UPDATE 2-Olympic Steel posts surprise Q4 loss, shares down

Thu Feb 25, 2010 12:37pm EST

* Q4 loss $0.24/shr vs est EPS $0.08

* Revenue drops 45 pct

* Sees sequential rise in sales in Q1

* Shares drop 11 percent (Recasts; Adds conference call details, analysts comments, share movement)

By Antonita Madonna Devotta

BANGALORE, Feb 25 (Reuters) - Olympic Steel Inc (ZEUS.O) posted a surprise fourth-quarter loss as sales nearly halved on lower shipments, pushing its shares down 11 percent despite the company forecasting higher first-quarter sales and margins.

Limp demand from most end-users like the construction market, and a flood of cheap Chinese imports into North America have pressured attempts by U.S. steel makers to raise prices in the last couple of quarters.

However, the United States is now checking these imports by slapping duties on various Chinese steel products and many steel companies, including Olympic Steel, have reported signs of an improvement in the market towards the end of 2009.

"Steel demand and pricing are both on the rise since year-end. We expect these trends to continue and look for our first-quarter 2010 sales to be better both year-over-year and over the fourth quarter ... in an improving marketplace," Chief Executive Michael Siegal said on a conference call.

Analyst Nat Kellogg of Hudson Securities said the negative stock reaction was a result of the disappointing fourth-quarter results outweighing forecasts of a profitable first-quarter, which was already priced into the stock.

"The fact that they say things are going to be better in the first quarter is not a surprise because... the fourth quarter was worse than what people have been expecting," Kellogg said.

Analyst Mark Parr of KeyBanc said the company's shares will continue to be pressured by the jump in profitability now needed to hit the first-quarter consensus estimate of 29 cents a share.

In the latest quarter, the company swung to a net loss of $2.6 million, or 24 cents a share, from a profit of $776,000, or 7 cents a share, a year ago.

Quarterly net sales slumped 45 percent to $138.5 million.

Analysts, on average, were looking for earnings of 8 cents a share, before items, on revenue of $127.3 million, according to Thomson Reuters I/B/E/S.

Shares of the Cleveland-based company were trading down $3.45 at $29.11 Thursday afternoon on Nasdaq. They touched a low of $29.01 earlier in the day. (Reporting by Antonita Madonna Devotta; Editing by Anne Pallivathuckal)

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