October 23, 2012 / 1:15 PM / in 5 years

UPDATE 2-AK Steel posts wider 3rd-qtr loss, sees more red ink

* Q3 loss 55 cents/shr vs year-ago loss of 3 cts/shr

* Cites 7-percent drop in average steel selling prices

* Shares down 5.4 percent

By Steve James

Oct 23 (Reuters) - AK Steel Holding Corp posted a wider quarterly loss on Tuesday and forecast more red ink for the fourth quarter as weak domestic and global demand pushed down steel prices.

The steelmaker’s stock fell 5.4 percent to $5.21 in morning trading on the New York Stock Exchange.

“Challenging domestic and global economic conditions continue to weigh on shipping volumes and prices,” Chairman and Chief Executive James Wainscott said in a statement.

“Additionally, while we expect to enjoy lower raw material costs in the future, we are still working through some higher cost raw material inventories.”

AK Steel, which warned last month of the third-quarter loss, does not normally give a detailed earnings forecast so far in advance. But on Tuesday it said, based on current conditions, it expected to incur a net loss for the fourth quarter.

“This anticipated net loss includes a non-cash tax expense for the fourth quarter as a result of an anticipated change in its tax valuation allowance, which the company expects to incur regardless of its fourth quarter pre-tax financial results,” it said.

Analyst Charles Bradford, of Bradford Research in New York, said a huge tax bill -- $736 million for a valuation allowance on deferred tax assets -- resulted in a second-quarter loss in July.

He also said AK Steel was the worst-placed of the U.S. steelmakers for raw materials, as it has no coal or iron ore sources of its own and is at the mercy of global markets.

“AK has to pay full market price for iron ore, but it should get better as prices are coming down now,” Bradford said.

The net loss widened to $60.9 million, or 55 cents per share, from $3.5 million, or 3 cents per share, in the same quarter of 2011, the Ohio-based steelmaker said.

Excluding tax expenses and an inventory accounting credit, the adjusted loss was 25 cents per share. On that basis, it beat Wall Street estimates for a loss of 36 cents per share, according to Thomson Reuters I/B/E/S.

Sales dropped to $1.46 billion from $1.58 billion, and shipments fell to 1.364 million tons from 1.369 million tons.

The average selling price for the third quarter was $1,073 per ton, a 7 percent decrease from both the second quarter and the 2011 third quarter. The company said that was primarily due to lower spot market prices for carbon steel products and reduced raw material surcharges.

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