Hello, good morning, welcome to Stelco Holdings Inc's First Quarter 2023 earnings call. All lines will be muted during the presentation portion of the call with an opportunity to questions and answers at the end. I would now like to pass the conference over to your host, Trevor Harris, to begin. Please go ahead. Good morning, everyone. Welcome to Stelco's quarterly earnings conference call. Speaking on the call today to discuss our 2023 first quarter results will be Alan Kestenbaum, our Executive Chairman and Chief Executive Officer, and Paul Scherzer, our Chief Financial Officer. Yesterday, after the market closed, we issued a press release overviewing Stelco's financial results for the first quarter of 2023. This press release, along with the company's financial statements and Management's Discussion and Analysis, have been posted on SEDAR and on our investor relations website at investors.stelco.com. We have provided a link to the presentation referenced on today's call on our website as well. I would like to inform everyone that comments made on today's call may contain forward-looking statements which involve assumptions which have inherent risks and uncertainties. Actual results may differ materially from the statements made today. Do not place undue reliance on them. Stelco management disclaims any obligation to update forward-looking statements except as required by law. With that in mind, I would ask everyone on today's call to read the legal disclaimers on Page two of the accompanying earnings presentation and also to refer to the risks and assumptions outlined in Stelco's public disclosures. In particular, the first quarter of 2023, Management's Discussion and Analysis sections relating to forward-looking information and risks and uncertainties, as well as our filings with securities commissions in Canada. The appendix of our presentation and the non-IFRS performance measures and review of non-IFRS measures of our MD&A provide definitions and reconciliations of the non-IFRS measures that we use today. Please also note that all dollar figures referred to on today's call will be in Canadian dollars, unless otherwise noted. Following today's prepared remarks, Alan and Paul will be taking questions. To maximize efficiency, we would ask that all participants who would like to ask a question please limit themselves to one question and one follow-up before re-queuing. With that, I would now like to turn the call over to Alan. Thank you, Trevor, and good morning, everyone. The first quarter of 2023 was shaped by macroeconomic and market challenges that negatively impacted our financial performance, as well as lower sales prices and higher input costs due to inflationary pressures. Despite that, we increased our shipments by 4% over the previous quarter. The even better news is we emerged from Q 1 optimistic about the path forward as prices being realized now in the second quarter have improved to far more favorable levels. Lead times have normalized and costs are dropping. Despite broad macroeconomic headwinds, we continue to see and hear from our customers solid business conditions in all of the end markets we service. We anticipate a significantly more robust level of earnings in the second quarter and a continued buildup in cash so that we can continue to effectively deploy our industry-leading capital allocation strategy. We are once again announcing a quarterly dividend of CAD 0.42 per share. That will add to the more than CAD 1.8 billion we have returned to our shareholders since our IPO in 2017. We are extremely proud of our track record on return of capital to our shareholders and are pleased to be able to continue this trend of positive returns. Thank you for your time this morning. I will now ask Paul Scherzer to detail some of our financial results. Thanks, Alan, and good morning, everyone. As Alan indicated, we did face another challenging quarter in Q1, with our average selling price dipping slightly from the prior quarter, but down 36% year-over-year. While we are pleased with our ability to ship 695,000 net tons, the resulting financial performance was negatively impacted by continued cost pressures that have persisted since mid-2022. Our Adjusted EBITDA of $65 million and the resulting Adjusted EBITDA margin of 9% were down 21% and 3% respectively when compared to the previous quarter. While the inflationary pressures and low pricing, combined with lead times that increase whenever pricing begins an upward trajectory, have contributed to weaker performance in recent quarters, we have seen some reversal of those trends and see opportunity in coming periods to improve our financial performance. We look forward to achieving stronger Adjusted EBITDA margins in the second quarter as our average selling prices increase significantly from the low levels of Q1. Of course, that will require diligence and focus on controlling our costs and ensuring all employees are focused on driving every dollar of incremental revenue through to the bottom line. We also expect that our shipping volume during the second quarter of 2023 will be approximately in line with the average of our trailing four quarters realized levels. Despite the challenges we faced through Q1, once again, we were able to close out the quarter with an excess of CAD 800 million of cash and