IPSCO’s Profit Edges Ahead of Previous Quarter

Please Note That IPSCO Results are Reported in U.S. Dollars

Lisle, Illinois - 8 February 2001 - IPSCO Inc. (NYSE/TSE:IPS) announced today that its fourth quarter 2000 after-tax earnings were $12.8 million, up marginally from the third quarter figure of $12.3 million, but lower than the $21.5 million recorded for the year earlier fourth quarter. After deducting preferred share dividends and interest on subordinated notes, basic earnings per common share were $0.24 as compared to $0.49 in the same period a year earlier. Operating profit per ton shipped was $32.

“Normally we would concentrate on explaining the change from a year ago but this has not been a normal year – given the oppressive price erosion that has been hitting the entire U.S. and Canadian steel industry due to surging imports we feel that the fact we did not see slippage from the third quarter is very significant,” said Roger Phillips, president and chief executive officer. “Price erosion from the third to the fourth quarter averaged $22 per ton for hot rolled coil and plate primarily because of unfairly traded imports. We also experienced the loss of a main power transformer that left the Iowa melt shop limping along with only one transformer for 8 days, and had difficulty getting railcars for outbound shipments, due to weather” he said. “On the positive side an $8 per ton average decrease in scrap costs and a surge in higher margin oil country tubular goods more than balanced things out. We had been expecting oil and gas well tubulars to negate falling prices for flat rolled products all year but poor drilling conditions in Canada had prevented us from demonstrating the value of our diverse product line. Finally our strategy is paying off.

“The drop in profit from the year earlier period was principally due to a less favorable product mix, price erosion as the result of an influx of unfairly priced imports, and higher energy costs,” Phillips pointed out. Shipments for the quarter were 559,500 tons, up nine percent over the fourth quarter 1999. Sales revenues of $231.9 million were virtually unchanged from the year earlier period.

Shipments of hot rolled coil and plate at 224,800 tons were nine percent higher than in the fourth quarter of 1999 as Montpelier production levels increased. Unit prices of these products were down about four percent from the earlier period indicating that the market continues to suffer from increased levels of dumped imports.

Shipments of further fabricated products at 334,700 tons were up about nine percent from the year earlier period. Within the group large diameter pipe shipments were down 58 percent as many large expansion projects were completed in 1999. Other tubular products sold to the energy industry, such as oil country tubular goods and small diameter line pipe, were up 42 percent reflecting higher drilling rates. Tubulars for equipment manufacture and construction decreased by three percent, while sales from IPSCO’s coil processing facilities were up 33 percent. Average unit prices for the group were down six percent, with large diameter pipe down 23 percent, energy related tubulars and products from the coil processing facilities unchanged, and non-energy tubulars up three percent.

For the full year after-tax earnings reached $57.7 million. After deducting preferred share dividends and interest on subordinated notes, net income available to common shareholders for the year was $46.8 million compared to $68.3 million for 1999. Basic earnings per common share were $1.15 compared to $1.68 in 1999. Operating profit per ton shipped fell to $39 from $60 dollars. Phillips stated that, “The principal reasons for the lower yearly results were precipitous drops in prices due to high levels of imports entering North America at unfairly traded prices, as well as lower sales of large diameter line pipe, balanced to a certain degree by enhanced demand for oil country tubular goods.”

Annual shipments at 2,233,200 tons exceeded that of 1999 by 22 percent. Shipments to United States based customers comprised over half of the Company’s total sales for the first time at 58 percent with Canadian based customers accounting for the remaining 42 percent. The company achieved a record production level for liquid steel in the year 2000 with the combined output of its Montpelier and Regina facilities reaching 2,020,948 tons.

Tonnage of steel mill products shipped, which comprises hot rolled coil and discrete plate, was 38 percent higher than 1999 with the increased volume coming almost precisely proportionately from the American and Canadian markets. Further fabricated products which include cut-to-length steel, standard pipe, hollow structurals, and energy related tubular products grew by 12 percent.

The Company's employees, and the communities in which they live, shared in the fortunes of the Company through its profit sharing plans with payouts to employees (excluding management performance bonuses) and contributions to charities and community services at $3.2 million and $1.1 million respectively in 2000 as compared to $4.6 million and $1.1 million in 1999.

IPSCO said that major capital spending for the year totaled $377 million, up from the $136 million spent in 1999 with the bulk of the funds being spent on IPSCO’s major ongoing project, the new steelworks in Alabama. Shortly following the end of the year 2000 the Mobile Steelworks commenced start-up with liquid steel poured for the first time and the initial slabs of steel cast.

