Stelco shares climb more than 10 per cent as CEO downplays tariff impacts

Shares of Stelco Holdings Inc. closed up almost 10 per cent Wednesday after the company downplayed expected impacts of U.S. tariffs as it shifts focus further into the Canadian market.

The Hamilton-based steel producer paid about $39 million in tariffs in the third quarter, but Stelco chief executive Alan Kestenbaum said in an earnings conference that he expects that to drop in the fourth quarter.

“In Q4 we will already see a meaningful drop in tariff costs,” he said.

He said the company will look to shift its current 24 per cent of production exposed to U.S. tariffs closer to zero by selling more into the Canadian market.

Those efforts have been helped by Canada’s retaliatory tariffs on U.S. producers, and Stelco’s investments to expand product offerings and fill voids in the Canadian market created by those retaliations.

The renegotiated North American trade deal could also leave the company better off, said Kestenbaum.

“I believe as a result of the new NAFTA, or USMCA, it is quite possible that the Canadian industrial markets we serve will actually improve its competitiveness and expand, giving us even more demand than just the void left by the retreating supply from the targeted sources.”

The bullish stance of tariff impacts helped push the company’s share price to as high as $20.42 before closing up $1.75 or 9.7 per cent at $19.80 on the Toronto Stock Exchange.

Kestenbaum said the company is also looking to create more value on the real estate side. Stelco bought more than 1,200 hectares of land in June, including nearly 324 hectares in the Toronto-Hamilton area.

“Strategically, we are continuing to advance our efforts to maximize value of our assets,” he said.

“During the third quarter, we advanced in our strategy to see that land developed for its highest and best purpose by starting to hire experts in real estate development, developing a master plan for land development and beginning to market some of our vacant buildings to the very hot Greater Toronto industrial market.”

After market close on Tuesday, the company had reported adjusted earnings of $135 million or $1.52 per share, compared with analyst expectations of $164 million or $1.54 per share according to Thomson Reuters Eikon.

Revenue came in at $619 million, an 84 per cent increase from the $336 million it pulled in for the same quarter last year as volumes shipped surged more than 42 per cent to 586 million tons.

Stelco says higher prices helped offset tariff costs, as its average selling price was $980 per net ton, up from $793 per net ton for the same quarter last year.