Shares of Canadian steelmaker Stelco Holdings (STLC.TO) climbed as much as 15 per cent on Wednesday as the company increased shareholder payouts and its CEO suggested pressure from inflation is starting to ease.
The Hamilton, Ont.-based company booked a 74 per cent drop in net earnings after the closing bell on Tuesday, largely due to a one-two punch of weak steel prices and inflationary pressure. Speaking on a conference call with analysts, CEO Alan Kestenbaum suggests he sees a light at the end of the tunnel following recent "tough times" for the steelmaker.
"While inflation has had an impact on many of our costs, we are starting to see that abate, with some input prices, especially for coal, natural gas, and alloys beginning to turn downwards," he said on Wednesday morning. "I do think that as we move into Q1, we'll start seeing some better conditions."
Kestenbaum's comments on inflation followed the release of fresh data from Statistics Canada. The agency says prices climbed 6.9 per cent year-over-year in October.
Stelco declared a special dividend of $3 per share on Wednesday, and a quarterly dividend of $0.42 per share payable on Dec 1, 2022, an increase of 40 per cent. In July, the company announced a plan to buy back about $1 billion worth of its stock for $35 per share.
Stelco says it continues to expect "very challenging market conditions" to persist into the end of 2022, due to lower prices and shorter lead times for orders.
Stelco's net earnings for the quarter ended Sept. 30 plunged to $158 million, a 74 per cent slide from a year earlier, and a 71 per cent drop from the previous quarter. Revenue fell 38 per cent year-over-year to $217 million. The company blames a 36 per cent decline in average selling prices per net tonne, as well as lower shipping volumes, compared to last year.
However, Kestenbaum says the company's margins remained strong in what he describes as a "terrible quarter," noting shipping activity is picking up. As a smaller steel producer, he says Stelco is less exposed than global peers to weaker demand from trends like a slowdown in housing construction.
Toronto-listed shares climbed more than 14 per cent to $46.15 as at 12.15 p.m. ET on Wednesday. The stock has declined about two per cent year-to-date.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.