Source: The Star, July 22, 2009
AK Steel Holding Corp., a supplier of steel for cars and trucks, on Tuesday posted a second-quarter loss of $47.2 million, partly due to shrinking demand from the battered auto industry.
But the results beat Wall Street expectations.
It was AK Steel's third consecutive loss and another sign of anemic demand for the metal amid the global recession.
Like other steel producers, AK Steel has been forced to cut production and lay off workers since the downturn intensified late last year.
Shares of AK Steel fell 96 cents, or 4.7 percent, to $19.34 in late afternoon trading.
AK Steel's loss amounted to 43 cents per share for the three months ended June 30. That compares with a profit of $1.29 per share during the same period last year.
It reported an operating loss of $72.5 million, down from an operating profit of $237.9 million in the year-earlier period.
But the company's loss was narrower than its first-quarter loss of $73.4 million, or 67 cents per share.
Revenue in the latest quarter slid 65 percent to $793.6 million from $2.24 billion a year earlier.
Analysts, on average, expected the West Chester, Ohio-based company to lose 75 cents per share on revenue of $929.3 million.
Those estimates typically exclude one-time charges.
In a note to clients, Morgan Stanley analyst Mark Liinamaa wrote: "The company surprised us by reducing operating costs more than expected."
The market for the metal - used in everything from trucks to bridges - remains far weaker than it was a year ago, when surging demand and prices helped steel companies notch record profits.
AK Steel said its shipments fell to 740,600 tons during the quarter from 1.74 million tons in the same period of 2008. Average selling prices, meanwhile, declined 17 percent, to $1,072 from $1,287 per ton.
The company, which had forecast a quarterly loss, said it expects "an approximate break-even in operating profit" in the third quarter. Analysts expect a loss of 8 cents per share.
The steel industry has shown signs of improvement recently, with prices and production rising, and analysts say AK Steel could benefit from an eventual auto industry recovery.
AK Steel's results have been hurt by a drop in orders from the auto industry, including the Detroit automakers and their suppliers, which accounted for about a third of the company's revenue last year.
Production cuts at General Motors Co. and Chrysler LLC have stunted demand for AK Steel's metal, used in exhaust systems and other vehicle parts.
Both automakers, which recently emerged from bankruptcy protection, have slashed output of cars and trucks as they grapple with the weakest U.S. auto sales in more than two decades.
Also Tuesday, AK Steel declared a regular quarterly dividend of 5 cents, payable Sept. 10 to shareholders of record on Aug. 14.
It also announced a $110 million contribution to its pension trust fund to be made in the third quarter.
That amount is twice the company's required funding amount of $55 million for the balance of 2009, AK Steel said.