Nov. 10, 2006 — Stelco Inc. reported a net loss of $25 million on net sales of $660 million for the third quarter of 2006. Results reflect the effect of fresh start accounting following Stelco’s reorganization.

Third Quarter Results—EBITDA was $64 million and earnings before tax was $13 million, representing an improvement in operating performance over the second quarter of 2006.

Results reflect an $11 million unusual deduction (for EBITDA) a $17 million unusual deduction (for earnings before tax). Of these unusual items, $11 million arose from a "fresh start" reporting inventory revaluation and $6 million related to employee voluntary retirement incentive costs. After deducting a tax provision of $38 million, which was largely attributable to non-cash adjustments from "fresh start" reporting, the net loss for the quarter was $25 million.

Net sales revenue of $660 million compares to net sales revenue of $698 million for the previous quarter (ending June 30, 2006). The decrease in net sales was due to a 5% decline in shipments resulting primarily from reduced demand from the automotive sector and steel service centers. Average revenue per ton was unchanged as higher spot prices offset a lower priced product mix. Costs were $596 million compared to $679 million for the quarter ending June 30, 2006.

Costs were lower by 12% primarily due to the 5% decline in shipments and a 7% decrease in the average cost per ton. The decline in the average cost per ton is largely attributed to the flow through of the balance of the "fresh start" inventory adjustment of $11 million for the third quarter, which was significantly less than the amount recorded in the second quarter of $49 million.

Net sales revenue was $660 million also compares to $559 million for the same period in 2005. The increase in revenue compared to the year-ago quarter was due to a 13% increase in shipments and a 4% increase in average revenue per ton. The average revenue per ton was higher primarily due to the strength of the market in the third quarter of 2006 relative to the same quarter of 2005 reflected in the pricing of spot business.

Outlook—Looking forward, demand for steel in the North American market has softened. Stelco expects that the reduced demand will continue through the fourth quarter and into the first quarter of 2007. As a result of the lower demand, certain major steel producers in North America, including Stelco, have elected to reduce production levels in order to better match supply with demand. In addition, Stelco will take advantage of the current market slowdown in order to complete two previously announced planned outages on its Hamilton blast furnace and Lake Erie hot strip mill. The North American market continues to support a significant level of imports, which may lead to lower selling prices and lower market share for domestic producers. The corporation is continuing to monitor market conditions and will adjust production levels as required.

Stelco says that changing market dynamics associated with the softening in North American steel demand make it difficult for the corporation to predict revenue, shipments, liquidity, and EDITDA for the fourth quarter of 2006. The corporation does not anticipate that it will achieve its previously announced revenue, shipments, production and EDITDA estimates relating to the second half of 2006. The corporation is continuing to build new customer relationships, negotiate contracts with existing customers, and lower overall operating costs through productivity initiatives and by negotiating better terms with suppliers.

Stelco is one of Canada's largest steel companies. It is focused on its two Ontario-based integrated steel businesses located in Hamilton and in Nanticoke that produce high-quality value-added hot rolled, cold rolled, coated sheet and bar products.