------------------------------------
DOFASCO INC.
Consolidated Statements of Cash Flows
(Unaudited)
-------------------------------------------------------------------------
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
(Dollars in Millions) 1997 1996 1997 1996
-------------------------------------------------------------------------
Cash derived from (used for)
operations:
Net income and charges not
involving cash outlays $ 103.3 $ 109.9 $ 326.3 $ 299.8
Changes in operating working
capital (27.7) 29.2 (106.6) (28.8)
------------------------------------
75.6 139.1 219.7 271.0
-------------------------------------------------------------------------
Cash used for investment activities:
New facilities and investments 26.1 66.0 88.4 269.4
Net proceeds from sale of
ownership interest in Ferrum Inc. - - (46.1) -
------------------------------------
26.1 66.0 42.3 269.4
-------------------------------------------------------------------------
Dividends paid 21.6 23.7 81.9 71.0
-------------------------------------------------------------------------
Cash derived from (used for)
financing activities:
Increase (decrease) in
long term debt (18.4) (1.9) (47.5) 36.5
Redemption of preferred shares - - (318.1) (.1)
Common shares purchased - (7.5) - (26.0)
Common shares issued 2.5 5.1 7.3 16.8
------------------------------------
(15.9) (4.3) (358.3) 27.2
-------------------------------------------------------------------------
Increase (decrease) in cash 12.0 45.1 (262.8) (42.2)
Cash and short term investments
less short term bank borrowings:
Balance at beginning of period 113.7 289.2 388.5 376.5
------------------------------------
Balance at September 30 $ 125.7 $ 334.3 $ 125.7 $ 334.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
- SUPPLEMENTARY INFORMATION -
Summary of Quarterly Gross Income (Unaudited) Dofasco Inc.
-------------------------------------------------------------------------
(in millions except shipments and per ton amounts)
1996 1997
Third Second Third
Quarter Quarter Quarter
-------------------------------------------------------------------------
Sales
Quebec Cartier Mining $ 69.5 $ 82.6 $ 78.9
Gallatin 36.6 57.3 58.7
Steel Operations(x) 668.5 709.8 652.3
Intercompany Adjustments (42.2) (56.4) (46.3)
-------------------------------------------------------------------------
Consolidated Sales $ 732.4 $ 793.3 $ 743.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cost of Sales
Quebec Cartier Mining $ 52.5 $ 65.4 $ 60.1
Gallatin 42.7 53.1 53.6
Steel Operations(x) 526.2 564.2 525.8
Intercompany Adjustments (43.4) (55.5) (42.9)
-------------------------------------------------------------------------
Consolidated Cost of Sales $ 578.0 $ 627.2 $ 596.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Gross Income
Quebec Cartier Mining $ 17.0 $ 17.2 $ 18.8
Gallatin (6.1) 4.2 5.1
Steel Operations(x) 142.3 145.6 126.5
Intercompany Adjustments 1.2 (0.9) (3.4)
-------------------------------------------------------------------------
Consolidated Gross Income $ 154.4 $ 166.1 $ 147.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Depreciation $ 58.2 $ 62.9 $ 63.0
-------------------------------------------------------------------------
Consolidated Operating Income $ 96.2 $ 103.2 $ 84.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Shipments
Iron Ore (000's tonnes)(xx) 1,795 2,192 2,156
Flat Rolled
Gallatin (000's net tons)(xx) 84 127 134
Hamilton Operations (000's net tons) 906 949 876
Less: Intercorporate (000's net tons) - 3 -
-------------------------------------------------------------------------
Total Flat Rolled 990 1,073 1,010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales Per Ton
Quebec Cartier Mining $ 39 $ 38 $ 37
Gallatin $ 433 $ 450 $ 438
Steel Operations(x) $ 738 $ 748 $ 745
Gross Income Per Ton
Quebec Cartier Mining $ 9 $ 8 $ 9
Gallatin $ (70) $ 33 $ 38
Steel Operations(x) $ 157 $ 153 (ss) $ 144
-------------------------------------------------------------------------
(x) Steel Operations include Hamilton Operations, Dofasco USA and Dofasco's share of Baycoat,
DNN, Sorevco and Wabush. Ferrum was included in this group prior to its sale on April 25, 1997.
(xx) Represents Dofasco's 50% share.
(ss) Sales and Gross Income for Steel Operations include a $3 per nt favourable adjustment relating
to anti-dumping duties recognized in the second quarter of 1997.
DOFASCO INC.
Corporate Information
--------------------------------------------------------------
For information concerning share ownership or
dividends, please contact our transfer agent:
CIBC Mellon Trust Company
393 University Avenue
5th Floor
Toronto, Ontario
M5G 2M7
AnswerLine: (416) 813-4600
Toll Free in Canada
and the U.S.: 1-800-387-0825
E-Mail Address: inquiries@cibcmellon.ca
---------------------------------------------------------------
When contacting Dofasco, please direct
inquiries to:
The Corporate Secretary
Dofasco Inc.
P.O. Box 2460
Hamilton, Ontario
L8N 3J5
(905) 544-3761 or 1-800-DOFASCO
(363-2726)
E-Mail Address: corpsec@dofasco.ca
Dofasco Website: www.dofasco.ca
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