AKS Hopeful of New Energy Standards

Zacks

AK Steel Holding Corporation (NYSE:AKS - News) announced that revised energy efficiency standards proposed by the U.S. Department of Energy (:DOE) will not have any major impact on its grain-oriented electrical steels (:GOES) market. GOES is used in the manufacture of electrical distribution transformers.

Initially, AK Steel believed that DOE will alter the efficiency standards in such a way so that it could reduce the competitiveness of its electrical products. However, the company feels that the new standards have the potential to boost the market for GOES.

The revised efficiency standards as proposed by DOE are expected to become effective in 2016. Meanwhile, AK Steel will continue investing in research and development activities so that these standards do not have any material impact on the market for its GOES products.

Recently, AK Steel posted its fourth-quarter 2011 results, delivering a net loss of $193.9 million or $1.76 per share compared with $98.3 million or 89 cents per share during the year-ago quarter.

Fourth-quarter 2011 results include a non-cash pre-tax pension corridor charge of $268.1 million, or $1.50 per share. Excluding this amount, the company's adjusted net loss for the fourth quarter of 2011 was $28.0 million, or 26 cents per share. Results beat the Zacks Consensus Estimate loss of 39 cents per share.

Net sales were $1.51 billion in the quarter on shipments of 1.41 million tons versus $1.39 billion and 1.36 million tons in the prior-year quarter. Net sales were ahead of the Zacks Estimate of $1.48 billion. Average selling price for the fourth quarter of 2011 was $1,070 per ton, up 5% year over year, but down 8% sequentially.

AK Steel is uniquely positioned to focus on products with high margins. Electrical steel continues to be the company’s strongest product line, with demand recovering in the U.S. and abroad, though at a slower rate. AK Steel is operating its plants at above 80% capacity and is well positioned to serve the end markets when the demand rebounds.

However, higher input costs, particularly iron ore, is eroding the company’s margins. Iron ore pricing concerns have led to a negative outlook for steel manufacturers. A K Steel currently retains a Zacks #3 Rank (short-term Hold rating).

Ohio-based AK Steel Holding Corporation is a leading producer of flat-rolled carbon, stainless, electrical steel and tubular products. It operates 7 steel-making and finishing plants in Ohio, Pennsylvania, Indiana and Kentucky. The company competes with Nucor Corporation (NYSE:NUE - News), U.S. Steel Corp. (NYSE:X - News) and Steel Dynamics Inc. (NasdaqGS:STLD - News).

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