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AK Steel (AKS) Posts Loss in Q2 as Imports Hit Prices

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Steel maker AK Steel Holding Corporation (AKS - Free Report) reported a net loss of $64 million or 36 cents per share in second-quarter 2015, wider than a loss of $17.1 million or 13 cents per share in the year-ago quarter.

The company’s results were hurt by unfairly traded steel imports which significantly impacted selling prices. However, the loss per share was narrower than the Zacks Consensus Estimate of a loss of 39 cents.
 

 

Revenues, Pricing and Shipments

Revenues rose 10.4% year over year to $1,689.4 million in the reported quarter, beating the Zacks Consensus Estimate of $1,670 million.

Shipments increased by about 29.6% year over year to 1,811,700 tons from 1,397,500 tons in the prior-year quarter. Shipments were also higher sequentially, primarily backed by increased shipments to the carbon spot market and continued strength in the automotive market.

Higher year-over-year revenues and shipments were a result of the addition of shipments from the Dearborn Works facility since its acquisition in Sep 2014. Continued strong shipments of carbon and stainless steel to the automotive markets also contributed to the improvement.

Average selling price decreased roughly 15% year over year to $931 per ton due to lower carbon steel spot market selling prices along with higher proportion of hot-rolled coil shipments resulting from the Dearborn acquisition. Higher imports of cheaper foreign steel also hurt carbon spot market selling prices.

Costs and Margins

Total operating costs increased around 12.6% year over year to $1,682.3 million in the second quarter of 2015. Operating profit for the reported quarter was $7.1 million compared with an operating profit of $36.5 million recorded in the prior-year quarter.

Financial Position

Cash and cash equivalents, as of Jun 30, 2015, were $75 million, up 36.9% from $54.8 million as of Jun 30, 2014. Long-term debt increased 25.4% year over year to $2,442.5 million.

Outlook

AK Steel plans to announce its detailed guidance for the third quarter of 2015 in September. However, management provided a qualitative guidance for the third quarter. AK Steel anticipates better results in the third quarter and the second half compared with the reported quarter as well as the first half of 2015 on the back of expected higher shipments, improved carbon steel market prices and higher production levels leading to reduced operating costs per ton. The company also anticipates gaining from reduced raw materials costs, mainly iron ore.

Additionally, AK Steel forecasts strong shipments to its automotive markets, going forward. The company is also optimistic that the level of unfairly traded imports will decrease in the second half of the year.

Zacks Rank

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

Better-ranked companies in the basic materials sector include Nippon Steel & Sumitomo Metal Corporation , Schnitzer Steel Industries, Inc. (SCHN - Free Report) and Primero Mining Corp. , all carrying a Zacks Rank #2 (Buy).

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