In the fourth quarter the company entered into sale and leaseback arrangements covering $150 million of melt shop and casting equipment at its Montpelier Steelworks and $8 million of temper mill equipment at its St. Paul facility.

With respect to the forward picture IPSCO said questions regarding the general economy and the posture that U.S. and Canadian governments and trade tribunals would take on a series of trade questions are still unclear. For the first quarter IPSCO said its plate and hot rolled facilities were virtually fully booked and its oil country tubular shipments were continuing at a brisk pace but the timing of the spring break-up drilling slowdown is always difficult to predict. After a normal winter increase in scrap prices usually encountered in January, scrap was again headed downwards, which would improve steel making costs. On the other hand IPSCO said it expected some continuing manufacturing problems at its Montpelier Steelworks that would not be corrected before a scheduled shutdown for major maintenance later in the year. So far any recession signs are in consumer goods manufacturing, the Company added, while its flat rolled products were chiefly aimed at industrial capital goods manufacturing. IPSCO said it expected flat roll prices to reach bottom during the quarter and cited a recent flurry of price increase announcements as good indicators of this expectation. “Some people have suggested average flat rolled prices will be down $10 per ton from the fourth quarter and this is probably a good estimate of the bottom. It is difficult to put hard numbers to the set of possible outcomes for the first quarter but as things look now we should continue comfortably in the black, probably no worse than earnings per share a third lower than the fourth quarter – this should be the cyclical bottom,” the Company reflected.

Phillips said the outlook for the rest of 2001, after the normal impact of the seasonal downturn in drilling in the second quarter, was “positive, with an upward bias” but it was too early to be more specific. The apparent start of a recovery in steel mill products pricing was a good sign. “If this were coupled with continuing strength in drilling related tubulars for the whole year, and some increase in demand for larger diameter line pipe,” he said,” we would be smiling a little more.”

As noted earlier IPSCO’s Mobile, Alabama steelworks had melted and poured its first steel in mid-January with rolling of finished product scheduled toward quarter end. Output of the mill will not count toward the bottom line during the first six months of operations or until breakeven production is sustained as under IPSCO’s accounting policy start-up losses are part of the project’s capitalized costs. Availability of Mobile production would, however, permit an early shutdown of Montpelier for the needed modifications cited above.

IPSCO said that capital spending, apart from completing the construction of the Mobile Steelworks, would amount to under $70 million during 2001. Included in this figure are the projects already in progress at the Camanche, Iowa pipe operations (to enhance the capability to produce oil country goods), the Red Deer, Alberta pipe mill (a new warehouse to store finished hollow structurals), and a planned project to install electronic surface inspection equipment at the Montpelier Steelworks. The balance of contemplated spending will be for maintenance type expenditures.

IPSCO said the final cost of the Mobile Steelworks would depend to a large extent on the duration and cost of the start-up. The project’s original budget was $425 million of which over $400 million had been spent by year-end 2000. Of the total budget of $425 million, $365 million was to comprise tangible project costs such as land, land improvements, buildings, and equipment while the other $60 million was to cover “soft costs” such as interest during construction, and operating losses during the commissioning period that are capitalized under IPSCO’s accounting policies.

The $365 million of budgeted tangible project costs chiefly include work performed under fixed price equipment supply contracts and a “guaranteed not to exceed” engineering and construction management contract for buildings, utilities, and equipment erection and installation. The company responsible for the work done under the “guaranteed not to exceed” contract has informed IPSCO that for a variety of reasons the actual spending will exceed the guaranteed amount. Part of the excess cost relates to a building supplier reneging on a firm price bid, which is currently the subject of litigation. Determination of the responsibility for the balance of the potential overrun is the subject of ongoing discussions with the contractor.

While the final cost to IPSCO will not be known until after project completion and the conclusion of these discussions, IPSCO believes that any overrun will not materially impact the project’s profitability.

This news release contains forward-looking information with respect to IPSCO’s operations and beliefs. Actual results may differ from these forward looking statements due to numerous factors, including weather conditions, drilling rig availability, demand for oil and gas, the duration of electrical cutbacks, if any, energy costs, demand for and prices for products produced by the company, the duration of maintenance work and throughput rates at the Montpelier Steelworks, the timing of construction at the Mobile Steelworks, the timing of completion of capital projects, and the outcome of trade actions. These and other factors are outlined in IPSCO’s regulatory filings with the Securities and Exchange Commission, including those on IPSCO’s Annual Report for 1999, its MD&A and Form 40-F.

For Further Information Please Contact:
IPSCO Inc.
Bob Ratliff
Vice President and Chief Financial Officer
Tel. 630-810-4769
Release 01-07

Fourth Quarter 2000 Financial Statements
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