IPSCO’s Strong U.S. Results Eliminate Tax Valuation Allowance Increasing Earnings Expectations For The Year

Lisle, Illinois, October 18, 2004 - IPSCO Inc. (NYSE/TSX: IPS) announced today that due to continued strong operating earnings it expects to eliminate the valuation allowance related to net operating losses in the United States. The elimination of the allowance will occur in the third quarter of 2004 with the earnings impact being recognized in the third and fourth quarters. This will result in an effective annual income tax rate reduction of more than 5 percentage points from the 38% rate utilized in the first half of the year, adding a one-time contribution to 2004 annual earnings of approximately $0.60 per diluted share. This increase in earnings was not included in the September 20, 2004 guidance provided by the Company.

The valuation allowance was originally recorded in accordance with Canadian and U.S. Generally Accepted Accounting Principles. IPSCO has grown substantially in the United States since the start of the 1990’s in particular with two new steel mills starting operation in 1997 and 2001 bringing new steel capacity to weak steel markets. Construction difficulties at Montpelier contributed to start-up production problems and delayed market entry which significantly contributed to the United States operating losses. Those losses, combined with the lack of earnings history in the United States, required IPSCO to recognize a valuation allowance against deferred tax benefits which were recognized on the United States net operating losses. Now that IPSCO has achieved strong earnings performance in the United States, the allowance is no longer necessary as the net operating loss carryforwards are being utilized. 

“This marks a turning point in IPSCO’s history where the lingering challenges of new construction and the introduction of new capacity to a new market are behind us. IPSCO in a short period of time has become the largest plate manufacturer in North America with a cost structure that is globally competitive,” said David Sutherland, IPSCO’s President and Chief Executive Officer.

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, but not limited to, weather conditions affecting the oil patch; drilling rig availability; demand for oil and gas; supply, demand and price for scrap metal and other raw materials; supply, demand and price for electricity and natural gas; demand and prices for products produced by IPSCO; general economic conditions and changes in financial markets. These and other factors are outlined in IPSCO’s regulatory filings with the Canadian securities regulators and the Securities and Exchange Commission, including those in IPSCO’s Annual Report for 2003, its MD&A, particularly as discussed under the heading “Business Risks and Uncertainties,” its Annual Information Form, and its Form 40-F.

Company Contact:
Vicki Avril
Senior Vice President and Chief Financial Officer
Tel. 630-810-4769
Release 04-36
  
Back to News