AK Steel Reports 1st Quarter Results
04/25/2007 - AK Steel reported net income of $62.7 million on record net sales of $1,719.9 million for the first quarter of 2007.
AK Steel reported net income of $62.7 million on record net sales of $1,719.9 million for the first quarter of 2007.
First Quarter Results—The $62.7 million net income ($0.56 per diluted share of common stock) compares to net income of $6.2 million ($0.06 per diluted share) for the first quarter of 2006. Net sales, a record $1,719.9 million, compare to net sales of $1,435.9 million for the year-ago quarter. Shipments of 1,596,200 tons compare to shipments of 1,526,800 tons for the year-ago quarter.
The company said its average selling price was a record $1,078 per ton, a 15% increase over the $940 per-ton mark set in the first quarter of 2006, and about 4% higher than the $1,041 per-ton level reached in the fourth quarter of 2006. The increase in selling prices resulted from higher contract and spot-market pricing coupled with increased raw-material surcharges, primarily scrap and nickel. Nickel is a key raw material commodity in stainless steel products, and has risen in price nearly 50% in 2007.
Operating profit was $120.0 million ($75 per ton), a four-fold increase from the $29.4 million ($19 per ton) the company generated in the first quarter of 2006. The year-over-year operating profit improvement was primarily the result of higher shipments and selling prices, lower total employment costs, and lower operating and maintenance costs at the company's Middletown Works. Operating profit was impacted by a pre-tax, non-cash pension curtailment charge of $15.1 million related to a new labor agreement for the company's Mansfield, Ohio, Works, along with higher raw material costs and associated higher LIFO charges.
Excluding the pension curtailment charge, operating profit in the first quarter of 2007 was $135.1 million ($85 per ton)—among the best-ever quarterly performances for the company.
Management Comments—"True to our approach for all of 2007, in the first quarter, AK Steel 'put the pedal to the metal' with record performances in safety, quality, productivity and revenues," said James L. Wainscott, Chairman, President and CEO of AK Steel. "We are beginning to experience the very positive effects of a strong market and new labor agreements at all of our plants, as well as our relentless cost and debt reduction initiatives, and we're taking that momentum into the second quarter."
Second-Quarter Outlook—AK Steel said it expects shipments in the second quarter of 2007 to be approximately 1,650,000 tons, reflecting an increase over first-quarter levels of approximately 3%. The company anticipates that its second-quarter 2007 average per-ton selling prices will be 2 to 3% higher compared to the first quarter of 2007. The company will also incur a non-cash, pre-tax pension curtailment charge of $24.7 million in the second quarter related to the new labor agreement covering union employees at the company's Middletown Works.
Overall, says the company, the higher sequential shipments, coupled with higher average selling prices, are likely to result again in record quarterly revenues, and an operating profit between $80 and $85 per ton.
AK Steel produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for customers in the automotive, appliance, construction and manufacturing markets.
