On September 9, AK Steel (AKS) said that it will be releasing the results from its third quarter before the markets open on October 22. After the closing bell on Thursday, the producer of flat-rolled carbon, stainless and electrical steels provided outlook for the quarter, warning of a wider-than-expected loss.
West Chester, Ohio-based AK Steel said that it sees a net loss in the range of 22 cents to 27 cents, in part because of an unplanned outage at a Middletown, Ohio blast furnace that cost the company $12 million, or 9 cents per share, in profits, after recovering a portion of the losses through insurance. Analysts were expected a loss of only 11 cents per share for the third quarter.
The company also said it anticipates more losses to be incurred and insurance recoveries in the fourth quarter related to the blast furnace outage.
In the second quarter, the steelmaker took a charge of $21.6 million related to a planned maintenance shutdown on the Middletown Works blast furnace and was also hit by a $6.2 million expense with the unplanned mechanical failure in June. Costs associated with planned outages during the third quarter are expected to be $5 million, which is far better than the $28.5 million it claimed in Q3 2012.
The blast furnace is the part of the mill where iron ore, fuel and limestone are heated and reduced to make hot metal. The Middletown plant wasn’t able to produce any new carbon flat-rolled steel during the shutdowns, affecting shipments to customers in carbon spot markets. The company used existing inventory and used its Butler Works and Ashland Works factories to service customers until the Middletown furnace was restarted in mid-July.
For the third quarter, AK Steel expects shipments between 1.24 million and 1.26 million tons, compared to 1.32 million tones in the second quarter, a decrease of 5 percent to 6 percent. Automobile factories shutting down for retooling during the quarter also partially account for the reduction in shipments.
Average selling prices are expected to rise mildly, from $1,061 per ton in the second quarter to $1,065 per ton in the third quarter. In last year’s third quarter, the company shipped 1.36 million tons at an average price of $1,073 per ton.
The automobile industry has been a bright spot for AK Steel, but demand in other components, such as electrical steel, stainless steel and commodity carbon markets, have kept pressure on profits.
Shares of AKS started 2013 simply terrible, plunging from near $5 each to lows of $2.76 in April, but have managed to slowly rise since to pare the losses, despite the unplanned outage and associated costs. Shares closed Thursday at $4.44, but have sunk back 10 percent to $4.00 in pre-market trading on Friday following Thursday’s guidance release.