Published: January 23, 2007 09:32 pm            

AK Steel shares hit 52-week high despite wider 4th-quarter loss

CINCINNATI — Shares of AK Steel Holding Corp. jumped nearly 10 percent on Tuesday after the steelmaker reported a wider fourth-quarter loss than a year ago but an upbeat outlook for 2007.

"They not only had a decent fourth quarter, but their guidance for the first quarter was very strong," said industry analyst Charles Bradford of Bradford Research/Soleil Securities in New York.

The company also said temporary workers hired to replace locked out union employees at its Middletown Works plant are setting production and safety records and that more workers are being hired.

AK Steel stock rose $1.63 to $18.40 in heavy trading on the New York Stock Exchange as the company reported a loss of $49.3 million, or 45 cents a share, in the three months ended Dec. 31, compared with $41.5 million, or 38 cents a share, a year ago. The stock reached as high as $18.68 on Tuesday. The low for the past year has been $7.71.

The loss for the quarter widened compared with a year ago as higher average selling prices failed to offset weaker steel shipments and increased costs.

Stripping out a $133.2 million charge related to retiree pensions and health care benefits, AK Steel said it earned $34.5 million in the recent quarter, compared with an adjusted profit of $65.1 million a year ago.

Sales grew to $1.58 billion from $1.38 billion in the prior-year period. Shipments fell 5 percent to 1.5 million tons from 1.6 million tons, while average selling prices jumped 21 percent. Cost of goods sold climbed 20 percent year over year.

On average, analysts surveyed by Thomson Financial forecast earnings of 19 cents a share on sales of $1.47 billion. The company did not provide a net earnings-per-share figure because of the uncertainty of tax and pension considerations. Bradford calculated a profit of 21 cents a share based on a tax rate of 35 percent.

For the year, AK earned $12 million, or 11 cents a share, after a loss of $2.3 million, or 2 cents a share, in 2005. Sales increased to $6.07 billion from $5.65 billion in 2005.

AK Steel has been operating its Middletown Works with replacement workers and salaried personnel since it locked out some 2,500 union hourly production and maintenance workers last Feb. 28.

Chief Executive James Wainscott told analysts in October that AK would continue using replacements as long as necessary, but would prefer to reach accord with its union members.

Wainscott said Tuesday that since he took over as CEO in October 2003, the company has reduced its hourly work force by about 1,600 companywide and has eliminated about 750 salaried jobs.

"We still have a ways to go," he said.

But he acknowledged that about 100 additional workers were hired at the Middletown Works in the fourth quarter. The company had said it was operating the mill with about 1,800 workers.

Wainscott called 2006 "a defining year" for AK Steel, "a year in which we had to significantly improve our competitiveness, and that is what we did."

"It was an extraordinarily good year, with our lowest accident frequency rate ever and record productively performances at all locations, including Middletown," he said.

And he predicted a better year in 2007 in which the company would use its strong cash position to improve its balance sheet, Wainscott said in a conference call with analysts. "We have re-established a strong foundation on which we can and will build in 2007 and beyond," he said.

Brian Daley, president of IAM Local Lodge 1943, which represents the locked-out union workers, disputed Wainscott's claim regarding the efficiency of replacement workers at the Middletown Works.

"It could certainly be running much better," Daley said. "The numbers bear it out. You can't call it record production levels and ship 250,000 tons less than the previous year."

On Monday, AK announced an early payment of $75 million to its pension fund, to be made in the first quarter. On Tuesday, it said that in the first quarter it will use cash reserves to buy back $225 million in debt payable in two years.

The company expects steel prices to rise between 4 percent and 5 percent in the first quarter from the average fourth-quarter level of $1,041 a ton. But the company cautioned that higher selling prices would be partially offset by rising costs of raw materials such as nickel and zinc used in making stainless and coated steels.

AK Steel makes flat-rolled carbon steel and stainless and electrical steel used in cars and appliances. Its headquarters and largest mill are in Middletown, about 30 miles north of Cincinnati, with smaller plants in Mansfield, Zanesville and Coshocton, Ohio; Ashland, Ky.; Rockport, Ind.; and Butler, Pa.

        

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