March 27, 2006 — Stelco Inc. released its 2005 Audited Consolidated Financial Statements together with Management's Discussion and Analysis, which outlines the corporation's financial results and condition. In the statements, Stelco reported a net loss of $120 million for the fourth quarter, and a net loss of $73 million for the year.

Fourth Quarter Results—The net loss of $120 million ($1.17 per common share) includes a $53 million net loss from discontinued operations. During this period the continuing operations recorded production of 982,000 semi-finished tons and shipments of 888,000 tons. For the fourth quarter of 2004, Stelco had restated net earnings of $1 million ($0.01 per common share), which included a net loss of $20 million ($0.20 per common share) from discontinued operations, on production of 1,115,000 semi-finished tons and shipments of 881,000 tons from continuing operations.

Full Year Results—Stelco’s net loss of $73 million ($0.71 per common share) includes a $64 million net loss from discontinued operations. This compares with restated net earnings of $64 million ($0.63 per common share) for the year ended December 31, 2004, which included net earnings of $30 million ($0.30 per common share) from discontinued operations.

Results were attributable in large measure to factors that reduced revenue and increased costs. A longer-than-anticipated shutdown at the Lake Erie facility was incurred during the fourth quarter as the company initiated its hot strip mill upgrade. The shutdown had a negative impact on the facility's overall production, as well as on the volume and mix of products shipped, leading to reduced revenue from sales. Other factors affecting revenue included softer demand (which resulted in lower prices) and a higher Canadian dollar.

Increased costs were attributable to such factors as higher spending on raw material and energy, especially for coal, iron ore, natural gas and electricity. In addition, Stelco experienced increased repair, maintenance and supply costs associated with planned shutdowns at a number of facilities. In addition, reorganization costs increased from $53 million in 2004 to $76 million in 2005.

Cash consumed from continuing operations for 2005 amounted to $23 million compared to $69 million generated in 2004. Major elements of cash consumption in 2005 included:

• $154 million for capital expenditures.
• $17 million for repayment of non-Applicant long-term debt.
• $124 million generated from cash earnings before working capital changes.
• $23 million generated from gross proceeds on the sale of Camrose Pipe.

As of December 31, 2005, Stelco's continuing operations net liquidity stood at $254 million. Cash, cash equivalents and restricted cash totaled $42 million. Available lines of credit stood at $403 million. And lines of credit drawn down totaled $191 million. Net short-term debt for continuing operations decreased from $152 million as at December 31, 2004 to $149 million as at December 31, 2005.

The Corporation noted that, entering 2006, customer inventory levels remained constant, resulting in stable order demand and pricing through the first quarter. Stelco also indicated that, as disclosed previously, financial results for the first quarter of 2006 would be negatively affected by the longer-than-anticipated shutdown of the Lake Erie hot strip mill during the fourth quarter of 2005.

Comments—Courtney Pratt, Stelco's President and CEO, said, "The past year was one of transition for Stelco. The bottom line results were recorded in the context of much more positive developments that bode well for the company's future. These included the achievement of a consensual restructuring plan, the conclusion of agreements to place the pension plans on a sound financial footing, the sale of non-core assets, the announcement of a contribution by the federal government to the funding of our electricity cogeneration projects, and the ratification of a new collective bargaining agreement at Lake Erie.

"Stelco is poised to emerge from Court protection on March 31, 2006 with an improved financial position, a new board of directors, a new President and Chief Executive Officer, and a new organizational structure. These factors, together with a dedicated workforce and quality products, provide the opportunity for Stelco to be a viable and competitive steel producer going forward."

Stelco is one of Canada's longest-established steel companies. It is currently in the final stages of a Court-supervised restructuring, a process that is designed to establish the company as a viable and competitive producer for the long term. The new Stelco will be focused on its two Ontario-based integrated steel businesses located in Hamilton and in Nanticoke, producing high-quality, value-added hot rolled, cold rolled, coated sheet and bar products.