AK Steel Corporation issued the following announcement on April 29.
AK Steel (NYSE: AKS) today reported its financial results for the first quarter of 2019.
First Quarter 2019 Highlights
Sales of $1,697.7 million, a 2% increase from first quarter 2018
Net loss of $4.5 million, or $0.01 per diluted share, including the Ashland Works closure charge of $77.4 million
Adjusted net income of $72.9 million, or $0.23 per diluted share
Adjusted EBITDA of $160.9 million, or 9.5% of sales; up 36% from a year ago
“Our solid first quarter operating performance benefitted from our annual customer contract renewals. A higher proportion of contractual sales helps to reduce the volatility in our business and this was reflected in our first quarter results,” said Roger K. Newport, Chief Executive Officer. “We also continued to strengthen our position with automotive manufacturers by commercializing new steel solutions, including through our downstream tubing and stamping operations.”
AK Steel reported a net loss of $4.5 million, or $0.01 per diluted share of common stock, for the first quarter of 2019, which included a $77.4 million charge for the Ashland Works closure discussed below. Excluding this item, adjusted net income was $72.9 million, or $0.23 per diluted share, for the period. For the first quarter of 2018, net income was $28.7 million, or $0.09 per diluted share.
The company’s adjusted EBITDA (as defined in the “Non-GAAP Financial Measures” section below) was $160.9 million, or 9.5% of net sales, for the first quarter of 2019. Adjusted EBITDA increased 36% from $118.7 million, or 7.2% of net sales, in the first quarter a year ago. Adjusted EBITDA in the recent first quarter included mark-to-market gains of $21.8 million from iron ore derivatives. For the same period in 2018, the company recorded a mark-to-market loss of $7.7 million. Also included in adjusted EBITDA for the recent first quarter was an $11.6 million gain from the sale of electrical transmission assets at the company’s Dearborn Works. The sale of the assets will transfer the maintenance requirements of those assets to the buyer.
Net sales for the recent first quarter were $1.7 billion, a 2% increase, compared to the first quarter of 2018. The increase was due to higher selling prices for most products and increased shipments to the distributors and converters market, partly offset by lower shipments to the automotive market, as expected.
The company reported liquidity of $937.5 million at the end of the first quarter, consisting of cash and cash equivalents and $896.8 million of availability under the company’s revolving credit facility. The company reported outstanding borrowings under the credit facility of $380.0 million at March 31, 2019.
|(Dollars in millions, except per share and per ton data)||Three Months Ended
|Flat-rolled steel shipments (000 tons)||1,388.4||1,430.9|
|Selling price per flat-rolled steel ton||$||1,112||$||1,045|
|Net income (loss) attributable to AK Steel Holding Corporation||(4.5||)||28.7|
|Adjusted net income attributable to AK Steel Holding Corporation||72.9||28.7|
|Net income (loss) per diluted share attributable to AK Steel Holding Corporation||$||(0.01||)||$||0.09|
|Adjusted net income per diluted share attributable to AK Steel Holding Corporation||0.23||0.09|
Ashland Works Closure
In January 2019, the company announced its intention to close its Ashland Works facility. The Ashland Works facility includes a blast furnace and steelmaking operations which were idled in December 2015, and a hot dip galvanizing coating line, which has remained operational. The company is transitioning its products to its other U.S. coating lines, and will close the Ashland Works line before the end of 2019. The company recorded a charge of $77.4 million during the first quarter of 2019 for termination of certain take-or-pay supply agreements, supplemental unemployment and other employee benefit costs, pension and OPEB termination benefits (including $13.3 million recorded in pension and OPEB (income) expense), estimated multiemployer plan withdrawal liability, and other costs.
Based on the change in hot-rolled carbon spot market pricing from approximately $720 per ton in January to about $690 per ton currently, the company is updating its annual guidance. The company’s annual guidance had indicated that for every $10 change in the carbon hot-rolled coil spot market price, annual earnings would be impacted by $5 to $7 million. Accordingly, the company now expects net income to be in the range of $76 to $96 million, or $0.24 to $0.30 per diluted share. Excluding the impact of the Ashland Works closure, adjusted net income is expected to be in the range of $153 to $173 million, or $0.48 to $0.54 per diluted share, and adjusted EBITDA to be in the range of $505 to $525 million. This updated guidance aligns with the company’s previous guidance.
Other outlook items include:
The company’s adjusted net income and adjusted EBITDA guidance exclude the effects of the Ashland Works charge of $77.4 million recorded in the first quarter of 2019, as discussed above.
Planned maintenance outage expenditures in 2019 are still expected to be $70 to $80 million and substantially heavier in the second and fourth quarters. As a result, the company expects to have a similar level of adjusted EBITDA between the first half and the second half of the year.
The company expects working capital to be a small source of cash for the year. In January, the company had indicated that working capital would be a small use of cash.
The other annual guidance items remain unchanged from the company’s January guidance.
The foregoing outlook is based on AK Steel’s current estimates and may change based on business conditions and other factors. There are many other items that could affect the company’s 2019 results, as outlined in the Forward-Looking Statements below, including developments in the domestic and global economies, in the company’s business, in trade actions and the imposition of tariffs, and in the businesses of the company’s customers, suppliers and competitors.
First Quarter 2019 Earnings Conference Call
AK Steel will provide live listening access on its website for the company’s earnings conference call on April 30, 2019 at 8:30 a.m. Eastern Time. A link to the webcast is on the company’s home page at www.aksteel.com. Presentation slides will also be available on the webcast link and under the Investor Presentations section on the website. The webcast will be archived on the company’s website for three months and will be accessible from the Investor News and Events section.
Original source can be found here.