James L. Wainscott, Chairman and CEO of West Chester, Ohio-based AK Steel, said that Q4 was the most challenging quarter of 2011 during the company's conference call Tuesday. Challenging market conditions and high raw materials costs negatively impacted AK Steel's profitability in Q4 2011, resulting in a $193.9 million net loss, compared to a net loss of $98.3 million in Q4 2010 and a $3.5 million net loss in Q3 2011. For the full year 2011, AK Steel reported a net loss of $155.6 million, compared to a net loss of $128.9 million in 2010.
"The economic recovery we've been anticipating for several years simply did not fully materialize in 2011," Wainscott said, adding that in "2011 we thought were on the road to recovery, but candidly, the economy and raw material prices did not cooperate."
Nonetheless, Wainscott was optimistic about 2012, and while he did not answer a question pertaining to whether or not AK Steel would be profitable in Q1 2012, said that its investments in the second half of 2011 to become more self-sufficient with regards to raw material costs would have a positive impact on financial results. "Lack of vertical integration over the last seven or eight years has cost us $2 billion," Wainscott noted, but "it's a new day for AK Steel."
In addition to AK Steel's growth toward becoming more vertically integrated, Wainscott said that automotive customers and all customers with contracts greater than six months now have stipulation in the contracts that allow for price adjustments based on iron ore costs. The variable pricing mechanism "will dampen the volatility" AK normally experiences with fluctuations in steelmaking input costs. About 90 percent of all of AK Steel's contract agreements have some sort of raw material "pass-through's" but the goal is to get that number to 100 percent, according to AK Steel executives.