AK Steel Posts Wider Loss in Q1 - Analyst Blog

Steel maker AK Steel Holding Corporation AKS posted a net loss of $86.1 million or 63 cents per share in first-quarter 2014 compared with a loss of $9.9 million or 7 cents per share in the year-ago quarter. The results were affected by a planned and an unplanned blast furnace outage, higher energy costs due to bad weather and a legal settlement.

In the reported quarter, AK Steel recorded a non-cash income tax charge of $31.7 million or 23 cents per share, relating to a change in its deferred tax asset valuation allowance.

Barring non-cash income tax charge, AK Steel's loss for the quarter was 40 cents per share, narrower than the Zacks Consensus Estimate of a loss of 43 cents.

Revenues, Pricing and Shipments

Revenues rose 1% year over year to $1,383.5 million in the reported quarter but missed the Zacks Consensus Estimate of $1,420 million.
Shipments declined by about 2.1% year over year to 1,262,100 tons due to a drop in shipments of electrical steel and carbon steel in the spot market, partly offset by higher automotive shipments.

Average selling price increased 3% year over year to $1,096 per ton due to better shipment mix of value-added products.

Cost and Margins

Total operating costs increased around 6.14% year over year to $1,418.8 million in the first quarter. Operating loss for the reported quarter was $35.3 million compared with an operating income of $33.2 million recorded in the prior-year quarter.

During the quarter, the company incurred about $18 million in costs as a result of the unplanned outage.

The company also incurred $29.4 million for planned outage costs during the reported quarter compared with $1 million in the year-ago quarter. The higher planned outage costs in the first quarter of 2014 include the acceleration of a majority of previously disclosed planned maintenance outage at Ashland Works that was expected to be incurred in the second quarter of 2014. The company does not expect to have any significant outages planned for the balance of 2014.

Financial Position

Cash and cash equivalents, as of Mar 31, 2014, were $31.1 million, down 83.8% from $191.8 million as of Mar 31, 2013. Long-term debt increased roughly 17.4% year over year to $1,657.2 million.

In Mar 2014, AK Steel entered into a new $1.1 billion asset-backed revolving credit facility with a group of lenders. The new credit facility expiring in Mar 2019 replaced the company's previous $1.1 billion asset-backed revolving credit facility, which was set to expire in Apr 2016. The new credit facility provides AK Steel with increased liquidity and greater financial and strategic flexibility.

Outlook

AK Steel plans to announce detailed second-quarter 2014 guidance in Jun 2014.

AK Steel currently has a Zacks Rank #3 (Hold).

Other companies in the steel and related industries worth considering include NN Inc. NNBR, Companhia Siderurgica Nacional SID and NSK Ltd. (NPSKY). While NN and Companhia Siderurgica retain a Zacks Rank #1 (Strong Buy), NSK carries a Zacks Rank #2 (Buy).