Stelco Q3 earnings soar on rising steel prices, raises dividend
HAMILTON – Stelco Holdings Inc. shares jumped higher Thursday after it reported a surge in its latest quarterly earnings on higher steel prices and said it would raise its dividend again.
The Hamilton, Ont.-based steel producer said its average selling price for steel in the third quarter was up 165 per cent compared with a year ago and 40 per cent higher than in the second quarter.
Stelco chief executive Alan Kestenbaum said the company is benefiting from having few long-term production commitments or hedged prices, allowing them to shift the product mix to where its most profitable and to reap the rewards of rising prices.
“We move to where the profits are,” Kestenbaum told a conference call with financial analysts to discuss Stelco’s results.
He said the company sees the strong market continuing next year, as indicated by high scrap prices that are still rising, as well as potentially increased demand from the auto industry as supply chain issues are resolved and from the oil and gas industry because of higher activity driven by energy prices.
Stelco is also set to benefit from lower electricity prices thanks to a cogeneration facility that it expects to complete next year, Kestenbaum said.
“An investment originally expected to save us $18 million per annum will be multiples of that as skyrocketing electricity demand over the coming years should result in higher costs and less reliability for others.”
The boost in steel prices, as well as a 113 per cent increase in shipping volumes from last year, helped push revenue up 471 per cent from last year to $1.35 billion for the quarter.
Net income came in at $614 million or $7.42 per diluted share in the quarter ending Sept. 30, compared with a loss of $88 million or 99 cents per share in the same quarter last year.
Adjusted net income was $7.60 per share for the quarter, compared with a loss of 91 cents per share last year.
Analysts on average had expected adjusted net income of $6.52 per share and revenue of $1.2 billion, according to financial markets data firm Refinitiv.
RBC analyst Alexander Jackson said that while the results fell below his expectations because of higher taxes, they beat the consensus because of prices and volume.
“The stronger result was primarily driven by a higher average realized steel price than we forecast due to the timing of sales and better realizations on the spot market than we forecast.”
Stelco said that given the results, it is increasing its dividend by 50 per cent to 30 cents per share. Last quarter it doubled its dividend to 20 cents per share.
Stelco shares were trading up $2.98, or a little over seven per cent, at $44.30 as of late morning on the Toronto Stock Exchange after trading up almost 12 per cent when the market opened.