Earnings Call Transcript - ASTL Q2 2023

Operator, Operator

Good day and welcome to today's conference call to discuss Algoma Steel's Fiscal Second Quarter 2023 Financial Results. My name is Latanya and I'm your operator for today's call. At this time, I would like to turn the call over to Mike Moraca, Treasurer and Investor Relations Officer for Algoma. Mr. Moraca, please go ahead.

Michael Moraca, Treasurer and Investor Relations Officer

Good morning everyone and welcome to Algoma Steel Group Inc's earnings conference call for the fiscal second quarter ended September 30, 2022. Leading today's call are Michael Garcia, our Chief Executive Officer and Rajat Marwah, our Chief Financial Officer. As a reminder, this call is being recorded and will be made available for replay later today in the Investors section of Algoma Steel's corporate website at www.algoma.com. I would like to remind you that comments made on today's call may contain forward-looking statements within the meaning of applicable securities laws, which involve assumptions and inherent risks and uncertainties. Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IFRS, which differs from US GAAP and our discussion today includes references to certain non-IFRS financial measures. Last evening, we posted an earnings presentation to accompany today's prepared remarks. The slides for today's call can be found in the Investors section of our corporate website. With that in mind, I would ask everyone on today's call to read the legal disclaimers on Slide 2 of the accompanying earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel's financial statements and management's discussion and analysis for the full year ended March 31, 2022. Please note that our financial statements are prepared using the US dollar as our functional currency and the Canadian dollar as our presentation currency. Our fiscal year runs from April 1 to March 31 and our financial statements have been prepared for the three months ended September 30, 2022. Please note all amounts referred to on today's call are in Canadian dollars unless otherwise noted. Following our prepared remarks, we will conduct a question-and-answer session. I will now turn the call over to our Chief Executive Officer, Michael Garcia. Mike?

Michael Garcia, CEO

Thank you, Mike. Good morning and thank you for joining us today. I will start my comments as we always do by addressing what truly matters most to us, the safety of our employees. At Algoma, we believe in safety without compromise and our continued focus has resulted in substantial improvement over the last decade in our lost time injury frequency rate. That said, we are focused on continued diligence as we relentlessly pursue our goal of achieving zero workplace injuries. I'll cover events and milestones during the quarter and subsequent to its end. I will then turn the call over to Rajat for a deeper dive into the numbers before closing with thoughts on the current state of steel markets. Our performance in the fiscal second quarter was not up to the standards we strive to achieve at Algoma. It included a number of operational challenges, which we disclosed last month, including commissioning challenges at the plate mill, a fire at one of our two coal conveyors, COVID-related labor availability issues at our direct strip production complex, as well as overall steel price softness in the market. We are taking actions to get our operations on stronger footing and improved performance. Specifically, we are addressing the operational challenges themselves, so we can return to full operating capacity. We continue to focus on cost control and working capital efficiency to maximize margins and cash flow. We are maintaining our pace of investment in our EAF project to dramatically transform Algoma, driving enhanced capability and long-term sustainability. And most importantly, we continue to focus on safe operations for our employees, our customers, and the communities we serve. During the quarter, we continued the commissioning of Phase 1 of our plate mill modernization project, working through automation upgrades that will improve the quality and capability of Canada's only discrete plate mill. These automation challenges continue as we are outfitting our legacy plate mill with modern, next-generation process controls. Mechanically, all upgrades are complete and the remaining work is centered on the IT side related to automation. During the quarter, both our technical and business leaders visited the vendor's facilities in Europe and met with their senior executive team here in Sault, Ste. Marie to advance the plans for completing the commissioning and applying our learnings to Phase 2 of the project. These efforts will continue in the calendar fourth quarter and we believe the plate mill will remain around 80% utilization range until completion in early 2023. The second phase of the plate mill modernization project is currently scheduled to begin in the middle of next calendar year. We will be mindful of market conditions and other operational factors when we make the final decision to commence. At our direct strip production complex or DSPC, production was lower than expected for the quarter. Our community was not immune to the impacts of COVID and during the quarter, we experienced a concentrated outbreak, which impacted the DSPC. We are implementing various measures to address labor availability including cross training more employees to better handle an absenteeism event. In August, we experienced a fire at one of the coal conveyors that supplies two of our three coke batteries. Fortunately, no one was injured. All repairs are complete and we are operating the coke ovens at capacity. The fire negatively impacted our ability to produce coke internally during the quarter, forcing us to buy a third party product, which unfavorably impacted cost and profitability. As we face those operational challenges, we also had to deal with what has been a volatile overall market for steel and for raw material inputs, which impacted realized prices and cost. Our consolidated results included shipments of 435,000 tons, revenues of CAD599 million and adjusted EBITDA of CAD83 million. During the quarter, we continued to advance construction of our transformative electric arc furnace project, which remains on budget and on time for our planned 2024 startup. We completed the next phase of our capital allocation program with a CAD400 million substantial issuer bid, which resulted in the successful repurchase of 41 million shares or almost 28% of our issued and outstanding shares at the time of announcement. Following completion of the SIB, we were able to resume activity under our normal course issuer bid or NCIB. During the quarter, we repurchased 1.5 million additional shares. And as of September 30, Algoma has approximately 104 million common shares issued and outstanding. Early in the quarter, we reached agreements with both local chapters of the United Steel Workers that represent our hourly, technical, and frontline supervisory employees. We are pleased that these five-year agreements provide the Company labor stability throughout our transformation to electric arc steelmaking. Now, I will pass the call over to our Chief Financial Officer, Rajat Marwah, to go over the financial results for the quarter, closing with some thoughts on the markets.

