Algoma's trash is another's treasure.

Algoma Steel is open--very open--for business.

The Sault Ste. Marie company's manager of corporate logistics, purchasing and stores Edward Bumbacco, drove home that message to an audience of almost 100 area business suppliers at the third NORCAT/Northern Ontario Business Opportunity Series breakfast meeting at Cambrian College on March 23.

"We're very attractive to take to the dance these days," Bumbacco says.

With its strong balance sheet, he says Algoma is generating a lot of interest in potential buyers.

As a leaner, more agile company, Algoma has risen out of the ashes of bankruptcy to become one of North America's lowest-cost producers of hot-rolled coil steel and plate products with the second-highest operating income per tonne (2004), according to Bumbacco.

Their success is not only measured by the 2.2 million tons of steel shipped annually, resulting in $1.8 billion in sales, or the fact that they are now in the black, but by their stock price.

"In June 2003, you could have bought shares at $1.03," Bumbacco says. "Today, they are trading around $35 to $36, where they reached just over $40 a couple of weeks ago (mid-March)."

The company also wants to become less wasteful. Byproducts of the steel production cycle include tar, light oil, ammonia, sludges and dusts, fines such as lime and pellet fines, mill scale and coke braize. They are all up for sale for those who see the financial opportunity, he says.

Ammonia, for example, is costing the company thousands to burn off every year. Bumbacco says he is eager to find a company that can take that product and use it.

"We've become a more entrepreneurial company," Bumbacco says. "We want to spread that word. If you have an idea or opportunity, come and talk to us."

Iron ore, coal, scrap and alloys are their main purchased commodities. Algoma spends about $350 million a year on refractories, rolls and castables, electrical equipment, heating and cooling ventilation, automotive supplies, production tooling, pumps, welding supplies, heavy equipment, line fasteners and much more, according to Bumbacco.

The company also has contracted services such as vacuum, power washing, electrical, mechanical, construction, general maintenance and engineering.

Reliable suppliers who consistently meet their quality, service and price requirements will fit in well with Algoma's approach to business. Preference will be given to local, regional, provincial and Canadian suppliers, in that order.

In 2004, the company's growth peaked, partly due to the cyclical nature of the market and the demand for steel. However, Algoma's success story is about restoring values and core business discipline, as well as renewing focus under the new leadership of Denis Turcotte, president and CEO, in 2002.

China's tremendous growth and consumption of steel has greatly influenced the market. Their consumption of steel increased by 50 per cent from 2000 to 2002 and another 50 per cent from 2002 to 2004.

"China has been the driving force behind what has been going on in the steel industry," Bumbacco says.

Another area the company focused upon was to restore core business discipline. Algoma has managed to get its employee base down to about 3,000.

As one of the best producers of rolled-coil in the world, they established a meaningful market position by selling only to customers who were willing to pay for it.

The focus was to keep costs low and productivity high in order to be a reliable supplier and utilize their resources more effectively.

One of the critical aspects to Algoma's recovery was their ability to get access to capital.

After two bankruptcies, the capital market was skeptical, Bumbacco says. Getting investors back on board was a matter of performing to plan.

"You have to start doing what you say you are going to do."

Over the last two years, they have consistently performed to plan, communicated to their shareholders and ownership group, and met that plan. Now, they have no problem getting access to capital.

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Their near-successful try to purchase insolvent Stelco was proof of that, he says.

They also focused on efficient and effective organization by implementing an accountability leadership management system. The employees, from senior management to union members, were trained and educated about business, accountability, and taking responsibility for what they do.

As a result, Bumbacco says, they have a much more committed workforce.

The company is also very focused on a margin improvement plan.

Bumbacco believes that in order to continue to prosper and maintain their position in industry, they will have to outrun the competition with best practices to meet customers needs.

On the future global market, Algoma intends to compete by keeping costs down and being a leader organization.

"We want to maintain a strong balance sheet, improve our margins, optimize our assets and extend our products and our product markets," he says.

Although Algoma is not a large company, Bumbacco believes they have the capacity to become a strong niche company by focusing on new markets and expansion.

After a long and difficult road of 20 years, Bumbacco looks to a bright future and its newer, more savvy position in industry.

"We believe we have become a supplier of choice, an employer of choice, and will become an investment and customer of choice."

www.algoma.com

By ADELLE LARMOUR

For Northern Ontario Business