Novamerican Steel Inc. announced net income of $8.7 million on sales of $218.0 million for the second quarter and net income of $18.8 million on sales of $424.3 million for the six months ended May 28, 2005.

Second Quarter Results — The $8.7 million net income ($0.88 per share, or $0.84 after dilution) represents an $11.9 million (57.8%) decrease compared to $20.6 million, ($2.12 per share, or $2.07 after dilution) for the same period in 2004. Income was adversely affected by $1.0 million in non-recurring costs of the company's secondary share issue. Sales of $218.0 million reflect an increase of $13.7 million (6.7%) compared to $204.3 million for the same period in 2004.

Tons sold and processed, 489,370 tons, reflect an increase of 4,224 tons (0.9%) compared to 485,146 tons in the second quarter of 2004. While tons sold decreased by 21,415 tons (8.5%), tons processed increased by 25,639 tons (11.0%) compared with the second quarter of 2004. The gross margin decreased to 19.7% from 29.8% in the comparable 2004 period.

Operations — The second quarter proved to be more difficult than anticipated due to continued downward price pressure which adversely affected margins. Tons sold were down from the same period last year due mostly to the absence of customer hedge buying which characterized the first six months of 2004. Lead times at North American steel mills remained short and many customers reduced inventories to minimum levels in an environment of declining prices.

Six Month Results — The $18.8 million net income ($1.91 per share, or $1.82 after dilution) reflects an $8.8 million (31.9%) decrease compared to net income of $27.6 million ($2.84 per share, or $2.80 after dilution) for the first six months of 2004. Sales $424.3 million reflect an increase of $72.6 million (20.6%) compared to $351.7 million in the first six months of 2004.

Tons sold and processed, 938,058 tons, reflect an increase of 16,401 tons (1.8%) compared to 921,657 tons in the first six months of 2004. While tons sold decreased by 44,560 tons (9.3%) compared with the first six months of 2004, tons processed increased by 60,961 tons (13.8%) compared with the same period. The gross margin decreased to 20.3% from 28.1% in the comparable 2004 period.

Outlook — The company believes that flat rolled steel prices will likely remain under pressure throughout the summer months due to seasonally weak demand and ongoing reductions in inventories. Management believes the supply/demand balance is approaching equilibrium, which should lead to price stability sometime in August or September. There appears to be a softening in demand which may be explained by steel buyers delaying purchases in anticipation of lower pricing and/or extended summer shutdowns.

Based in Montreal, Canada, Novamerican Steel Inc. has twelve operating locations in Canada and eleven operating locations in the United States. Novamerican Steel processes and distributes carbon steel, stainless steel and aluminum products, including carbon steel tubing for structural and automotive markets.