Rajat Marwah, CFO

Thanks, Mike. Good morning and thank you all for joining the call. Our fiscal second quarter results, while challenging for the operational reasons Mike alluded to, came in line with our guidance for shipments and EBITDA. I'll remind you again that all numbers are expressed in Canadian dollars unless otherwise noted; however, our functional currency is the US dollar. During the quarter, the Canadian dollar weakened materially, which impacts balance sheet comparisons quarter over quarter. For the quarter, net income was CAD87 million or CAD0.36 per diluted share compared to CAD288 million and CAD4.02 per diluted share in the prior year quarter, with the decline attributable to market conditions as well as the operational factors we are working to resolve. In addition, the quarter was impacted by a one-time charge resulting in increased pension and post-employment benefit expenses. The one-time charge was due to the extension of indexation for the contract period related to the ratification of new collective bargaining agreements with our unionized employees. The only long-term debt on our balance sheet continues to be in the form of government loans linked to our capital projects. We finished the quarter with CAD465 million of unrestricted cash and remain undrawn on our revolving credit facility. So even after funding our CAD400 million SIB, our balance sheet remains strong. Now let me dive into the key drivers of our performance. We shipped 435,000 tonnes in the quarter, down 25.9% as compared to the prior year quarter. As we previously disclosed, delays experienced during the commissioning of our plate mill modernization project were the largest impact on shipments. In addition, volume through our DSPC was adversely impacted by production shortfalls arising from COVID-linked workforce availability events. Net sales realization averaged CAD1,266 per tonne down 20.6% versus the prior year period. The decrease primarily reflects softening market conditions during the quarter. This resulted in steel revenue of CAD552 million in the quarter, down 41.1% versus the same quarter of last year. On the cost side, Algoma's cost of goods sold averaged CAD1,033 per tonne in the quarter, up 20.7% over the prior year period. The main drivers of this increase include the replacement of internally produced coke with purchased coke as a result of the conveyor fire and an increase in the purchase price of many of our key inputs including natural gas, alloys, and scrap. Adjusted EBITDA for the quarter was CAD83 million in line with our previously guided range and compared to CAD431 million in the year-ago quarter. When we consider the operational impacts in the quarter, namely the plate mill conveyor outage and DSPC labor issues, we estimate there is a CAD130 million drag on EBITDA. Of that roughly 60% fell in our fiscal second quarter results and the remaining 40% is expected to impact fiscal third quarter results due to the flow-through of higher production costs into inventory. From a cash flow perspective, cash flow from operating activity was a use of CAD66 million in the quarter compared to the cash generation of CAD380 million in the year-ago quarter. The main drivers include lower adjusted EBITDA and a significant use of working capital in the quarter as both raw material and work-in-progress inventory rose on account of our lower production volume and shipments. We will continue to use working capital through the third fiscal quarter as we receive contracted volumes of raw material ahead of the winter period and expect to hold higher than normal inventories through the end of the calendar year, which will gradually be released in 2023. We finished the quarter with CAD465 million of cash and cash equivalents on the balance sheet. As an update to EAF project spending, as I mentioned on the previous call approximately 8% of the spending occurred in the prior fiscal year, approximately 60% is expected to be spent in fiscal 2023 and the balance of the spending occurring after 2023. Up to the end of the September quarter, we have spent approximately CAD163 million on the EAF project. Looking at the project in totality, approximately 62% has been contracted with fixed price commitments with the balance of 38% still to be contracted. Beyond the progress made on the EAF project, we are pleased to complete our SIB during the quarter. In addition to the SIB, we remain active in returning capital to shareholders on multiple fronts, including our normal quarterly dividend and through our NCIB. Our cash position and ample liquidity help us in periods of volatility, supporting us through the cycle, while also allowing us to advance our strategic capital initiatives and transformation. I'd now like to turn the call back to Mike for a market update and closing remarks.

