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Dofasco Posts Very Good First Quarter Results

04/28/2005 - Dofasco Inc. reported consolidated net income of $78.2 million on consolidated sales of $1,073.1 million for the first quarter of 2005. The company credits higher selling prices for its much-improved earnings compared to the first quarter of 2004.

Dofasco Inc. reported consolidated net income of $78.2 million on consolidated sales of $1,073.1 million for the first quarter of 2005. The company credits higher selling prices for its much-improved earnings compared to the first quarter of 2004.

Harshaw Named VP of Manufacturing

Dofasco's Board of Directors has appointed Andy Harshaw to the position of Vice President — Manufacturing. Mr. Harshaw succeeds Dave Borsellino, who recently indicated he would retire in November 2005.

Since joining Dofasco in 1978, Mr. Harshaw has held management positions within the company's Research and Development, Commercial and Manufacturing departments. He currently holds the position of Works Manager.

Mr. Borsellino's career at Dofasco began in 1971, and he held several management positions in Manufacturing and Technology at Dofasco before his appointment to the position of Vice President—Manufacturing in 1994.

Don Pether remarked, "Dave Borsellino has made a remarkable contribution to Dofasco for more than three decades, providing sound leadership to help guide the organization to achieve many successes."

Mr. Pether added, "Andy Harshaw comes to the position of Vice President—Manufacturing following years of varied experiences that have helped prepare him for his new senior management role at Dofasco. These experiences, which were part of our long-term succession planning process, have provided exposure to different parts of Dofasco's business and direct leadership involvement in several key projects."

The $78.2 million ($1.01 per common share) consolidated net income was significantly higher than the $54.6 million ($0.71 per share after deducting preferred share dividends) reported in the same quarter last year.

Commenting on the quarter, Dofasco's President and CEO Don Pether said, "Dofasco continues to post very good results in an ever-changing and continuously challenging environment thanks to the contribution of its team of employees in Canada, the United States and Mexico. These quarterly earnings — the best first quarter ever — represent a continuation of the success that we have achieved over the cycle and are evidence that we continue to deliver long-term value to our customers and shareholders."

Dofasco's consolidated sales of $1,073.1 million represent a 12% increase from the $961.2 million for the same period in 2004. Steel shipments, at 1.17 million tons, were down from the 1.32 million tons shipped in the first quarter of 2004 due to higher customer inventories at year end, which were driven by a surge in imports into North America in the second half of 2004.

Dofasco's Steel Operations segment, which includes the company's Hamilton operations, reported income before income taxes of $82.3 million for the quarter, compared to $74.3 million for the first quarter of 2004, reflecting the stronger pricing. Shipments from Hamilton were 972,000 tons, a decrease from the record 1,125,000 tons in the same quarter of 2004. Higher selling prices on contract and spot business resulted in a $152 increase in the average revenue realized per ton of steel shipped from Hamilton in the first quarter of 2005 compared to the same period in 2004. Average cost per ton increased by $135 over the high levels experienced in 2004, driven primarily by higher prices for scrap and purchased slabs and increased costs of other raw materials and energy.

Dofasco's 50% share of Gallatin Steel's income before taxes for the quarter was $38.1 million, up from $10.5 million in the same quarter for 2004. Significantly higher U.S. spot market selling prices drove Gallatin's profitability in the first quarter. Shipments for the quarter were 388,000 tons, slightly higher than the 383,000 tons shipped in the first quarter of 2004.

Outlook—"Looking forward, Dofasco expects second quarter results to be similar to the first quarter. For our Steel Operations segment, we expect flat rolled steel demand to improve in the second quarter. At Gallatin, shipments are expected to remain similar to the first quarter, however, North American hot band spot market prices are anticipated to continue to ease," said Pether.

The No. 2 Blast Furnace rebuild in Hamilton is expected to be completed late in the second quarter. After the startup of No. 2 Blast Furnace, the No. 3 Blast Furnace will be removed from service.

On April 14th, Dofasco announced the first in a series of pledges that will be made in 2005 to local organizations in the Hamilton area that will exceed $8 million over a number of years. These donations are further evidence of Dofasco's commitment to the principles of corporate social responsibility. The first capital gift of $2.5 million will support the new and expanded Heart Investigation Unit at the Hamilton General Hospital. Dofasco had previously donated $1 million to bring an MRI scanner to the Hamilton General.

"We're sharing the rewards of our success with a community that's been Dofasco's home for 93 years and home to generations of Dofasco people and their families," said President and CEO Don Pether. "We're proud to be a part of the community and we're committed to giving back."

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.