AK Steel Holding Corporation
(
AKS
) has slid into a loss in second-quarter 2012, bludgeoned by a
sizable tax-related charge. The Ohio-based leading producer of
flat-rolled carbon, stainless, electrical steel and tubular
products also saw a decline in sales and shipments in the quarter.
AK Steel posted a net loss of $724.2 million (or $6.55 a share) in
the quarter compared with a profit of $33.1 million (or 30 cents a
share) a year ago. The company was hit by a non-cash charge of $736
million associated with a valuation allowance for its deferred tax
assets. Excluding the impact, AK Steel earned 10 cents a share in
the second quarter, which beat the Zacks Consensus Estimate of 6
cents.
Revenue
Revenues slipped 14% year over year to $1,538.4 million on lower
shipments, narrowly missing the Zacks Consensus Estimate of $1,539
million. Shipments fell roughly 11% year over year to 1,335,800
tons. Average selling price dropped 3% year over year to $1,152 per
ton while edging up 1% sequentially. The company noted that weak
global economic conditions affected volume and steel pricing in the
quarter.
Cost and Margins
Consolidated operating costs fell 14% year over year to $1,481.7
million. Operating profit dipped 17% year over year to $56.7
million as lower revenues more than offset a decline in operating
costs.
Financial Position
AK Steel exited the quarter with cash and cash equivalents of $37.4
million, down roughly 18% year over year. Long-term debt climbed
46% year over year to $950.4 million.
Outlook and Recommendation
The company said that it expects to record a loss in the third
quarter. However, it has not divulged any specific guidance for the
quarter given the volatile economic conditions across the U.S. and
overseas markets. AK Steel plans to provide more color on that
later.
The company said that it expects to record roughly $28 million in
maintenance outage charges in the third quarter, mostly related to
a blast furnace outage at its Ashland Works facility. Separately,
AK Steel said that it has decided to suspend its dividends, a move
which is expected to save roughly $22 million a year.
While AK Steel is expected to benefit from the strength in the
automotive market, we are concerned about the challenging operating
environment in overseas markets, softness in the construction
market and weaker international electrical steel prices.
AK Steel and other major players in the steel space such as
Nucor Corporation
(
NUE
) and
U.S. Steel
Corp.
(
X
) are contending with weak steel demand, oversupply in the industry
and pricing pressure.
AK Steel currently holds a short-term Zacks #3 Rank (Hold). We have
a long-term Underperform recommendation on the stock.
AK STEEL HLDG (AKS): Free Stock Analysis Report
NUCOR CORP (NUE): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
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