AK Steel Turns To Red

Zacks Investment Research
updated | Zacks.com

AK Steel Holding Corporation (NYSE:AKS) has slipped into a loss in first-quarter 2012 as it saw a decline in sales and shipment volumes. The Ohio-based leading producer of flat-rolled carbon, stainless, electrical steel and tubular products posted a net loss $11.8 million (or 11 cents a share) compared with a profit of $8.7 million (or 8 cents per share). The results came in sync with the Zacks Consensus Estimate.

Revenue

Revenues dipped 4.6% year over year to $1,508.7 million, missing the Zacks Consensus Estimate of $1,520 million. Shipments fell 6.8% year over year to 1,325,900 tons. Average selling price, however, rose 6% sequentially and 3% year over year to $1,138 per ton.

The increase in average selling price resulted from better product mix, higher contract sales and increased prices for certain products. The company noted that it witnessed a slow, but steady, improvement in underlying market conditions during the quarter.

Shipments

Value-added shipments for stainless/electrical, coated, cold-rolled decreased to 214.9 tons, 583.2 tons and 286 tons, respectively, from 224.4 tons, 621.8 tons and 344.8 tons, respectively, a year ago. Value-added shipments for Tubular product increased to 36.3 tons from 34.2 tons in the prior-year quarter.

Non value-added Hot-rolled shipments increased to 170.5 tons from 161.1 tons a year ago. Non-value-added shipments for secondary products fell to 35 tons from 36.8 tons in the prior-year quarter.

Cost and Margins

Consolidated operating costs fell 3.7% year over year to $1,504.6 million. Operating profit for the quarter was $4.1 million, a roughly 79% year-over -year decline.

Financial Position

AK Steel exited the quarter with cash and cash equivalents of $42.3 million, down roughly 22% year over year. Long-term debt climbed 46% year over year to $949.9 million.

Outlook

The company said that it expects to record a profit in the second quarter. However, it has not divulged any specific guidance for the quarter in its first quarter call. AK Steel plans to provide more color on that in mid-June. The company, nevertheless, remains optimistic that business conditions will improve in the second quarter on the back of increased strength in the automotive market. It also envisions higher shipment in the quarter vis-à-vis the first quarter.

We currently have a long-term Neutral recommendation on AK Steel. The company which competes with Nucor Corporation (NYSE:NUE), U.S. Steel Corp. (NYSE:X) and Steel Dynamics Inc. (NASDAQ:STLD), holds a short-term Zacks #3 Rank (Hold). 

 
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