AK Steel hits 8-year low as metal prices decline
AK Steel Holding Corp., a supplier of the metal to U.S. builders and automakers, forecast lower prices and a wider-than-estimated loss while announcing the sale of equity and debt to repay a credit facility.
The fourth-quarter loss excluding a tax expense will be 34 cents to 39 cents a share, West Chester, Ohio-based AK said on Tuesday. That trailed the 21-cent average of 17 analysts' estimates compiled by Bloomberg. AK said separately it will offer $350 million of secured notes, as much as $143.8 million of exchangeable notes and sell as many as 28.8 million shares to repay the facility and for general corporate purposes.
AK dropped 18 percent to $4.50, the biggest decline since Nov. 20, 2008, and the lowest closing price since June 2004. The shares have tumbled 46 percent this year. The company operates a plant in Butler.
Average steel selling prices will be down 5 percent compared with the third quarter, in part because of worsening global business conditions, and lower raw-material costs won't fully make up for the decline, AK said. The company is refinancing debt on concern that demand won't improve in 2013 because Congress may not act to avoid the so-called fiscal cliff, in which $607 billion in automatic spending cuts and tax increases start in January, said Kuni Chen, an analyst at CRT Capital Group.
“The financings here reflect management's conservative macro view and the fiscal cliff worries,” said Chen, who's based in Stamford, Conn. “You've seen AK Steel and other companies ... look to rebalance the capital structures now because we could certainly be in a much worse economic environment next year.”
The fourth-quarter net loss will be 67 cents to 72 cents a share, AK said. Steel shipments are forecast at about 1.37 million to 1.4 million tons, compared with 1.36 million tons in the third quarter.
Standard & Poor's downgraded AK's credit rating to B, five levels below investment grade, from B+. Moody's Investors Service downgraded the company an equivalent step, to B2 from B1.