Aug. 11, 2006 — Stelco Inc. reported a net loss of $31 million on net sales of $698 million for the second quarter ended June 30, 2006.

Second Quarter Results—The net loss of $31 million equates to $1.14 per share. Net loss and EBITDA ($19 million) was negatively impacted (by $54 million and $49 million, respectively) by a number of unusual items that relate primarily to adjustments related to fresh-start accounting and workforce cost reduction initiatives. These factors were partially offset by a net favorable future income tax adjustment due to the enactment of lower federal corporate income tax rates.

Net sales revenue, $698 million, compares to net sales revenue of $658 million for the same period in 2005. Stelco says the increased revenues were mainly due to a 15% increase in steel shipments. The increased shipments were partially offset by an 8% decrease in average revenue per ton resulting from lower spot and contract pricing, the negative impact of the higher Canadian dollar, and a shift in mix towards lower-valued added products.

Production increased to 1,108,000 semi-finished tons with shipments increasing to 971,000 net tons as compared to 1,054,000 semi-finished tons produced and 840,000 net tons shipped in the second quarter of 2005.

While steel shipments remained relatively constant, there was a 4% increase in average revenue per ton. Stelco says the increase in average revenue per ton was primarily due to an increase in the company’s spot pricing business and a shift in mix from hot roll into higher-priced cold rolled products. Production of 1,108,000 semi-finished tons reflects an increase from the 997,000 tons produced in the previous quarter. Shipments were relatively constant with 971,000 net tons shipped in the second quarter and 974,000 net tons in the first quarter.

A number of positive events occurred during the second quarter, including the ratification of a new collective agreement by USW Local 1005. This collective agreement has a term of four years and incorporates a new level of cooperation with management in seeking out efficiencies on the shop floor by leveraging the knowledge of those employees who make the steel and by empowering them to effect change. An incentive program has recently been introduced to promote and facilitate this change in thinking.

During the quarter, Stelco introduced a number of workforce cost reduction initiatives. Although these initiatives will have a negative short-term impact on EBITDA, net earnings and operating cash flows, they will have a long-term benefit to the cost structure and are a major step towards the corporation’s drive to return Stelco to a viable and profitable company.

Stelco says it is developing a number of other initiatives that will further reduce costs by reducing spending, increasing productivity or increasing production volumes.

Outlook—Looking forward to the second half of 2006, Stelco says it expects the steel market to remain strong. The company says that it expects production for the second half of 2006 to be 2.1 million net tons of semi-finished steel with approximately 2 million net tons of shipments (including the impact of scheduled outages).

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, which produce high quality value-added hot rolled, cold rolled, coated sheet and bar products.