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Fourth-Quarter & Year-End Reports: Mills
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In their fourth-quarter and year-end reports to analysts and investors, executives from the major publicly held mills all forecast continuing gains for the metals markets in 2011.

AK Steel
Fourth-Quarter Loss Ends
Another Unprofitable Year
AK Steel, West Chester, Ohio, reported an adjusted net loss of $54.5 million for full-year 2010, excluding costs related to the shutdown of the company’s Ashland, Ky., coke plant and other special charges. This compares to a net loss of $74.6 million for 2009.

Sales for full-year 2010 totaled $5.97 billion, compared to $4.08 billion for 2009. Shipments for 2010 totaled 5,660,900 tons, up from 3,935,500 tons in 2009.

AK Steel reported an operating loss for fourth-quarter 2010 of $154.6 million, or $114 per ton, compared to an operating profit of $87.0 million, or $64 per ton, for the fourth quarter of 2009.

Net sales for the fourth quarter were $1.39 billion on shipments of 1,359,900 tons compared to sales of $1.32 billion on shipments of 1,368,300 tons for the year-ago fourth quarter. The company said its average selling price for the fourth quarter of 2010 was $1,022 per ton, approximately 6 percent higher than the $964 per-ton average price realized in the fourth quarter of 2009.

AK Steel expects to ship approximately 1,450,000 tons in the first quarter of 2011, 7 percent more than fourth-quarter 2010 shipments. Its average per-ton selling price is expected to increase approximately 8 percent compared to the fourth quarter due to anticipated higher contract and spot market prices and an improved product mix. Overall, the company expects to break even at the operating level for the first quarter of 2011, representing a substantial improvement compared to the $60 per ton adjusted operating loss experienced for the fourth quarter of 2010.

“AK Steel employees can be proud of their performances in 2010, which in some cases were all-time records,” said James L. Wainscott, chairman, president and CEO. “Unfortunately, soaring raw material costs and a stubbornly slow economic recovery overshadowed that great work. Nonetheless, AK Steel is poised for the road to recovery in 2011.”

Alcoa
Aluminum Maker Ends 2010
with Strong Fourth-Quarter Results
Alcoa announced fourth-quarter 2010 income from continuing operations of $258 million, the company’s highest quarterly income since the economic downturn and $197 million higher than the third quarter of 2010.

Improved earnings were driven by higher pricing, continued strengthening in most end markets and improved productivity as a result of the company’s Cash Sustainability Program. Results were offset somewhat by a weaker U.S. dollar and higher energy and raw material costs.

“We exceeded all of our targets and continued to build momentum,” said Klaus Kleinfeld, Alcoa chairman and CEO in his comments to analysts and investors Jan. 10. “We delivered all-time record cash from operations, record fourth-quarter free cash flow, improved earnings, grew revenue and paid down debt.

“In 2011, we see aluminum growing another 12 percent on top of last year’s 13 percent improvement. We are well positioned to outpace the recovery in the markets we serve and grow shareholder value,” he added.

Alcoa projects global demand for aluminum to double by 2020. For 2011, the company projects growth in all end markets on a global basis.

Alcoa’s revenue for the fourth quarter totaled $5.7 billion, up 7 percent compared to the third quarter. The increase was driven by an improvement in realized pricing for both alumina (9 percent) and aluminum (11 percent), as well as continued strengthening in most end markets.

Income from continuing operations in the quarter totaled $258 million, up from $61 million in the previous quarter and a loss of $266 million in the fourth quarter of 2009.

For the year 2010, Alcoa’s revenue hit $21.0 billion, up from $18.4 billion in 2009. Income from continuing operations totaled $262 million, up from a loss of $985 million in 2009. Full-year 2010 net income totaled $254 million, up from a net loss of $1.15 billion in 2009.

Alcoa exceeded all targets in its Cash Sustainability Program in 2010. Results for the year include procurement savings of $2.64 billion, overhead savings of $509 million, capital spending reduced to $1.21 billion and working capital at 34 days.

Allegheny Technologies
Key Markets Showing
Signs of Strong Growth
Specialty metals maker Allegheny Technologies Inc., Pittsburgh, reported net income of $70.7 million on sales of $4.05 billion for full-year 2010, up from a net income of $31.7 million on sales of $3.05 billion in 2009.

In the fourth quarter, the company’s net income totaled $15.1 million on sales of $1.04 billion. This compares to $37.8 million in income on sales of $815.7 million in fourth-quarter 2009.

“Sales for 2010 increased by approximately 33 percent compared to 2009. We view 2010 as the transition year to the resumption of strong secular growth in our key global markets beginning in 2011,” said L. Patrick Hassey, chairman and CEO.

Shipments for most products recovered from low levels in 2009. Total titanium shipments increased 12 percent to nearly 38 million pounds. In the High Performance Metals segment, shipments of nickel-based alloys and specialty alloys increased 14 percent, while shipments of exotic alloys decreased 14 percent. In the Flat-Rolled Products segment, shipments of high-value products increased 24 percent and shipments of standard products increased 35 percent.

