AK Steel Reports Second Quarter Results Impacted by Middletown Blast Furnace Outage
07/23/2013 - AK Steel reported a net loss of US$40.4 million for the second quarter ended 30 June 2013, compared to a net loss of US$724.2 million for the second quarter of 2012.
The results for the second quarter of 2012 included a non-cash income tax charge of US$735.6 million as a result of a change in a deferred tax asset valuation allowance. The company reported adjusted EBITDA of US$47.5 million, or US$36 per ton, for the second quarter of 2013 compared to adjusted EBITDA of US$88.3 million, or US$66 per ton, for the year-ago second quarter and adjusted EBITDA of US$66.8 million, or US$52 per ton, for the first quarter of 2013.
Net sales for the second quarter of 2013 were US$1,404.5 million on shipments of 1,323,700 tons, compared to net sales of US$1,538.4 million on shipments of 1,335,800 tons for the year-ago second quarter and net sales of US$1,369.8 million on shipments of 1,289,800 tons for the first quarter of 2013. The lower shipments for the second quarter of 2013 compared to the year-ago period were primarily due to lower shipments to the carbon spot market and electrical steel market, partially offset by increased shipments to the automotive market. The unplanned outage of the Middletown Works blast furnace also contributed to a decline in shipments in the second quarter of 2013. The higher shipments in the second quarter of 2013 compared to the first quarter of 2013 were primarily due to higher shipments to the automotive market, partially offset by lower shipments to the carbon spot market.
The company said its average selling price for the second quarter of 2013 was US$1,061 per ton, an 8% decrease from the second quarter of 2012 and flat with the first quarter of 2013. The average selling price for the second quarter of 2013 improved over the first quarter of the year as a result of the favorable mix of shipments, but was offset by lower spot market prices for carbon steel products. The lower average selling price for the second quarter of 2013 compared to the second quarter of 2012 was primarily due to lower spot market prices for carbon steel products, reduced raw material surcharges and lower selling prices for electrical steel products globally.
The decrease in adjusted EBITDA from the prior quarter was primarily the result of planned major maintenance outages. As previously announced, the Middletown blast furnace underwent a planned seven-day maintenance outage during the second quarter of 2013. This was the first major maintenance outage to the blast furnace since the furnace was relined in 2009. The company recorded expenses of US$21.6 million during the second quarter of 2013 for planned outages, compared to US$1.0 million in expenses in each of the second quarter of 2012 and the first quarter of 2013. The 2013 second quarter results also include expenses of approximately US$6.2 million for costs related to an unplanned blast furnace outage at the company's Middletown Works, as discussed more fully below.
The 2013 second quarter results include a LIFO credit of US$12.4 million, compared to a LIFO credit of US$18.3 million in the second quarter of 2012 and a LIFO credit of US$6.0 million for the first quarter of 2013.
"Excluding the blast furnace repair costs, both planned and unplanned, AK Steel's second quarter performance improved compared to our first quarter," said James L. Wainscott, chairman, president and CEO of AK Steel. "We will continue to drive the company for improved results on every front on behalf of our shareholders and all of our constituents."
The company ended the second quarter of 2013 with total liquidity of US$905.3 million, consisting of cash and cash equivalents and US$857.7 million of availability under the company's revolving credit facility. There were US$40.0 millionof outstanding borrowings under the company's revolving credit facility as of 30 June 2013.
Six-Month Results
For the first six months of 2013, the company reported a net loss of US$50.3 million. For the corresponding six months of 2012, the company reported a net loss of US$736.0 million. The results for the first six months of 2012 include a non-cash income tax charge of US$735.6 million as a result of a change in a deferred tax asset valuation allowance in the second quarter.
For the first six months of 2013, the company reported a net loss of US$50.3 million. For the corresponding six months of 2012, the company reported a net loss of US$736.0 million. The results for the first six months of 2012 include a non-cash income tax charge of US$735.6 million as a result of a change in a deferred tax asset valuation allowance in the second quarter.
Sales for the first six months of 2013 were US$2,774.3 million compared to US$3,047.1 million in the first half of 2012. Shipments for the first half of 2013 were 2,613,500 tons compared to 2,661,700 tons in the first half of 2012. The company recorded expenses of US$22.6 million during the first six months of 2013 for planned outages, compared to expenses of US$1.6 million during the first six months of 2012.
The company reported adjusted EBITDA of US$114.3 million, or US$44 per ton, for the first six months of 2013, compared to US$137.2 million, or US$52 per ton, for the first six months of 2012. The decrease in earnings in the first six months of 2013 was primarily a result of higher planned maintenance outage costs.
Middletown Works Unplanned Blast Furnace Outage
As previously announced, the company's blast furnace at its Middletown Works experienced an unexpected mechanical failure in the charging apparatus internal to the furnace on 22 June 2013. The company executed its contingency plan and the blast furnace was taken off-line to prevent any damage to the furnace and to position it for start-up once the repairs were completed. During the period in which the blast furnace was off-line, the company utilized its existing inventory together with its Butler Works electric arc furnace and its Ashland Works blast furnace and purchased some merchant carbon slabs to help service its customers. The company restarted the blast furnace on 12 July 2013.
As previously announced, the company's blast furnace at its Middletown Works experienced an unexpected mechanical failure in the charging apparatus internal to the furnace on 22 June 2013. The company executed its contingency plan and the blast furnace was taken off-line to prevent any damage to the furnace and to position it for start-up once the repairs were completed. During the period in which the blast furnace was off-line, the company utilized its existing inventory together with its Butler Works electric arc furnace and its Ashland Works blast furnace and purchased some merchant carbon slabs to help service its customers. The company restarted the blast furnace on 12 July 2013.
The company's second quarter results for 2013 included a charge of US$6.2 million for the unplanned outage. The company maintains property damage and business interruption insurance, and it currently expects that its total uninsured portion of losses in the second half of 2013 will be between US$12.0 million and US$17.0 million.
Third Quarter 2013 Outlook
Consistent with its current practice, the company said that it will provide detailed guidance for its third quarter results in September. However, the company noted that it expects to incur additional expenses related to the unplanned Middletown blast furnace outage in the third quarter. Further, the timing and amount of any insurance recovery cannot be accurately predicted at this time and could occur after the third quarter, thus resulting in a mismatch of expenses and insurance recovery.
Consistent with its current practice, the company said that it will provide detailed guidance for its third quarter results in September. However, the company noted that it expects to incur additional expenses related to the unplanned Middletown blast furnace outage in the third quarter. Further, the timing and amount of any insurance recovery cannot be accurately predicted at this time and could occur after the third quarter, thus resulting in a mismatch of expenses and insurance recovery.
AK Steel produces flat-rolled carbon, stainless and electrical steels, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets. The company employs about 6,100 men and women in Middletown, Mansfield, Coshocton and Zanesville, Ohio; Butler, Pa.; Ashland, Ky.; Rockport, Ind.; and its corporate headquarters in West Chester, Ohio.
