WEST CHESTER, Ohio,
Sept. 3, 2014 /PRNewswire/ -- AK
Steel (NYSE: AKS) today provided guidance for its third quarter
2014 financial results. AK Steel said it expects to report
net income of $0.05 to $0.10 per
diluted share of common stock, representing a substantial
improvement over its second quarter results.
Severstal Dearborn Acquisition Update
On September 2, 2014, AK Steel was notified by the
Department of Justice that the company has received early
termination of the Hart-Scott-Rodino review for the proposed
acquisition of Severstal Dearborn, LLC. As a result of receiving
this clearance, subject to customary closing conditions, the
company expects to complete the acquisition in the third quarter of
2014. The company expects the acquisition of Dearborn to
enhance its future earnings and improve its credit profile and
liquidity, as well as position the company to better serve the
needs of its customers in the future.
The guidance contained in this release does not include the
effects on the company's earnings related to the acquisition of
Severstal Dearborn.
Shipments
For the third quarter of 2014, the company
expects shipments of approximately 1,350,000 tons, a decrease of
approximately 3% from the 1,398,000 tons shipped in the second
quarter of 2014. Shipments for the third quarter reflect the
effects of reduced production at the company's Ashland Works blast
furnace due to a recent unplanned maintenance outage and subsequent
production shortfall, partly offset by continued strong demand from
the automotive market.
Pricing
The company expects its average selling price
for the third quarter of 2014 will be approximately $1,100 per ton, similar to the second quarter
average selling price of $1,095 per
ton. The small anticipated increase in the company's overall
average selling price is primarily due to a lower percentage of
product shipments to the carbon spot market in the third quarter
compared to the second quarter.
Ashland (KY) Works
Blast Furnace Outage
As previously disclosed, the company
experienced an unplanned outage at its Ashland Works blast furnace
during the third quarter of 2014. The Ashland Works blast furnace
has returned to operation, but it continues to operate at rates of
production below its normal levels. To return the blast
furnace to normal production levels and to provide more reliable
operations in the future, the company believes it is prudent to
accelerate a planned outage from the first half of 2015 to the
fourth quarter of 2014. Among other things, the planned
outage will include a reline of the blast furnace hearth.
This planned outage is now expected to begin in late October and
last approximately 28 days. The capital investment associated
with the hearth reline is expected to be approximately $17 million.
The reduced operations at the Ashland Works blast furnace will
impact both the third and fourth quarters of 2014 in terms of
production, shipments, operating costs and margins.
For the third quarter, the company estimates that the unplanned
outage and the subsequent lower than normal production levels will
negatively affect its financial results by approximately
$25 million. This impact is
reflected in the company's third quarter guidance. For the
fourth quarter, the company estimates that its financial results
will be negatively impacted by approximately $13 million for reduced production from the blast
furnace prior to the planned outage in October and by $29 million related to repair costs and the loss
of production during the planned outage. The company will
purchase merchant carbon slabs and increase production of carbon
slabs at its Butler Works electric arc furnace to offset a portion
of the reduced production at Ashland Works. In addition, to
the extent the company's acquisition of Severstal Dearborn is
completed in advance of this planned outage, the company will
utilize the operational flexibility afforded by the addition of the
Dearborn blast furnace to help meet the needs of its
customers. Notwithstanding the negative impact from the
Ashland Works blast furnace issues, the company currently
anticipates an improvement in its financial performance in the
fourth quarter compared to the third quarter.
The company believes that the reline of the blast furnace hearth
will position it well to provide stable blast furnace operations in
the future by allowing the company to avoid the unplanned
disruptions that have occurred in 2014. In addition, the
company expects this investment to reduce the company's future
production costs by returning the Ashland Works blast furnace to
normal operating levels and allow the company to better serve its
customers in the future.
Lower Raw Material and Energy Costs
The company will
benefit from substantially lower iron ore and energy costs in the
third quarter compared to the prior quarter.
