West Chester, Ohio-based AK Steel reported Tuesday an $11.8 million net loss for Q1 2012, compared to a net income of $8.7 million a year ago and a Q4 2011 net loss of $193.9 million. Looking to Q2, AK said it expects to report net income in the second quarter of 2012. During the question-and-answer portion of the call, James L. Wainscott, Chairman, President and Chief Executive Officer of AK Steel, said that in Q2, AK will be consuming lower-cost iron ore, and steel prices are expected to firm. Additionally, AK is constantly looking for opportunities to increase prices, and in May/June, scrap prices will likely pick up a bit. Wainscott added that the economy and demand are improving, but "we need one more thing: more business and more orders." He added that on carbon products, AK is sold out on all products for April, and is into May and even June on some products.
Net sales for Q1 2012 were $1.5 billion on shipments of 1,325,900 tons, compared to sales of $1.58 billion on shipments of 1,423,100 tons for the year-ago first quarter. The company said its average selling price for the first quarter of 2012 was $1,138 per ton, a 6 percent increase from Q4 2011, and about 3 percent higher than Q1 2011.
Wainscott commented that the economy, input costs and actions of competitors, new and old, "keep me up at night." He said the US steel market's recovery has lagged because of increased capacity which is not needed right now. Additionally, AK is meeting ThyssenKrupp "in the market a bit more" but he said "I don't know how/if they'll get their return on investment...eventually, there will be a home for them," but until then, it could get a "little sloppy."
However, he was optimistic about AK's growing contract business, which is up 10 percent versus last year's Q1, and spot market exposure is down to 35 percent of shipments. He cited the importance of moving into black ink, which will be possible as AK continues to implement variable pricing mechanisms to recover high raw material costs, which he said the company "got smacked in the face" on.