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AK Steel Holding Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 3, 2011 08:48AM

AK Steel Holding Corp. (AKS) filed Quarterly Report for the period ended 2011-09-30. Ak Steel Holding Corp. has a market cap of $921.8 million; its shares were traded at around $8.36 with and P/S ratio of 0.2. The dividend yield of Ak Steel Holding Corp. stocks is 2.4%.



Highlight of Business Operations:

In the third quarter of 2011, the Company experienced a decline in shipments compared to the second quarter of 2011. The average selling price for the Company s products declined from the prior quarter by approximately 2%. As a result of these factors, third quarter 2011 revenue declined by approximately 12% from the second quarter of 2011. In addition, cost performance remained a challenge. While the Company did a good job managing its controllable costs, it continued to be negatively affected by increases in costs beyond its control, including steelmaking input costs. In summary, in the third quarter of 2011 the Company experienced downward pressure on its selling prices and lower shipments, while continuing to experience high input costs.

Total shipments for the three months ended September 30, 2011 and 2010 were 1,368,800 tons and 1,465,800 tons, respectively, and 4,288,900 tons and 4,301,000 tons for the nine months ended September 30, 2011 and 2010, respectively. The decline in total shipments in the third quarter of 2011 compared to the prior year was attributable principally to lower demand caused by weakness in the economy and a slowdown in the recovery from the recent recession. For the three months ended September 30, 2011, value-added products comprised 81.6% of total shipments compared to 82.4% for the three months ended September 30, 2010. For the nine months ended September 30, 2011, value-added products comprised 83.3% of total shipments compared to 83.4% for the nine months ended September 30, 2010. The Company continued to focus on maximizing profitability through product mix adjustments based on current and projected market demands—both domestically and internationally. The following table presents net shipments by product line:

For the three months ended September 30, 2011, net sales were $1,585.8, a 1% improvement over third quarter 2010 net sales of $1,575.9. For the nine months ended September 30, 2011, net sales were $4,958.8, an 8% improvement over net sales of $4,577.7

for the nine months ended September 30, 2010. The Company s average selling price for the third quarter of 2011 was $1,158 per ton. Although this was down about 2% from the immediately prior quarter, it represents an increase of approximately 8% from the Company s third quarter 2010 average selling price of $1,075 per ton. The Company s average selling price for the nine months ended September 30, 2011 was $1,151 per ton, an increase of approximately 8% from the Company s average selling price of $1,064 per ton for the nine months ended September 30, 2010. The higher average selling prices for 2011 periods over comparable 2010 periods were driven by increases in the cost of steelmaking raw materials, which were reflected in both higher contract prices and base selling prices in the spot market, as well as in higher surcharges. Net sales to customers outside the United States for the three and nine months ended September 30, 2011 totaled $243.6 and $734.5, respectively, compared to the three and nine months ended September 30, 2010 which totaled $203.0 and $629.5, respectively.

The Company reported an operating profit of $11.4, or $8 per ton, and $99.4, or $23 per ton, in the three and nine months ended September 30, 2011. These results compare to an operating loss of $102.5, or $70 per ton, in the three months ended September 30, 2010, and an operating profit of $20.7, or $5 per ton, in the nine months ended September 30, 2010. For the three and nine months ended September 30, 2011, the Company benefited from year-over-year increases in its average selling price. However, during those same periods, the Company also experienced lower sales volumes and significantly higher iron ore and other raw material costs that could not be fully recovered through price increases. The effect of the iron ore cost increases on the three-month operating profit in 2010 was exacerbated by the delay in setting the 2010 annual benchmark price for iron ore, which resulted in the Company assuming a lower price for iron ore in the first half of 2010 than ultimately was established. Because of that assumed lower iron ore price in the first half of 2010, the Company had to “true up” the difference in the third quarter of 2010, causing that quarter to reflect even higher pricing. That third-quarter “true up” of iron ore costs affects the year-over-year comparison of third quarter operating profit. This adjustment decreased the Company s operating profit (loss) in the third quarter of 2010 by approximately $76.0, or $52 per ton. See discussion in “Cost of Products Sold” for a further explanation of that impact. Excluding the effect of the furnace incident at Butler Works described in “Butler Works No. 5 EAF Incident”, the Company s adjusted operating profit was $21.2, or $15 per ton, in the third quarter of 2011.

Read the The complete Report



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