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Wheeling-Pittsburgh Reports 1st Quarter Results
05/11/2007 - Wheeling-Pittsburgh reports a net loss of $59.9 million on net sales of $397.7 million for the first quarter ended March 31, 2007.
Wheeling-Pittsburgh Corp., the holding company of Wheeling-Pittsburgh Steel Corp., reported a net loss of $59.9 million on net sales of $397.7 million for the first quarter ended March 31, 2007.
First Quarter Results—The $59.9-million net loss ($(3.92) per basic and diluted share) compares to a net loss of $2.1 million ($(0.15) per basic and diluted share) for first quarter of 2006. The company also reported an operating loss of $52.9 million, which compares to an operating loss of $0.1 million for first quarter of 2006.
Steel shipments totaled 603,893 tons ($659 per ton) vs. shipments of 620,668 tons ($680 per ton) for the first quarter of 2006 (excluding non-steel product revenue). Net sales totaled $397.7 million, which compares to net sales of $437.0 million for the first quarter of 2006. (Results for the first quarter of 2006 included $14.8 million from the sale of coke to the company's joint venture partner.)
The decrease in net sales as compared to the year-ago quarter was due to a decrease in the volume of steel products sold compounded by a $21-per-ton drop in average steel product selling price, reflecting the remnants of the service-center-inventory overhang condition, as well as the absence of coke revenue in the first quarter 2007 due to the deconsolidation of the Mountain State Carbon joint venture effective January 1, 2007.
Cost of sales totaled $416.3 million, which compares to $408.1 million cost of sales for the first quarter of 2006. In the first quarter of 2006, cost of sales included the cost of coke sold of $13.2 million and was reduced by an insurance recovery of $7.3 million related to a prior-year claim.
Cost of sales for steel products totaled $416.3 million ($689 per ton) versus $402.2 million ($648 per ton) during the first quarter of 2006. The $14.1-million overall increase resulted principally from a $41 per-ton increase, offset by a decrease in the volume of steel products sold. The per-ton increase in cost of steel products resulted principally from lower steelmaking production levels as well as changes in the cost of certain raw materials (including scrap, pig iron and zinc). Natural gas cost was lower than in the first quarter of 2006. Severance costs accrued in the first quarter 2007 results for the salaried workforce reduction initiative amounted to $1.4 million within cost of goods sold and $2.5 million within selling, general and administrative expenses.
Management Comments—"The company's first quarter results were significantly impacted by a very low January production level, which was a result of the anemic order book inherited in December 2006,” said James P. Bouchard, Chairman and CEO. “The loss, while a bit higher than expected, includes approximately $4 million in accruals for a salary-workforce reduction implemented in March. The eventual reduction of over 90 salaried employees represents an important step in improving the cost competitiveness of Wheeling-Pitt, as it is expected to save approximately $9.0 million on an annualized basis.
The new management team’s mission is to remedy the company’s difficult production, supply-chain and selling problems. Bouchard said the company continues to work diligently to rectify these problems in order to improve the company’s operational and financial performance. On the commercial side, Bouchard said, “we are making progress through a significant improvement in the order book.”
Bouchard noted that the proposed combination with Esmark has entered the review process with the Securities and Exchange Commission, and “we anticipate that the closing of the transaction will occur this summer.”
Wheeling-Pittsburgh is a steel company engaged in the making, processing and fabrication of steel and steel products using both integrated and electric arc furnace technology. The company manufactures and sells hot rolled, cold rolled, galvanized, pre-painted, and tin mill sheet products. The company also produces a variety of steel products including roll formed corrugated roofing, roof deck, floor deck, bridgeform and other products used primarily by the construction, highway and agricultural markets.
