AK Steel Announces Q2 Financial Results

- Aug 02, 2018-

AK Steel reported its financial results for the second quarter of 2018.

Second Quarter 2018 Highlights
1. Net income of USD 56.6 million, or USD 0.18 per diluted share
2. Adjusted EBITDA of USD 148.4 million, or 8.5% of sales
3. Revenues of USD 1,746.6 million, a 12% increase from second quarter 2017
4. Free cash flow generation allowed for a USD 70 million reduction in debt

Mr Roger K Newport, Chief Executive Officer of AK Steel said that “We were able to generate meaningful earnings and free cash flow during the second quarter, despite the impact of certain operational events. We expect that the continued strong business environment will result in improved performance in the second half of 2018 compared to the first half and position us well for resetting a majority of our annual contracts later this year.”

AK Steel reported net income of USD 56.6 million, or USD 0.18 per diluted share of common stock, for the second quarter of 2018. The company’s adjusted EBITDA (as defined in the “Non-GAAP Financial Measures” section below) was USD 148.4 million, or 8.5% of net sales, for the second quarter of 2018. These financial results were impacted by USD 11.5 million of costs associated with operational events during the quarter, including a fire at one of the company’s temper mills and a power outage at its Butler Works caused by a lightning strike.  Higher steel selling prices during the quarter more than offset cost increases for certain raw materials and supplies, including graphite electrodes, compared to the second quarter of 2017.

Net sales for the second quarter of 2018 increased compared to the second quarter of 2017 due to higher selling prices and the effect of the Precision Partners acquisition. For the second quarter of 2017, net income was USD 77.2 million, or USD 0.24 per diluted share, and adjusted EBITDA was USD 167.1 million, or 10.7% of net sales.

The company substantially increased liquidity by approximately USD 100.0 million to USD 952.1 million during the second quarter. Liquidity consists of cash and cash equivalents and USD 908.5 million of availability under the company’s revolving credit facility. As a result of solid operating cash generation during the quarter, the company reduced outstanding borrowings under the credit facility by USD 70.0 million to USD 370.0 million at June 30, 2018.

Outlook
The company anticipates that market conditions will remain strong in the third quarter.  Accordingly, the company expects:
An increase in flat-rolled shipments in the third quarter of approximately 5% compared to the second quarter of 2018. The company expects relatively flat automotive shipments despite the seasonal July automotive plant downturns and higher carbon steel shipments to the distributors and converters market.
An average selling price per flat-rolled ton of USD 1,105. The estimated average selling price reflects an anticipated change in mix as a result of increased shipments to the distributors and converters market tempering the effect of automotive, stainless and electrical steel shipments at relatively higher selling prices.
Planned outage costs of approximately USD 8.0 million in the third quarter of 2018, compared to USD 17.9 million in the second quarter.
The anticipated improvements in pricing and shipments will be partially offset by the continued outage of one of the company’s temper mills, which is expected to be operating by late September, as well as from higher costs for certain raw materials and supplies including graphite electrodes. Accordingly, the company expects margins to improve by about 50 basis points from the second quarter of 2018.
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 2018 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.

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