Michael Garcia, CEO

Thanks, Rajat. Looking at the state of the North American steel market today, pricing has been steadily declining for much of the year. Highs that were reached in March around the start of the Ukraine war quickly reversed and prices have tested various support levels through the summer and into the fall. The steel industry, as well as our customers, continue to face challenges related to inflation and interest rates, supply chain issues, and recessionary fears. However, our underlying order book supported by a significant portion of contract sales will keep demand for our products consistent with our expectations, including sales to the automotive, construction, oil and gas, and other steel intensive industries. Additionally, global price dynamics and trade measures reduce the attractiveness of our market for imports. We continue to focus on improving operational reliability and we are currently executing a number of planned seasonal maintenance activities ahead of the fourth fiscal quarter winter period. For the fiscal third quarter, we expect sequentially higher shipments tempered by planned maintenance activities and lower production at our plate and strip facility as we complete Phase 1 commissioning. Coupled with current steel pricing, we expect reduced net sales realizations impacting margins for our products. While there remains uncertainty, the published forward curve for hot-rolled coil currently shows prices rising modestly from now through next summer, albeit at levels well below what we have realized the last few quarters. With this backdrop, our primary focus remains on prudent financial discipline, returning to full operating capability, and execution of our EAF project, ushering in the next era for our Company that provides the foundation for long-term value creation for our stakeholders. While the market remains challenging and we are completing our plate mill commissioning, my view is consistent with the Board's in that we expect to be a significant generator of free cash over the longer term, which supports our transformation journey, including our two main capital improvement programs, the second phase of the plate mill modernization and the EAF. We are focused on putting the operational challenges we have faced behind us to ensure safe, reliable, efficient production at our existing facilities while we advance the EAF project. Thank you very much for your continued interest in Algoma Steel. We look forward to what the future holds. At this point, we would be happy to take your questions. Operator, please give the instructions for the Q&A session.

Operator, Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from David Ocampo with Cormark Securities. Please proceed.

David Ocampo, Analyst

Thank you. Mike, you called out that 40% of the CAD130 million negative impact should be realized in the upcoming quarter. But I was wondering if you could break it down by the operational issues that you guys are facing, so the plate mill modernization, the coke operations, and then the labor availability.

Michael Garcia, CEO

Sure, David. We've prepared some more detailed information on that. So, I'll pass it over to Rajat and he can walk you through that in a little bit more detail.

Rajat Marwah, CFO

Hi, David. This is a crucial question for the quarter. From a business standpoint, it seems straightforward, but the accounting aspect adds significant complexity. I'll do my best to clarify. The CAD130 million represents the total impact from three major events that occurred during the second quarter: the plate mill commissioning delays, the coke fire, and the DSPC labor shortage, listed in order of their impact. Approximately 50% of the impact is linked to the plate mill delays, around 30% is due to the coke conveyor fire, and 20% relates to the DSPC labor shortage stemming from COVID. Regarding the impact across the two quarters, starting with the plate mill, we began operating at 80% capacity, but some effects of the plate mill issues are reflected in our inventories, influencing costs in the third quarter. The split is roughly 70% of the cost absorbed in the second quarter and 30% carried over to the next quarter. This is because the higher costs of production are caught in our inventory and shift into the following quarter. To summarize, while 50% of the impact accounts for the issues of that quarter, 30% flows into the next one. Concerning the coke operations, this has the most significant spillover into the next quarter. We had substantial contracted coke inventory for the year, but we needed to purchase additional coke on the spot market at higher prices. This change affects both the coke inventory and the higher cost of steel produced from the purchased coke, with a distribution of about 20% impact in the second quarter and 80% moving into the third quarter. As for DSPC, the majority of its impact was felt in the second quarter, with no significant carryover to the next quarter since the issues arose mid-quarter and did not heavily affect inventory. In summary, the impact breakdown for the three events is 50%, 30%, and 20%, with the flow from one quarter to the next being approximately 70% and 30% for the plate mill, 20% and 80% for coke operations, and 100% for DSPC in the second quarter.

