Published: January 22, 2008 11:04 pm            

AK on a roll, swings to 4Q profit on higher sales, shipments

CINCINNATI — AK Steel Holding Corp. had record revenues and shipments in 2007 and starts the new year healthier than imaginable when his management team took over four years ago, CEO James Wainscott said Tuesday.

The company, with headquarters in suburban West Chester, earned $106.7 million, or 95 cents a share, in the three months ended Dec. 31, compared with a loss of $49.3 million, or 45 cents a share, a year ago during a long lockout when results included a $133.2 million charge for retiree health care benefits.

Fourth-quarter revenue rose 7 percent to $1.69 billion from $1.58 billion a year ago, when AK was operating its nearby Middletown Works with replacement workers. When a new contract was reached with union workers to end a nearly 13-month lockout, the company had shed about 1,000 jobs.

For the year, AK Steel reported net income of $387.7 million, or $3.46 a share, compared with $12 million, or 11 cents a share in 2006. Net sales rose to $7 billion for the first time on shipments of 6.5 million tons, compared with $6.1 billion and 6.2 million tons in 2006.

Analysts surveyed by Thomson Financial were expecting a profit of 59 cents per share on revenue of $1.68 billion for the quarter and a profit of $3.07 a share for the year.

"Our plan is working, and we're on the right track," Wainscott told analysts in a conference call. "Looking back, 2006 was a defining year; 2007 was a breakthrough year that very few thought was possible four years ago.

"We have reshaped the future of AK Steel."

Wainscott said AK expects solid improvement in 2008. Directors voted to begin paying a quarterly dividend of 5 cents a share. The company had not paid a dividend since 2001.

"This dividend announcement is a clear indication that AK Steel's board recognizes and values the support of our shareholders during the company's complete financial transformation over the past four years," Wainscott said.

The company also announced an early contribution of $75 million to its pension trust fund.

Last year's results include a $39.8 million pretax charge related to the implementation of new labor agreements at the company's Mansfield and Middletown plants. The 2006 results included $15.8 million of one-time charges related new labor agreements at plants in Butler, Pa., and Zanesville, Ohio.

Wainscott said the company is positioned to benefit even more in 2008 from those cost reductions.

Shipments in the first quarter should be similar to the latest quarter, with average per-ton selling prices 5 percent to 6 percent above 2007 fourth-quarter levels, although those increases could be partially offset by higher raw material costs, the company said.

Goldman Sachs analyst Aldo Massaferro, in a note to investors, said downside risks for AK Steel include weak demand from the automotive market, a global economic slowdown and the possibility of excess exports from China. But he said AK has the potential to surprise analysts again, as it did in the fourth quarter.

"AKS' end markets of auto and appliance look less attractive then average, and raw material cost are going up, but AKS' high sensitivity to changing steel prices and the 4Q evidence of good cost control continues to make it a candidate for upside earnings surprises in 2008," he wrote.

Wainscott became president and chief executive in October 2003, when the stock was trading around $2 a share, and added the title of chairman on Jan. 1, 2005.

Shares have traded between $16.47 to $53.97 in the past year, peaking just after the company reported robust third-quarter earnings. But its cautionary forecast for the rest of the year caused prices to slip since then.

AK shares got hammered with the rest of the market when trading opened Tuesday, then recovered to trade up $2.10, or 5.7 percent, to $39.29.

AK Steel makes flat-rolled carbon steel, stainless and electrical steel and carbon and stainless tubular products used in cars and appliances. Its headquarters are in West Chester, and its biggest plant is in Middletown, with smaller plants in Zanesville, Mansfield and Coshocton, Ohio; Ashland, Ky.; Rockport, Ind.; and Butler, Pa.

        

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