Kestenbaum looking at multiple ways to grow Stelco

“We have been actively evaluating opportunities to grow our company, all while staying highly disciplined on value and knowing when to say no,” Kestenbaum said on the call.

“We will remain active, but only where valuations are attractive and synergies are significant,” he added.

Inorganic growth

Kestenbaum noted that Stelco was active on several acquisition opportunities last year, but they “didn’t get there.”

“We don’t control M&A. We can’t force somebody to sell to us,” he commented on the call.

The CEO noted he’s learned a lot from the ongoing U.S. Steel sales process and continues to study the acquisition to see what can be learned from the sale’s valuation. When looking at Nippon Steel’s proposed nearly $15-billion buy of U.S. Steel, “whether it happens or not, clearly some assets in that package are attractively valued,” he said.

“I’m studying with interest some of the things that U.S. Steel has done very, very well. And I give them a tremendous amount of credit,” he said, for making decisions that may have caused them to face criticism.

“The management at Stelco is highly entrepreneurial … we look and try to study from what others have done successfully,” he said. That deal “has given us time to reflect on what we can do better to improve on the multiple we trade at compared to the very attractive price that was paid for U.S. Steel.”

On the call, Kestenbaum said one thing he learned from the M&A activity Stelco pursued last year was how remarkable the company’s access to capital really is.

“One of the things I learned from that endeavor was how attractive our business is to shareholders, lenders, their confidence in our track record, their knowledge that we’re not reckless, and that we know how to extract synergies,” he said.

Organic growth

Kestenbaum hinted the company could add some value-added output to its mill in Hamilton, Ontario, in the future.

“We’re not driven by awards and accolades from big auto manufacturers. … We get driven by profitability. And I think there’s more profitability in our downstream operations than what we’re currently doing,” he commented.

The company has initiated a review of those operations. He said the study is currently in the evaluation stage.

“We do have the facilities right here to do it. … Stay tuned. Maybe in the next quarter, we’ll have a bit more meat to put on the bones for you guys with a more specific direction,” he said.