over CAD 1 billion of total liquidity. This is a positive achievement that preserves substantial financial flexibility and will afford us the opportunity to strategically allocate our capital in a manner that continues to strengthen our business and is in the interest of our shareholders, including through the continued payment, as Alan noted, of our CAD 0.42 per share quarterly dividend. We know that the fundamentals of our business are strong and that we have the ability to deploy our tactical flexibility model to capitalize on opportunities that are presented by the market. By doing so, we will continue to generate the necessary cash to support future capital deployment opportunities when they arise. We have a proven track record of being able to navigate challenging periods and deliver industry-leading results, and we look forward to once again demonstrating the strength of our business in the second quarter and through the balance of 2023. Thank you for taking the time today to join our call. Thank you, Alan and Paul. That concludes our prepared remarks for today. I would like to turn the call back over to the operator for questions and answers. Operator? Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. When preparing to ask your question, please make sure you are unmuted locally. First question we have comes from Katja Jancic from BMO Capital Markets. Please go ahead. Good morning. Thank you for taking my question. Now, looking to second quarter, specifically at the prices, I see U.S. spot agency prices up somewhere between $350 to $400 per ton sequentially. I think in the past, it was said that each $100 per ton increase should translate to about $400 million in incremental annual EBITDA. Which means, you know, this implies a pretty meaningful sequential potential increase in earnings. My question is that fair? Or what are some of the puts and takes we should be thinking about? Sorry, I think we're having a technical difficulty. Okay, sorry about that. Yes, your math is correct. It works like this. Basically, $100 is CAD 130 per ton Canadian, times approximately three million tons takes you about CAD 390 million annualized. Each $100 gets us to about CAD 390 million of Adjusted EBITDA. As you noted, there has been a significant increase in price in Q2, and therefore, we expect significantly better results. Maybe just as a follow-up, how should we think about the cost side? How much improvement could we see? On the cost side, I think we can see probably somewhere close to about CAD 20 per ton reduction in cost. Perfect. Thank you so much. I'll go back in queue. The next question we have comes from David Ocampo from Cormark Securities. Please go ahead. Thanks. Good morning, guys. Good morning. In your commentary and even on the release, you guys talked about a Q2 cash build that will support your capital allocation strategy. Can you update what your priorities are as it relates to that strategy? Are you thinking more shareholder returns or internal capital projects? I was thinking more on the shareholder returns, front. We've largely completed our large, internal capital expenditures, so it's really more on the shareholder front. If you look at, last year, we had a similar type situation where we built up a lot of cash in the beginning of the year and then went very, very aggressively into three share buybacks, taking up about 29% of our stock, plus a very large, special dividend. You know, as we look at this year, there's that. We anticipate doing things that are meaningful for the shareholders. That can take the form of any of share buybacks, can take the form of dividends. Also, we're starting to see some potential growth opportunities. As you know from my history, I don't grow in strong markets, I grow in weaker markets. We're seeing now for the first time in many, many years, potentially interesting growth opportunities. Unlike last year, where everything went into share buybacks and dividends, this year we may have a trifecta. Trifecta consisting of share buybacks, dividends, and potential growth opportunities. When I say growth, I mean inorganic growth opportunities. Got it. Maybe for Paul, if I take a look at the CapEx in the quarter, it was CAD 48 million. You annualize that number, it's quite a bit higher than where you guys are in terms of maintenance, at least what you've disclosed in the past. How should we be thinking about CapEx for this year? CapEx for this year, the first quarter definitely ran high relative to where we'll be for the year, so I wouldn't annualize that number, David. We won't be quite at that maintenance level that we've talked about in the past because we do have a number of small projects. But it's certainly not 4x Q1. You'll see that come down in subsequent quarters. Okay. That's it for me. I'll hop back in the queue. The next question we have comes from James McGarragle from RBC. Please go ahead. Hey, good morning, Paul and Alan. Just regarding the market outlook and, you know, maybe looking a little bit beyond the second quarter, it seems that, you know, prices as of late, kind of flatlining. You know, lead times might be coming down a little bit. How do you see beyond the second quarter for prices? I mean, you know, demand's so strong right now, but it does seem the different pricing signals that suggest, you know, we