Steel maker AK Steel (AKS - Analyst Report) posted a net loss of $31.7 million or 23 cents a share in third-quarter 2013, roughly 48% narrower than a loss of $60.9 million or 55 cents a share a year-ago.
During the reported quarter, AK Steel took a charge of $4.2 million related to the planned maintenance outage at its Middletown Works blast furnace in Ohio. Moreover, it incurred $11.8 million expenses associated with unplanned blast furnace outage in the quarter. AK Steel also recorded an inventory-related credit of $15.8 million in the reported quarter.
Barring one-time items (tax charges related to a valuation allowance for deferred tax assets), AK Steel’s loss for the quarter was 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 24 cents.
Revenues, Pricing and Shipments
Revenues fell 9% year over year to $1,331.3 million in the reported quarter due to lower shipments. It missed the Zacks Consensus Estimate of $1,365 million. Shipments fell around 9% year over year to 1,242,400 tons due to the effects of unplanned outage and seasonal reduction in shipments in the automotive market.
Average selling price decreased slightly year over year to $1,071 per ton. The average selling price improved sequentially on account of favorable mix of value-added products, the benefit of which was largely offset by lower raw material surcharges and delayed shipments.
AK steel benefited from the price increases in the carbon spot market. However, it experienced a decline in electrical steel spot market pricing during the quarter. International sales particularly reflected the effect of pricing decline
Cost and Margins
Consolidated operating costs fell around 11.5% year over year to $1,305.4 million. Operating profit for the reported quarter was $25.9 million compared with an operating loss of $12 million recorded in the prior-year quarter.
AK steel exited the quarter with cash and cash equivalents of $65.7 million, up 39.5% year over year. Long-term debt increased roughly 4.8% year over year to $1,415.4 million.
In line with its current practice, AK Steel plans to announce detailed fourth quarter guidance in Dec 2013. However, the company said that it expects better performance in the fourth quarter compared with the third .
Middletown Works experienced an unexpected mechanical failure in Jun 2013. As a result, the blast furnace was taken offline to prevent any damage to the furnace. The blast furnace was restarted on Jul 12.
AK Steel, which maintains property damage and business interruption insurance, expects the retained portion of its losses to be between $20 million and $23 million before taxes. While the remain insurance recoveries are expected to be recognized in the fourth quarter, the extent and timing of the impact on the fourth quarter results will be decided depending on the agreement with the insurance underwriters on the insured portion of the losses.
AK Steel currently retains a Zacks Rank #3 (Hold).
Other companies in the steel industry with favorable Zacks Rank are Companhia Siderurgica Nacional (SID - Analyst Report), Shiloh Industries Inc. and Gerdau S.A. (GGB - Analyst Report). While Companhia Siderurgica and Shiloh hold a Zacks Rank #1 (Strong Buy), Gerdau retains a Zacks Rank #2 (Buy).