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Dofasco Most Profitable North American Steelmaker in 2003

Feb. 9, 2004 — Dofasco Inc. reported net income of $118.4 million on consolidated sales were $3.55 billion for 2003, a result of record shipments and solid operating results. Dofasco's performance makes it the most profitable flat-rolled steelmaker in North America in 2003.

Fourth Quarter Results—Net income of $2.6 million ($0.03 per share) compares to a loss of $57.0 million ($0.76 per share) in the same quarter in 2002, which included a $118.5 million non-cash impairment write-down of Dofasco's share of QCM's assets. Eliminating the 2003 QCM non-cash charge and fourth quarter QCM earnings, pro-forma net income in the fourth quarter of 2003 was $26.8 million ($0.35 per share).

Full-Year Results—Net income of $118.4 million ($1.56 per share) compares to $122.8 million ($1.63 per share) in 2002. Eliminating a non-cash charge on the disposal of its remaining equity value in Quebec Cartier Mining Co. (QCM), and eliminating QCM's earnings for 2003, Dofasco earned pro-forma net income of $133.9 million ($1.78 per common share) in 2003.

Consolidated sales, $3.55 billion, compare to $3.58 billion in 2002. Steel shipments hit a record 4.833 million tons, an increase from 4.827 million tons in 2002.

Comments—Dofasco's President and CEO Don Pether said, "Dofasco people demonstrated exceptional strength of purpose throughout the year. Once again, they performed well in a continuing difficult environment while many of our competitors sustained losses. Dofasco overcame major challenges including significant increases in scrap prices, high energy costs and a strong Canadian dollar. Dofasco continues to generate strong internal cash flows and is well positioned to pursue growth, which will advance our competitive positioning. In this environment, our strong balance sheet, our flexible cost structure and our fully-funded pension plan also represent strategic advantages."

Segment Results—Dofasco's Steel Operations segment, which includes the company's Hamilton operations, reported income before income taxes of $181.7 million for the year, compared to $313.8 million for 2002, due to lower average revenues, higher costs per ton and a higher foreign exchange loss. Shipments from Hamilton were 4.09 million tons compared to 4.12 million tons in 2002. Average revenue per ton decreased by $2 during the year, mainly due to the lower pricing resulting from the weaker U.S. dollar and weaker spot market prices, partially offset by a higher-value product mix. Average cost per ton increased by $24 largely caused by higher scrap and energy costs and lower production levels.

Gallatin Steel achieved record production and shipments. Production reached 1.49 million tons (1.43 million tons in 2002) and shipments were 1.48 million tons (1.42 million tons in 2002). However, because of lower selling prices and significantly higher scrap costs, Dofasco's share of Gallatin's pre tax income was $2.9 million compared to $46.6 million in 2002.

Effective December 31, 2003, the restructuring of Dofasco's investment in Quebec Cartier Mining Co. (QCM) was completed. The restructuring resulted in a conversion of Dofasco's $20 million in notes into preferred shares of QCM and a disposal of the $27.9 million remaining equity value of Dofasco's holdings in QCM as at December 31, 2003, which is reported on Dofasco's financial statements as a non-cash charge against earnings. As a preferred shareholder, Dofasco will account for its investment in QCM on a cost basis rather than by proportionate consolidation. Dofasco, CAEMI and Investissement Quebec, all shareholders of QCM, will continue to support future mine development. Dofasco's support will not be greater than $34.5 million between 2004 and 2010. The restructuring will enable QCM to undertake the $350 million capital investment for mine development required to extend the mine life through 2016. Dofasco's current iron ore supply contracts with QCM will remain in place.

"Among our many accomplishments of 2003, Dofasco was again listed on the Dow Jones Sustainability World Index — for the fifth year in a row," said Pether. "And we added several significant achievements during the final quarter. For the second consecutive year, we were chosen as one of Canada's Top 100 Employers by MediaCorp Canada Inc. and Maclean's magazine. And for the second year in a row, Dofasco was named one of Canada's 50 Best Employers by Report on Business Magazine and Hewitt Associates. In addition, we were ranked as one of Canada's most respected corporations in the annual KPMG survey conducted by Ipsos-Reid."

Dofasco continued to implement its five-year, $700 million Finishing Division Improvement Program. In December, the company upgraded its coupled pickle line cold mill. This will enable Dofasco to further increase throughput and raise quality.

Outlook—"Looking forward, we expect ongoing volatility and uncertainty in several key areas," said Pether. "For instance, the rapid growth of the steel market in China continues to push raw material costs to record levels. These costs are being absorbed through the value chain, and we will continue to work with our customers to re-calibrate for this global shift. We are also countering these forces by looking for opportunities to enhance revenues, reduce costs and move toward a higher value-added product mix."

"Dofasco's people have demonstrated remarkable flexibility and perseverance to sustain our leadership position in our markets," said Pether. "As a result, we approach the future with confidence and the ability to reinvest in our business by growing in our strategic market segments and continuing to improve our quality and customer service."

Dofasco is a leading North American steel solutions provider. Product lines include hot rolled, cold rolled, galvanized, Extragal^(TM), Galvalume^(TM) and tinplate flat rolled steels, as well as tubular products, laser welded blanks and Zyplex^(TM), a proprietary laminate. Dofasco's wide range of steel products is sold to customers in the automotive, construction, energy, manufacturing, pipe and tube, appliance, packaging and steel distribution industries.

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