David Ocampo, Analyst

That's very helpful commentary there, Rajat. And then on the inventory side of it, I think you said in your remarks that it would stay elevated and it does look even if you exclude FX that it's probably CAD250 million to CAD300 million above normal levels. So, how should we think about that release into fiscal 2024? Should we expect that full CAD200 million or CAD250 million to be released kind of in equal proportions throughout the quarters?

Rajat Marwah, CFO

So, I think you should see it releasing from the first fiscal quarter onwards. The normal release between in the first calendar quarter, which is our fourth fiscal will happen because we will be building again more in December and then we'll be releasing it and the balance release will come in the first and the second quarter of next year from an inventory perspective. So that's how it will flow. We've also built some raw material and some web as well as we ship less. We have some web developed which we will also release over the next couple of quarters. So your point is right, it will get released in the first and the second fiscal quarter of next year, more so compared to what we've seen in the past.

David Ocampo, Analyst

And is there any risk on the work in progress there, just given the softness that we're seeing in the marketplace today?

Rajat Marwah, CFO

No, I think we should not. Normally, we buy slabs from outside to fill the gap in our own production facility to some extent, and whatever we have will help replace that. So we don't foresee much risk in getting that released over the next couple of quarters.

David Ocampo, Analyst

And then last one from me on your fixed annual contracts. I think it's 10% on an annual basis. How are those discussions going with customers? Do they actually believe that the futures curve is actually on contango and they're negotiating around that or are they looking for pretty steep discounts relative to where we are?

Michael Garcia, CEO

Yes, I think we're right in the middle of several negotiations for our contracted customers, David. And I think each one of them has their own particular order book to fill and then they oftentimes know the pricing or have pricing expectations in their own order book and they're looking to secure contracted supply of the raw materials they need. And we haven't faced a huge amount of pressure or expectations that we would need to be talking of pricing levels a lot lower than they are now, although I think everybody that we speak to had some expectation that there's going to be a recession or recessionary conditions next year, but they're all looking at their own unique positions, which in spite of the expectation of an economic slowdown, they may be sitting with an order book that they feel gives them a lot of clarity that maybe not as much risk because maybe you would expect in the overall recessionary period. And I'm speaking about customers that are producing either parts in a supply chain or end products that have firm visibility. Obviously, if it's a customer that is a service center and needs to think about the pool on their products that they stock and supply that aren't necessarily tied to contracts, they would be more sensitive to where they think the pricing is going and an expectation of lower pricing. Is that helpful?

David Ocampo, Analyst

That is. Thanks guys. I'll hop back in the queue.

Operator, Operator

Our next question comes from Anoop Prihar with Eight Capital. Please proceed.

Anoop Prihar, Analyst

Yes, good morning. Just a couple of quick questions from me. Rajat, can you tell me, please, what's the remaining CapEx for the completion of the plate mill modernization and can you just give me the number net of government funding, please?

Rajat Marwah, CFO

Yes. The remaining CapEx will be around CAD40 million that needs to be spent on the plate mill, and that's mostly the Phase 2 where work is happening, and that's net of any government funding.

Anoop Prihar, Analyst

And so, just to be clear, what's the reasonable expectation for your plate mill production volume in fiscal 2024? I know it's a bit of a moving target. I just want to make sure, I mean the ballpark that was reasonable here?

Rajat Marwah, CFO

So, we should be at historical levels in any case in fiscal 2024. The big question still is on our second phase and when we get it done. Currently, it's slated for the middle of next year. And as we have said that we will be very cautious and careful about moving on the second phase, though most of the work will be done, but pulling the trigger and getting all the integration done and automation completed will be very carefully studied and done because we don't want to lose beyond what is normal downtime on that mill. So that's a big wild card. If, let's say, that gets completed in the middle of next year, which will be, let's say, in the June or July period, then it will take at least five odd months to start ramping up for higher volume because that upgrade will double the volume that we have currently, but reaching that full percentage will take a little bit longer.

Anoop Prihar, Analyst

Okay, all right, thank you. And lastly, are you guys still active on the NCIB?

