AK Steel Holding Corporation (NYSE:AKS - News) posted its fourth-quarter 2011 results, delivering net loss of $193.9 million or $1.76 compared with net loss of $98.3 million or $0.89 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 diluted share. Excluding this amount, the company's adjusted net loss for the fourth quarter of 2011 was $28.0 million, or $0.26 per diluted share. Results were above the Zacks Consensus Estimate loss of $0.39 per share.
For 2011, AK Steel reported a net loss of $155.6 million, or $1.41 per diluted share, compared with a net loss of $128.9 million, or $1.17 per diluted share in 2010. Excluding the non-cash pre-tax pension corridor charge of $268.1 million, or $1.50 per diluted share, the company's adjusted net income for 2011 was $10.3 million, or $0.09 per diluted share.
Net sales were $1,509.2 million on the shipments of 1,409,900 tons versus $1,390.6 million and 1,359,900 tons in the prior-year quarter. Net sales were ahead of the Zacks Estimate of $1,481 million. Average selling price for the fourth quarter of 2011 was $1,070 per ton, up 5% year over year, but down 8% sequentially.
For 2011, sales were $6,468.0 million, up 8% year over year. Shipments were 5,698,800 tons versus 5,660,900 tons in 2010.
Shipments
Value-added shipments for stainless/electrical, coated, cold-rolled decreased to 200.9 tons, 611.2 tons and 262.9 tons, respectively, compared with 208.1 tons, 613.6 tons and 352.2 tons, respectively, in the prior-year quarter. Value-added shipments for Tubular product increased to 30.7 tons compared with 29.3 tons in the year-earlier quarter.
Non value-added shipments including Hot-rolled increased to 251.3 tons from 114.9 tons in the year-earlier quarter. Non-value-added shipments including secondary products increased to 52.9 tons from 41.8 tons in the prior-year quarter.
Cost and Margins
In the fourth quarter 2011, cost of sales was $1,451.6 million versus $1,379.5 million in the year-earlier quarter. Selling and administrative expenses increased mildly to $53.8 million from $50.4 million in the year-ago quarter.
In 2011, cost of sales was $6,036.8 million versus $5,643.2 million in 2010. Selling and administrative expenses increased marginally to $215.4 million from $204.0 million in 2010.
Operating loss in the fourth quarter was $300.7 million, including $268.1 million pre-tax pension corridor charge. Excluding the pension corridor charge, the company's adjusted operating loss for the fourth quarter of 2011 was $32.6 million, or $23 per ton.
For 2011, operating loss was $201.3 million, or $35 per ton, which was largely a result of the pension corridor charge, compared with an operating loss of $133.9 million, or $24 per ton, for 2010. Excluding the pension corridor charge, the company's adjusted operating profit for the full year of 2011 was $66.8 million, or $12 per ton.
Financial Position
Cash and cash equivalents reduced to $42.0 million as of December 31, 2011 versus $216.8 million as of December 31, 2010. Long-term debt of the company decreased marginally to $650.0 million as of December 31, 2011 versus $650.6 million as of December 31, 2010.
As of December 31, 2011, cash from operating activities was $180.5 million compared with $132.4 million as of December 31, 2010.
Outlook
Due to continued uncertainty and volatility with respect to economic conditions in the U.S. and in other markets served by the company, AK Steel is not providing an outlook for the company's first quarter 2012 results at this time. However, the company expects to provide first quarter guidance in March.
Our Take
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 margins of the company. 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 basic raw materials required for the steel manufacturing are iron ore, coal, coke, chrome, nickel, silicon, manganese, zinc, limestone and carbon and stainless steel scrap.
Natural gas, electricity and oxygen are the sources of power for steel manufacturing operations. 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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