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Bayou Steel Reports Strong 2nd Quarter Results

05/24/2005 - Bayou Steel Corp. reported net income of $5.1 million on sales of $62.1 million for the second quarter (ending March 31, 2005) of fiscal 2005.

Bayou Steel Corp. reported net income of $5.1 million on sales of $62.1 million for the second quarter (ending March 31, 2005) of fiscal 2005.

Bayou Steel emerged from bankruptcy effective February 18, 2004. For accounting purposes, financial statements for periods after February 18, 2004 are not directly comparable to periods prior to February 18, 2004 (the Predecessor Company).

Among other changes, when Bayou Steel emerged from bankruptcy, there were substantial reductions in its debt as well as revaluations of assets and other liabilities.

The second quarter and year-to-date periods of fiscal 2004 reflect both the company's and Predecessor Company's results, rendering the traditional comparison of net income with fiscal 2005 less useful.

Second Quarter Results — The $5.1 million net income equates to $2.50 per fully diluted share. Sales of $62.1 million compare to sales of $60.2 million for the comparable prior-year quarter. The increase in sales was entirely due to a $126 per ton increase in selling price (to $532 per ton).

The selling price increase has generally been related to sharply escalating prices for scrap and increasing prices for alloys and fuel during fiscal 2004. The company was successful during the period in passing through several price increases for its products, offsetting higher scrap and additive costs, and increasing gross margin by $75 per ton.

Year-to-Date Results — Net income of $9.3 million equates to $4.60 per fully diluted share for the first six months.

Jerry M. Pitts, President and CEO, commented, "Operating income in the second quarter of fiscal year 2005 has increased significantly as compared to the prior year quarter and was one of the best quarters in the company's history. Strong margins contributed to the growth of earnings. Given the challenges of the last four years in the steel industry, it is especially pleasing to see the market continue to support healthy margins while demand has softened."

Mr. Pitts continued, "In December, we successfully achieved a much needed shutdown in the manufacturing plants to conduct equipment maintenance that was partially deferred due to limited funds during the Company's bankruptcy. Since the start-up, our production and efficiencies have increased in both our Louisiana and Tennessee plants. For example, productivity in our melt shop increased by 17% in the second quarter as compared to the immediate preceding quarter in which we took the shutdown. These improvements will enable us to better control costs and capitalize on favorable market conditions. In December, we opened a remote scrap processing location. Our ferrous and non-ferrous operations are expanding according to plan. We expect this facility to provide the Louisiana plant with additional scrap metal and replace more costly purchased scrap."

Mr. Pitts added, "The decline in scrap pricing and scrap surcharges in recent months has resulted in conservative buying patters by our customers. The quarter also reflected some seasonal weakening in demand. As we anticipated, customers' adjusted inventories and shipments declined. As a result, we have adjusted operations to control our inventories. This may increase per unit fixed costs. Our outlook for the June 2005 quarter, however, is positive with demand remaining steady and margins continuing at high levels."

Bayou Steel Corp. manufacturers light structural and merchant bar products in LaPlace, Louisiana and Harriman, Tenn. The company also operates three stocking locations along the inland waterway system near Pittsburgh, Chicago, and Tulsa.