Investing.com -- Shares of Algoma Steel Group Inc (NASDAQ:ASTL). (TSX:AGA) tumbled 6.6% on Friday morning, marking the company's most significant intraday drop since June 2023. The decline followed the steel producer's release of Ebitda guidance for the quarter ending December 31, which fell short of analyst expectations.
Algoma Steel's Ebitda guidance indicated losses ranging from C$55 million to C$65 million, a steeper decline than the anticipated C$25 million to C$6 million loss range. This guidance reflects the challenges faced by the company, including increased costs that have impacted the steel industry.
BMO Capital Markets analyst Katja Jancic commented on the results, noting the deeper losses and referring to it as a weak quarter, which didn't come as a surprise given the current cost pressures.
“Overall, despite the currently challenging steel market, our longer-term thesis remains intact that the transformation to an EAF will result in higher through-cycle profitability and multiple re-rate.”
Meanwhile, Stifel Canada analyst Ian Gillies described the update as a "negative" but maintained that it does not fundamentally alter his team's investment outlook for Algoma.
Gillies highlighted Algoma's strategic position for its transition to an electric arc furnace (EAF) by the calendar year 2025 and its potential for mergers and acquisitions. He did, however, acknowledge the heightened level of uncertainty for the company, citing the looming tariff threat and challenging steel market conditions.
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