potentially may have reached a peak and, you know, maybe things might come down a little bit from here. Yes. As you see it, when you look at how Q2 looks, Q2 is booked basically at the beginning of the first quarter, throughout the first quarter, as lead time starts to grow. When you finish the blend of what Q2 is gonna look like, which as we indicated, is gonna be significantly better than Q1, prices have come down, but they haven't come down low enough to be worse than the average of Q2. It really all depends. I think it's pretty remarkable that we're seeing in most of our end markets continued strength in demand. We are seeing scrap come down, which is definitely a major contributor to prices having recently fallen. It depends to what level they go. If they stay at the levels that they're at right now, which is down already quite a bit from the height, we're gonna be in really good shape for Q3 and beyond. It really depends what goes on afterwards. As we look at it's not just the performance of the company, it's the market conditions overall, and they're very, very really very perfect for us. As I said before, we have a instead of a two-pronged approach to growth this year, we've got a trifecta of growth. It's rare to get into a situation like that where you're sitting on very large piles of cash, no debt, plenty of liquidity. Price is still pretty decent for us to have a good, strong Q3 as well, to continue to build up cash. Equity markets definitely have come down. I mean, it's opened up all kinds of doors for us. Opens up doors for us on share buybacks, opens up doors for us on very good dividend policy, especially taken as a percentage of a share price, for those investors that like a fixed income type instrument. As I said before, inorganic growth opportunities that, you know, those of you who know my track record, I really am very disciplined and I just sit and wait for market conditions to come ripe. You're now sitting in a situation of high interest rates, of course, helps us really because we have a lot of cash. Hurts people with significant debt obligations, and you have a tightening of credit throughout the market. That's created for us another leg of shareholder growth, which we did not have for several years, which is the potential inorganic growth. I don't want to give anyone the impression like we're on the verge of doing anything. We're not, but we are seeing valuations come down to a level that makes things interesting for us. Because we're tactically flexible in our business model and how we make products and how we make profits, we're equally flexible on how we deploy our capital. If you look what we did last year, it all happened in the second half of the year because we like to be very conservative. We like to see the cash in the bank and then go and do what we need to do. This year, without making any promises or of anything, but this year is shaping up to a similar type year. As I sit here today, pretty confident about continuing to build cash, as we go through the remainder of the year as well. Yeah, I appreciate the color. Then another question on how you kind of see the scrap market evolving here. You know, we look at the last year, you know, we saw some excess scrap inventories, you know, that were built by some other steel companies, kind of in response to the war in Ukraine. They were ultimately drawn down, you know, which obviously had an impact on scrap prices. With some of these new electric arc furnaces coming online, you know, obviously gonna have a big impact on demand for scrap. A big source of these imports before was Russia and Ukraine. you know, when you're looking a little longer term, what's your outlook on the scrap side of things and, you know, any opportunities for Stelco to kind of capitalize on this dynamic a little longer term? Let me kind of break that down a little bit into two bucks, buckets when we look at scrap. The what you're referring to with Ukraine and Russia really has less to do with scrap, more to do with pig iron. If we break the scrap down into separate buckets, I think you look at iron and then you look at scrap, and you look at lower grades of scrap. The prime scrap and the lower grade scraps are domestically sourced. It's the pig iron that comes in from Ukraine and Russia. You're absolutely correct, people built up enormous amounts of stocks of that, and then the prices came down. We benefited from that because as a, as a side product, we make pig iron. We're the only North American merchant producer of pig iron today. So we took advantage of that at that time. You're absolutely correct about the longer term impact of scrap, because scrap doesn't travel all that well. So most of it is sourced domestically. There's no doubt that the increasing demand on the scrap supply will, over the long term, and we're seeing it already, so it's not long term. It's actually right now, where we see demands on scrap and scrap prices go up to levels that nobody would have predicted several years ago. We've seen them as high as CAD 600 + per ton, which means that the cost of production for your typical electric arc furnace producer is CAD 900-CAD 1,000 a ton. That's a great situation for us because our costs are relatively flat. That's the long term trend. That's a view that we've had for a very, very long