AKS AK Steel Holding Corp

Effective January 1, 2011, AK Steel Holding Corporation (AKS) will increase the base prices for all 200, 300 and 400 series flat-rolled stainless steel products. The company announced that the increase will be achieved through a reduction in the functional discount of four percentage points for cold rolled and hot rolled products. Base prices of automotive exhaust grades and bright anneal finishes will increase by $0.08 per pound.  

The impact of escalating steel prices in the U.S. is starting to filter through supply chains, with companies that buy and process steel raising their prices, stockpiling in anticipation of more increases and boosting volume to offset rising costs.

A K Steel is raising the price of its products to offset higher input costs of raw materials. Higher costs for steel, which are expected to continue well into 2011, are hitting the bottom lines of companies and prompting additional price increases.

Steelmaking is undergoing a crisis around the world as producers struggle with overcapacity, poor demand and economic weakness in the United States and Europe. U.S. Steel Corp. (X) one of the competitors of A K Steel is also raising prices as soaring raw material costs eat into margins.

Recently, AK Steel posted its third-quarter 2011 results, delivering a net loss of $3.5 million or $0.03 cents compared with a net loss of $59.2 million or $0.54 cents during the year-ago quarter. However, results were below the Zacks Consensus Estimate of break-even.

Third-quarter 2011 results include after-tax expenses of approximately $6.2 million, or $0.05 per diluted share related to the previously reported incident involving an electric steelmaking furnace at the Butler Works, which was damaged on July 1, 2011.

Net sales, as reported by the company, were $1,585.8 million on the shipments of 1,368,800 tons versus  sales of $1,575.9 million and 1,465,800 tons in the prior-year quarter. Net sales also missed the Zacks Consensus Estimate of $1,662 million. Average selling price for the third quarter of 2011 was $1,158 per ton, up 8% year over year, but down 2% sequentially.

Cash and cash equivalents reduced to $58.7 million as of September 30, 2011 versus $216.8 million as of December 31, 2010. Long-term debt of the company decreased marginally to $650.2 million as of September 30, 2011 versus $650.6 million as of December 31, 2010.

The debt-to-capitalization ratio stood at 50.8% as of September 2011 versus 50.2% as of June 30, 2010 and December 31, 2010.

As of September 30, 2011, cash from operating activities was $355.4 million compared with $176.5 million as of September 30, 2010.

Due to continued uncertainty and volatility with respect to economic conditions in the U.S. and in other markets served by the company, AK Steel is not currently providing any outlook for its fourth-quarter results.  However, the company stated that it intends to provide fourth-quarter guidance later during the quarter.

AK Steel is uniquely positioned to focus on products with high margins. Electrical steel continues to be the company’s strongest product line, with demand recovering in the U.S. and abroad, although at a slower rate. AK Steel is operating its plants at above 80% capacity and is well positioned to serve the end-markets when the demand rebounds.

However, higher input costs, particularly iron ore, are eroding the margins of the company. Iron ore pricing concerns have led to a negative outlook for steel manufacturers. A K Steel currently retains a Zacks #3 Rank (short-term Hold rating).

The company competes with Nucor Corporation (NUE) and Steel Dynamics Inc. (STLD).

 
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