1998 Second Quarter Financial Results
STELCO INC ("STE.A,STE.B-TM")
- 1998 Second Quarter Financial Results
To The Shareholders:
Financial
Demand for steel products in the automotive, construction, and pipeline
sectors of the North American market remained strong during the second
quarter, providing good order loads at most Stelco Business Units. Weaker
demand in the oil and gas, mining, and forestry sectors, however, adversely
affected order loads at both AltaSteel Ltd. and Stelpipe Ltd. Net sales
were $801 million compared with $819 million for the second quarter of
1997, and the average selling price per ton was $681 compared with $652.
Net income per common share at $0.41, including an after-tax gain of $0.10
per share on the disposal of collateral held as secured creditor, was up
from $0.38 in the same period last year.
On May 1, 1998, the Corporation redeemed all of its Series B Preferred
Shares and 50% of its Series C Preferred Shares for $98 million. During the
quarter, the Corporation purchased 750,000 of its common shares for $9
million under a normal course issuer bid.
Operations
Semi-finished steel production was 1,338,000 tons, essentially
unchanged from 1,349,000 tons produced in the second quarter of 1997. A
quarterly record for steel output was established at Stelco-McMaster Ltee
as a direct benefit of the higher-powered transformer installed in 1997.
Shipments for the quarter were 1,178,000 tons compared with the record
level of 1,258,000 tons in the second quarter of 1997. Shipments were
limited at Hilton Works by lower than normal outputs at the Hot Strip and
Plate Mills, and at Lake Erie Steel Company Ltd. by scheduled five-day
major maintenance of the Hot Strip Mill.
In comparison to the year-earlier quarter, operating costs were
adversely affected by cost escalation related to the weaker Canadian dollar
and by operating inefficiencies at Hilton Works caused by capital asset
installations. At Welland Pipe Ltd. both the U&O and Stelform
large-diameter pipe mills are operating at target levels.
In June, Stelco-McMaster Ltee was awarded QS9000 certification,
enhancing this Unit's position as a supplier of quality steel to the
automotive market.
Capital Investments
During the quarter, the new reheat furnace at the Hilton Works Bloom
and Billet Mill successfully began commercial operations; this project will
improve productivity and product quality, and will reduce operating costs.
Also at Hilton Works, good progress was made on the No. 7 Coke Oven Battery
refurbishment. Completion of construction of the Plate Mill modernization
project has now been delayed beyond the third quarter. During the third
quarter, the supply of oxygen to the Lake Erie Steel blast furnace will be
increased, allowing the benefits of the recently completed upgrades to the
blast furnace and slab caster to be fully realized.
Trade
On May 5, 1998, the Canadian International Trade Tribunal (CITT)
rescinded its 1993 antidumping finding on carbon steel plate from Belgium,
Brazil, the Czech Republic, Denmark, the Federal Republic of Germany,
Romania, the United Kingdom, and the former Yugoslav Republic of Macedonia.
Three Canadian plate producers, including Stelco, have filed an application
with the Federal Court of Canada to appeal the CITT decision.
The import share of domestic consumption continues to increase in 1998.
Imports from all sources are being closely monitored and the Corporation
will initiate appropriate action against those imports being unfairly
traded.
Board of Directors
Dr. J. Fraser Mustard and Mr. George Lethbridge, Directors of the
Corporation since 1986 and 1993 respectively, retired from the Board in
April. Mr. Gilles Labbe, Chairman of the Board and Chief Executive Officer
of Heroux Inc., joined the Board at the Corporation's Annual Meeting.
Outlook
General market conditions remain favourable. While the widespread work
stoppages at General Motors' plants had a minor effect on Stelco's second
quarter, their continuation will adversely affect shipments. Generally,
prices are stable due to market conditions; a weakening in demand or
increasing supply of lower-priced imports could exert downward pressure on
prices in the second half of the year.
HAMILTON, ONTARIO
July 22, 1998
(signed) James C. Alfano
President and Chief Executive Officer |