Income Taxes
The company said that it expects to
record income tax expense of approximately $3 million for the third quarter of 2014 using
the discrete method of accounting for income taxes.
Magnetation Joint Venture Update
The company
anticipates the start-up of Magnetation's pellet plant will occur
in September 2014. The pricing for the Magnetation pellets
provided to the company will be at a discount to the then current
market price. In addition, AK Steel also will benefit from
logistics and working capital advantages associated with purchasing
Magnetation pellets. AK Steel expects to consume the
Magnetation pellet plant's production at its Ashland Works and/or
Middletown Works blast
furnaces. When fully ramped up, Magnetation's pellet plant is
expected to produce approximately 50% of the annual pellets
consumed at the company's Ashland Works and Middletown Works blast furnaces and continues to
represent an important long-term strategic hedge against volatile
iron ore prices.
Forward-Looking Statements
The statements in this
release with respect to future results reflect management's
estimates and beliefs and are intended to be, and hereby are
identified as "forward-looking statements" for purposes of the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. Words such as "expects," "anticipates," "believes,"
"intends," "plans," "estimates" and other similar references to
future periods typically identify such forward-looking
statements.
The company cautions readers that such forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those currently expected by
management, including that the acquisition of Severstal Dearborn
may not be consummated, or may not be consummated in a timely
manner; that Severstal Dearborn will not be integrated successfully
into AK Steel following the consummation of the acquisition; and
that cost savings, synergies, accretion to earnings, increased
shipments and other anticipated benefits and opportunities from the
acquisition may not be fully realized or may take longer to realize
than expected.
In addition, our results and financial condition and any
benefits from the acquisition, if consummated, could be adversely
affected by reduced selling prices, shipments and profits
associated with a highly competitive industry with excess capacity;
changes in the cost of raw materials and energy; the company's
significant amount of debt and other obligations; severe financial
hardship or bankruptcy of one or more of the company's major
customers; reduced demand in key product markets due to competition
from alternatives to steel or other factors; increased global steel
production and imports; excess inventory of raw materials; supply
chain disruptions or poor quality of raw materials; production
disruption or reduced production levels, including the anticipated
effects of the planned outage at the Ashland Works blast furnace;
the company's healthcare and pension obligations; not timely
reaching new labor agreements; major litigation, arbitrations,
environmental issues and other contingencies; regulatory compliance
and changes; climate change and greenhouse gas emission
limitations; financial, credit, capital and banking markets; the
company's use of derivative contracts to hedge commodity pricing
volatility; the value of the company's net deferred tax assets;
inability to fully realize benefits of long-term cost savings and
margin enhancement initiatives; lower quantities, quality or yield
of estimated coal reserves of AK Coal; increased governmental
regulation of mining activities; inability to hire or retain
skilled labor and experienced manufacturing and mining managers;
and IT security threats and sophisticated cybercrime; as well as
those risks and uncertainties discussed in the company's Annual
Report on Form 10-K for the year ended December 31, 2013, as updated in subsequent
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
filed with or furnished to the Securities and Exchange
Commission. Except as required by law, the company disclaims
any obligation to update any forward-looking statements to reflect
future developments or events.
AK Steel
AK Steel is a world leader in the production
of flat-rolled carbon, stainless and electrical steel products,
primarily for automotive, infrastructure and manufacturing,
construction and electrical power generation and distribution
markets. The company's AK Tube subsidiary produces carbon and
stainless electric resistance welded tubular steel products for
truck, automotive and other markets. Headquartered in
West Chester, Ohio (Greater Cincinnati), the company employs
approximately 6,500 men and women at seven steel plants and two
tube manufacturing plants across four states: Indiana, Kentucky, Ohio and Pennsylvania. The company also
has interests in iron ore through its Magnetation LLC joint venture
and in metallurgical coal through its AK Coal subsidiary.
Additional information about AK Steel is available at
www.aksteel.com.
SOURCE AK Steel