Algoma Steel Inc. reported record net income of $122.2 million on sales of $489.8 million for the fourth quarter and net income of $343.8 million on sales of $1,803.1 million for the full year ended December 31, 2004.

Fourth Quarter Results—Net income of $122.2 million ($3.03 per common share) compares to net income of $10.1 million for the three months ended December 31, 2003 and net income in the third quarter of 2004 of $121.6 million. EBITDA was $191.2 million, which compares to $202.0 million for the third quarter of 2004. Cash and short-term investments increased by $209.9 million, totaling $453.2 million at December 31, 2004.

Full Year Results—Net income of $343.8 million ($8.83 per share) compares to $8.4 million ($0.27 per share) for 2003. The main reason for the decline in EBITDA in the fourth quarter compared to the third quarter was a reduction in shipments of 34,200 tons, while a decline in selling prices was more than offset by lower manufacturing costs.

Stelco Process—Algoma announced today that it does not intend to submit a binding offer for Stelco. Algoma has been engaged in due diligence and in discussions with Stelco and its stakeholders since mid-December. Denis Turcotte, President and CEO, stated, "Algoma's due diligence has confirmed that there are significant potential benefits in a combination of Algoma and Stelco, but given the risks and obligations associated with the acquisition, we have concluded that proceeding with the transaction would not be in the best interests of our shareholders."

Denis Turcotte further stated, "The efforts of our people across the company continue to contribute to strong financial performance. This has allowed us to investigate strategic options that we will continue to explore
in the months ahead." Ben Duster, Algoma's Chairman, said, "We believe Algoma can continue its success in the North American steel industry, however, the company is also mindful of the potential for value creation through either acquisitions or industry consolidation. The Board will continue to evaluate all of these opportunities on behalf of its shareholders."

Outlook—Algoma expects spot prices for sheet and plate products to be lower than in the fourth quarter of 2004, although an increase in contract prices is expected to offset most of the effect of lower spot prices. The level of contract sales for 2005 approximates 50%. Excess inventories are currently suppressing prices and North American demand from several market sectors has weakened from 2004 levels. Management is optimistic that this inventory overhang is temporary and believes that pricing will stabilize in the coming months. Shipments are expected to increase from the fourth quarter level, which was affected by seasonal factors.

Higher coal costs are expected in the first quarter due primarily to the purchase of 117,000 tons of coal in late 2004 and early 2005 at spot prices due to a temporary disruption in supply from the company's primary coal supplier. Iron ore prices for 2005 are expected to increase by a minimum of 25% and this will affect earnings commencing in the second quarter after existing iron ore inventories purchased in 2004 are exhausted.

Lower earnings are expected in the first quarter compared to the fourth quarter of 2004, but a substantial increase in the cash and short-term investments is expected.