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AKS Expects 2Q Loss on Higher Charges

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Steelmaker AK Steel (AKS - Free Report) expects to witness a loss in second quarter 2013 as non-cash tax expenses coupled with maintenance outage costs are expected to dent its bottom line in the quarter.

These factors are expected to lead to a loss of between 33 cents and 38 cents per share in the second quarter. Analysts polled by Zacks are expecting a loss of 10 cents a share on average for the quarter.  

AK Steel expects to take tax charges of roughly $11 million (or 8 cents a share) in the quarter related to a valuation allowance for its deferred tax assets.

In addition, the quarter’s results will include the impact of a planned maintenance outage at the Middletown Works blast furnace. AK Steel expects to incur maintenance outage costs of around $21 million in the second quarter, an increase from $1 million in the first quarter.

Moreover, the company anticipates its average per-ton selling price to slip roughly 1% in the second quarter from the first quarter level of $1,062 per ton. The expected sequential decline is partly triggered by lower spot market prices for carbon steel products. However, AK Steel added that its spot market prices have been favorable of late given a recent price hike on carbon flat-rolled steel products.

Shares of the Ohio-based company, which are down roughly 25% so far this year, fell 5% in regular trading yesterday.

On a positive note, AK Steel expects shipments to increase to roughly 1,340,000 to 1,360,000 tons in the second quarter from 1,289,800 tons in the first. The company sees sequentially higher shipments to automotive and carbon spot markets in the current quarter.

While AK Steel is poised to gain from healthy automotive demand and lower raw material costs, we remain cautious factoring in its high cost structure, weak steel pricing environment and a challenging operating backdrop in overseas markets.

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

Other companies in the steel industry with favorable Zacks Rank are Kobe Steel Ltd. , Shiloh Industries Inc. (SHLO - Free Report) and Angang Steel Company Limited . While both Kobe Steel and Shiloh Industries hold a Zacks Rank #1 (Strong Buy), Angang Steel retains a Zacks Rank #2 (Buy).

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