time, something we invested heavily in starting from 2018, and has really served us well. We've had the highest earnings, EBIT earnings in the industry on our steel business compared to everybody else. You know, that's a trend that will continue to happen. Right. Bringing things back to the short term, price of scrap has fallen. That is a result of reduction in demand from the steel mill. We saw it at the end of last year, we're seeing that again now to some extent, you're seeing steel scrap fall, but still at very heavy levels, over $400 a ton. You know, levels that is, you know, going back five-plus years ago, it would be considered to be very, very high levels. Overall, the scrap market is very, very healthy and it self-corrects very quickly because as prices drop, collections dry out and scrap prices immediately rebound. The other thing that happens is if industrial production starts to slow down, that also impacts the supply side of scrap. We view this as a very good existing and long-term factor for Stelco, who relies less on scrap. Oddly enough, we actually like to see higher scrap prices even though it's something we do buy scrap and it impacts us our costs. Compared to an electric arc furnace, our costs are impacted by about 15%, whereas their costs are impacted by about 115% on a ton-for-ton basis. Right, longer term, and even not just longer term, but even in recent history, that has been the case. Picked up in demand of scrap units has raised scrap prices and therefore raised steel prices, which are good for us as I mentioned before on the first question that came in. When $100 a ton comes in for in the market, like it pretty much all goes to our bottom line, which is pretty amazing, because of how little scrap we actually use. That's the longer term trend and, you know, it's another thing that's odd about this business. I'll give you another example. When we went to COVID in 2020, like March, April, everything shut down. Well, when everything shut down, industrial production shut down, a shortage of scrap showed up, and steel prices actually went up when the industry was operating at only 50% of capacity. It's a very, very interesting dynamic in the steel industry that, you know, I suggest our investors to always watch as a very good predictor about where things are headed and where they're headed in the medium, immediate, and long term is in a very positive direction for us. I appreciate that. Just one more from me, before I turn the line over. Again, another bit of a, you know, a longer term type of question. You know, as an example, I know some, in the electric vehicles manufacturing, process, there's some U.S. producers that are kind of investing in some capability for some very thin steels that are used in electric vehicles. You know, they've said longer term, this is gonna be, you know, an important driver of demand. You know, my question isn't just about that specific type of steel, but, you know, kind of more generally with all this U.S. infrastructure spending and the types of steel that will be required to support that demand longer term, anything that your team's kind of looking at potentially investing in to be able to capitalize on that demand? Or are you kinda happy with, you know, your internal processes now, to be able to kinda capture all the benefit from that demand going forward? I'll turn the line over after that. Thank you very much. Yeah. Well, thank you for that question. You know, we're never satisfied with where we are. We're always looking to grow, always looking to get better, and we make the thin steels right now and supply right now to the auto industry, these very steels. You're correct, those steels are gonna continue to get lighter, and we have to stay on the forefront of that, and we will. You mentioned a few drivers in the U.S. in terms of infrastructure spending, in terms of EV growth. I think the most exciting thing going on in North America is what's going on actually in Canada. There have been major auto factories, battery factors, factories being announced in Canada. This is driven really by two things. One, the governments of Canada and Ontario and the province of Ontario have gone out aggressively all over the world. You can hardly get these guys. They're always traveling in Asia and in Europe. They're trying to bring in foreign automakers to come and locate in Canada. I don't know if you guys have seen this major announcement by Volvo to locate in Ontario. It's gonna be the largest auto plant in North America. The guy was telling me who's building this, the distance from the furthest car in the parking lot to the factory is gonna be 1.5 km. This is gonna be an enormous driver. The reason why these companies are locating in Canada is for two reasons. One, it's part of the USMCA free market for auto products and auto components and autos to for the USMCA market. In terms of producing, Canada is out promoting the following three factors. One, we have battery metals in Canada like no other country in the world. It's a huge risk, right? Whether it's lithium, whether it's cobalt, whether it's nickel, whether it's graphite, it's all located in Canada. There is not another part or place in the world with the rule of law applies that has all these battery metals right there. That's one. Two, you've got recycling