US flat rolled producers report drop in Q1 profits

Major North American flat rolled producers US Steel, AK Steel, and Steel Technologies Tuesday released fiscal results for the first quarter, ended March 31, 2006. Pittsburgh, Pennsylvania-based flat rolled producer US Steel reported its net earnings for the first quarter were $256 million, or $2.04 per share, a significant decrease from net earnings of $459 million, or $3.51 per share, in the first quarter of 2005. Net sales fell to $3.73 billion from $3.79 billion a year earlier. The company cited the rebuilding of its major blast furnace as the reason for the huge drop in profit. However, now that the Gary No. 14 furnace is back online, US Steel reports second quarter increases in sales and shipments. Middletown Ohio's AK Steel also reported a decrease in net profit from the previous year. The company posted Q1 '06 net earnings of $6.2 million, or $0.06 per share, compared with $59.3 million, or $0.54 per share, earned in the first quarter of 2005. AK's net sales for the first quarter were $1.44 billion, a 1 percent increase Q1 '05 net sales. Costs associated with the lockout at AK Steel's largest plant, Middletown Works, were the main reason for the drop in earnings. While the company and the union that represents the locked out workers have not yet agreed on a new contract that would end the lockout, AK expects better fiscal results in the second quarter, citing higher market prices for flat rolled products, decreased energy costs, and increased shipments of its products. Louisville, Kentucky-based flat rolled manufacturer Steel Technologies Inc. reported that net income in its second quarter, ended March 31, 2006, totaled $3 million, or $0.23 per share, down from $15.4 million, or $1.17 per share, a year earlier. Net sales were $238.3 million, compared to Q2 '05 net sales of $275.3 million. The company attributes its dramatic decrease in profit to higher raw material costs and low operating margins. Looking forward, CEO Bradford T. Ray stated, "Current market demand is favorable and we have implemented several initiatives focused on improving our performance, product mix and returns."