Rajat Marwah, CFO

Yes, we are. That program is on and we are still selective on it.

Anoop Prihar, Analyst

Thank you.

Operator, Operator

Our next question comes from Ian Gillies from Stifel. Please proceed.

Ian Gillies, Analyst

Morning, everyone.

Michael Garcia, CEO

Good morning, Ian.

Ian Gillies, Analyst

What I understand, coking contracts or pricing is simply said in and around this time of year, is there any context you can provide for how you're thinking about that cost item as we head into, call it, calendar 2023 and usage there just given what's transpired over the last couple of quarters and the inventory build?

Rajat Marwah, CFO

Sure. On coal and coke, you are correct. This is typically the time when most contracts are settled, and we have completed that process as well. The coal market is flat year-over-year, and the same applies to the coke market. Overall, long-term contracts, which are annual, are maintaining flat pricing. We are anticipating this trend, and regarding the shortfall we experienced due to the coke battery fire, we sourced additional supplies at spot pricing, which was higher, and we are accounting for that in our costs for this quarter and the previous one.

Ian Gillies, Analyst

Okay. That's really helpful. Thank you. With respect to the construction contracts for the EAF, it looked like there was a modest uptick in what's been fixed. Can you just provide a bit of a reminder of when you think some other chunky items may get fixed here? It would seem maybe some of the costs might be moving in your favor given the deflationary pressures on some of the inputs.

Rajat Marwah, CFO

Yes, we anticipate completing a significant portion over the next five to six months, which aligns with the end of our fiscal year.

Ian Gillies, Analyst

Yes.

Rajat Marwah, CFO

Yes. And then from a cost perspective, definitely it will help. So Mike, you have added color on it?

Michael Garcia, CEO

Yes, I would add that we are experiencing a competitive environment as we approach our contractor base and potential business partners with bids for additional segments of major construction projects. Contractors are eager to secure business and clarify their work pipeline for the upcoming year. Several recent bid packages we have finalized or are close to finalization have been encouraging, with pricing coming in favorably below our budget estimates for the projects. While we cannot guarantee that all bids will reflect this trend, contractors are looking for visibility in their workload for next year and share concerns about potential recessions. They may be wondering what other opportunities are available for bidding if they do not secure this business. We believe this situation is beneficial for us in terms of cost and engagement with potential suppliers as we choose the best ones for this project.

Ian Gillies, Analyst

Got it. That's helpful context. And one of the things I just want to clarify the language in the MD&A had changed a little bit around completion of the EAF. There was a comment about it finishing mid-year. There was another comment about finishing end of year. Can you just reconfirm that there has been no change to the in-service date and the expected start-up or if there has been what is transpiring there?

Michael Garcia, CEO

That's correct. It's still mid-year. Sorry for the confusion on that. Just to add a little more color, the bid packages, the final important ones are getting placed with suppliers and our approach is fixed pricing. So unless we come in with a change of scope or a change order, we feel very comfortable that we have visibility to the pricing once that bid package is awarded. We continue to work very hard on supply chain issues that we need to manage for a project of this size. The only real specific one that we are working on is with a vendor of cards that rely on semiconductor chips. So, in one specific instance, there's some cards that go into some of the control panels in the new melt shop. Those cards are delayed by six months right now. So, we had to put plans into place to complete all of the other peripheral work in those panels and those cabinets, get those on the boat and ship to Sault Ste. Marie and installed, and the cards will be installed at a later date, when the panels or cabinets arrive here in Sault Ste. Marie versus being installed at the vendor's construction site. Now, that won't jeopardize the overall critical path and timeline, but we just need to be mindful of where we are doing that and making sure that almost every day, but at least weekly, we are in touch with the actual semiconductor supplier to our vendor, doing everything we can to make sure that we know exactly when those cards will be delivered. And we're doing everything we can to make sure nothing slips or if it does slip anything, any further, that we work on mitigation plans. And this is a global supply chain issue and the suppliers of these cards, they've got a global kind of criteria for managing who gets what's coming out of the supply chain based on their first preference is medical devices and then things involved with National Defense and then things involved with more typical industries like ourselves.

Ian Gillies, Analyst

Okay, that's very helpful. And if I could just ask one last question. Regarding the high-voltage power line at the PUC that is going to be installed, there hasn't been any change to the disclosure there. But I'm just curious if there's any operational update on how you're considering that key piece of getting the EAF into service and ramping it up?