projects like Stelco has announced, the battery recycling, cutting-edge battery recycling capabilities. Three, the government is actively bringing in these auto components. One of the major things that they're promoting to get these auto companies in is green steel in Canada. Our government is investing incredible amounts in the three major steel producers to produce green steel. All these auto companies are pushing for green steel content. That's what we have here in Canada, driven by the government's investment. It's a major selling point, and we happen to be a beneficiary of that policy. When you talk about thin steels, auto making, there is no better opportunity I've ever seen than what's going on in Canada right now. We're right in the center, right in the eye of this massive boom that's here for those reasons. We have the raw materials in terms of battery metals. We have the green steel production of the automakers work. We have a brilliant and available labor force in Canada, therefore absolutely driving very, very strong work by us to try and continuously stay ahead of the curve, improve the qualities of our steel to make sure we can service these guys. In addition to the battery recycling facility that we will build to handle the batteries and provide a full holistic solution to automakers who wanna give us end-of-life cars. We can generate more battery metal for battery makers who are also located in Canada and process the steel and return green steel back to these automakers. The next question we have comes from Anoop Prihar from Eight Capital. Please go ahead. Yes, good morning. The cost per ton were up during the quarter, which you allude to. The MD&A makes reference to the impact of coal. I'm wondering, are there any other components of the input costs that were significant contributors to that increase in the purchase cost during Q1? Yes. The major contributors were coal, which was the absolute worst. The reason for that is that the coal prices last year, when the war came out, a lot of metallurgical coal was being diverted into thermal coal, which never happens. The lowest grades of coal, the High-Vol B, actually traded a premium to Low-Vol because Low-Vol can't be used for power production, High-Vol B can. It was a crazy, insane market. Our long-term contract ended, we were victims of that market. Since then, prices are down by about 30%. The end of that coal, those coal purchases that were done about a year ago, are flowing through or did flow through during Q1, and we're starting to see those gradually abate as we get through Q2 and beyond. That was by far and away the worst. The other big impact was natural gas. Natural gas went also crazy last year, but since then has dropped to near all-time lows right now. We're definitely seeing a huge benefit in lower natural gas prices. Scrap prices were high, but as I mentioned earlier, we actually like high scrap prices. I'm not gonna complain about high scrap prices because it means steel prices are up as well. In fact, scrap prices have started to drop in April and May, and therefore we're seeing some benefit from there, too. Those are the main drivers that you'll see in Q2 start to reduce our costs. We expect as we get through the remainder of the year, that costs will continue to drop. Just a point of clarification then. Earlier on, you made a comment that you thought the per ton cost would be down about CAD 20 sequentially in Q2. Are you basically assuming that the levels we're at now prevail for the balance of the quarter, or are you being a little more optimistic in terms of what you're anticipating? We're in Q2, that's what you referenced. What I've answered before was related to the Q2 costs. We do anticipate costs to continue to drop beyond Q2 as we get through the rest of the year. Undetermined at this point, unclear how much, we do expect to see costs continue to drop. By the way, I should also add, it's not just the raw materials. You asked me the major impact there is, and that is the major impact. There's the other parts of this is our team, led by our Chief Operating Officer, Sujit Sanyal, they have a continuous improvement program to reduce operational costs. you know, that's hard work, like CAD 1, CAD 2 at a time, but it adds up, and we've got a massive program, pushing on every single lever possible, you know, whether it includes bringing in more full-time workers and taking out some contractors. Some of it involves how we handle materials, some minor CapEx investments to increase automation, things like that. We have a continuous push to try and do that. The major drivers for this particular year are raw materials, and we're seeing it in Q2. We expect continued improvements as we get through the rest of the year as well. Thank you. You're welcome. We have no further questions. All right. We're out of time, folks. Yeah, we're out of time, folks, and we have no further questions. I would like to call that perfect timing. Thank you everyone for joining the call. I wish everyone a fantastic day, and we look forward to speak to you soon. As always, we're always available to you guys. Anyone need to contact us, we're always reachable. Take care. Bye-bye. This concludes the conference call. Thank you all for your participation and enjoy the rest of your day. You may now disconnect your line.