Michael Garcia, CEO

You're right. There is no change in the timeline. It's another critically important piece to how this all comes together. There is the 230 K volt line that is 11 km long, running from one side of Sault Ste. Marie to the other. That project is in process and being handled by the local utility provider, and everything is on track. Another aspect involves the grid power upgrades by Hydro One, and we are in regular contact with them to address their technical concerns and assist them as needed. While it would be disappointing if the grid is not as reliable as we would prefer when we first need to supply power to the electric arc furnaces, there is sufficient power available in Sault Ste. Marie to operate those furnaces, taking into account the additional electrical demands that may arise in the community over the next couple of years. However, if we encounter unexpected maintenance issues or weather events, we may need to rely more on our internally generated power. This is one of the reasons we are enhancing our internal power generation capability by installing the new GE gas turbines on-site.

Ian Gillies, Analyst

Got it. Thanks very much, I appreciate that. I'll turn the call back over.

Michael Garcia, CEO

Sure.

Operator, Operator

Our next question comes from Ahmad Shaath with Beacon Securities. Please proceed.

Ahmad Shaath, Analyst

Hi guys, just a quick one on the plate modernization project. Did I catch that right, there is a light CapEx increase from CAD120 million to CAD135 million and if so, can you guys speak to that?

Rajat Marwah, CFO

Yes, there has been a slight increase to CAD135 million on the plate mill modernization, and that's reflective of the delays that have happened on getting the project done, which was supposed to be completed earlier and we shifted it to this year and the next one to next year and also with the delays that have happened in the commissioning. So, that's all factored in, including the inflationary pressure that we saw. So, that's all factored into that CAD135 total.

Ahmad Shaath, Analyst

Perfect, thanks for that. And if I got your answer regarding the timeline for Phase 2, is it fair to say that mid-next year, as stands right now, is sort of a soft timeline depending on how we end up commissioning Phase 1 and see how that works out for you guys or are you guys committed to the mid-next year for Phase 2?

Michael Garcia, CEO

I think it’s flexible depending on our certainty that we fully understand all the issues we faced during the first phase of the plate mill modernization. We need to be aware of everything that must be addressed beforehand to significantly reduce the risk of encountering similar challenges while we’re operating and processing steel through the plate mill. There’s a process already in motion, but it will not be fully complete until everyone involved, including those working on the commissioning, has contributed. We need to conduct a thorough after-action review to identify all issues and root causes and determine how to address them offline before we shut down for Phase 2. Additionally, we must establish an oversight function to ensure that our offline preparations are executed in detail. Only then will I feel confident and able to assure my Board that we are ready to move forward with Phase 2. The current plan is to be prepared to proceed with Phase 2 by midyear. However, if we do not reach that necessary level of comfort and confidence, we will postpone until we are ready. Is that helpful?

Ahmad Shaath, Analyst

Yes, that's very helpful. Thanks for that answer. I'll jump back in the queue.

Operator, Operator

Our next question comes from Alexander Jackson with RBC. Please proceed.

Alexander Jackson, Analyst

Yes, thanks guys. So given market conditions with weaker pricing and higher OpEx, I'm wondering if that's impacted how you're thinking about capital returns and maybe some non-essential capital projects or maybe we're not there yet? Thank you.

Michael Garcia, CEO

Yes, that's a good question, Alexander. Because of our fiscal calendar, we have started the annual business planning cycle for our next fiscal year, which includes a lot of scenario planning based on commercial assumptions. One important scenario we are focusing on is the possibility of a continued low pricing environment and low demand. We understand that in such circumstances, it is critical to control any discretionary costs, and we must make those decisions carefully. We need to consider not only the immediate challenges of supply, demand, and pricing but also the long-term consequences of our decisions, ensuring they do not lead to poor outcomes for the business. Our team, especially Rajat, is well aware of how to navigate challenging environments, and we have developed a clear strategy of actions we can take and factors we need to consider as we adapt to a changing business landscape.

Alexander Jackson, Analyst

That's helpful, thanks.

Operator, Operator

There are no further questions in queue at this time. I would like to turn the call back over to Mr. Michael Garcia for closing comments.

Michael Garcia, CEO

Okay, thank you again for your participation in our second quarter fiscal 2023 earnings conference call and for your continued interest in Algoma Steel. We look forward to updating you on our results and progress when we report our fiscal third quarter results early next year.

Operator, Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation and have a great day.