“As we begin 2011, our key global markets are showing signs of strong growth,” Hassey said, elaborating on each one.

“Our outlook for the commercial aerospace market remains bullish. We expect to benefit from increased production schedules for legacy aircraft and increased demand for aftermarket jet engine spare parts. In addition, both Boeing and Airbus have reported that they are considering further single-aisle aircraft production increases beyond 2012.

“We expect the global oil and gas/chemical process industry to remain strong due to increased demand from offshore oil and gas projects, large sour gas pipelines, desalination projects, and increasing orders for chemical processing projects from several areas of the world.

“In the electrical energy market, we expect demand for our grain-oriented electrical steel for power distribution to remain essentially flat. We also expect demand from the nuclear electrical energy market to remain flat in 2011, although growth opportunities exist for new nuclear plants under construction over the next several years.

As the U.S. economy continues to recover, ATI officials believe company earnings will be much improved in 2011. “In total, we expect 2011 revenue growth of 15 percent to 20 percent compared to 2010, and expect segment operating profit to be approximately 15 percent of sales,” Hassey said.

Carpenter Technology
Specialty Metals Maker Sees Momentum
Carpenter Technology Corp., Wyomissing, Pa., reported net income of $9.3 million on net sales of $375.6 million for its fiscal second quarter ended Dec. 31. This compares to net income of $3.5 million for the same quarter a year earlier.

“We are pleased with the continued strong volume and revenue momentum, which we expect to carry over into the second half of our fiscal year,” said William A. Wulfsohn, president and CEO. “Our operating margins should noticeably improve over the next several quarters as pricing and mix improvement efforts hit the bottom line.

“Longer term, we are increasingly excited about how we are positioned for growth in our key end-markets of aerospace and energy. In aerospace, we expect to benefit from a strong projected build rate, a higher material content per plane and increasing overall market share with customers who are also improving their position in the industry. In energy, our recently announced acquisition of Amega West gives us a stronger position in the fast-growing oil and gas market with key customers, and expands the opportunities for our high-end alloys.”

Carpenter’s aerospace market sales were $150.2 million in the second quarter, up 27 percent compared with the same period a year ago. Aerospace results reflect the fifth consecutive quarter of strong demand for engine components and returning demand for titanium fastener material.

Industrial market sales were $88.2 million, up 60 percent compared with the second quarter of fiscal year 2010. The year-over-year growth reflects increased demand and supply chain restocking for materials that go into niche industrial applications.

Energy market sales of $41.8 million increased 104 percent from the second quarter a year earlier. The increase reflects sharply higher demand for materials used in oil and gas applications and recovering demand for high-value materials used in industrial gas turbines.

Consumer market sales were $35.7 million, an increase of 49 percent from the second quarter of fiscal year 2010. Increases in volumes and revenues were due to demand for fasteners and electronic components used within housing and appliances.

Automotive market sales were $33.7 million, an increase of 42 percent from a year earlier. The growth rates reflect continued sales of lower value materials used in valves, combined with renewed demand for materials used in high-value turbo charger products and fuel system components.

International sales in the second quarter were $122.0 million, an increase of 42 percent compared with the same quarter a year earlier. Sales in Europe were up 47 percent on 61 percent higher volume driven mainly by increased demand in aerospace, energy and automotive markets. Asia revenues increased 39 percent on 62 percent higher volume driven by significant broad-based growth in most markets with particular strength in the energy and automotive sectors. International sales in the quarter represented 32.5 percent of total sales, unchanged from the prior year, reported Carpenter officials.

Nucor
Profitable Year Ends
with Small 4Q Loss
Nucor Corp., Charlotte, N.C., saw net earnings of $134.1 million on net sales of $15.84 billion for full-year 2010, up from a net loss of $293.6 million on sales of $11.19 billion in 2009. The average sales price per ton increased 13 percent, while total tons shipped to outside customers increased 25 percent from 2009 levels, reported company officials to analysts and investors.

In the fourth quarter, the company reported a net loss of $11.4 million on net sales of $3.85 billion, down 7 percent from sales in the previous quarter, but up 31 percent compared with fourth-quarter 2009 sales.

Nucor shipped a total of 5,334,000 tons to outside customers in the fourth quarter, a decrease of 5 percent from the third quarter, but an increase of 15 percent over last year’s fourth quarter. The average sales price per ton was down 2 percent from the previous quarter, but up 14 percent from fourth-quarter 2009.

Overall operating rates at Nucor’s steel mills were 68 percent in the fourth quarter, up from 58 percent in last year’s fourth quarter. Steel mill utilization rates increased from 54 percent for the full year 2009 to 70 percent for the full year 2010. Utilization rates are expected to continue improving through the first quarter. Recent price increases for all steel mill products are expected to have a positive impact on earnings and return the company to profitability in the first quarter, said company officials.

On the negative side, raw material costs may remain volatile, they added. Improvement in operating rates will be the result of a combination of improving demand and steel buyers reacting to increasing prices. It remains to be seen how much of this improvement is due to real demand.

The most challenging markets for Nucor products continue to be those associated with residential and nonresidential construction.

Steel Dynamics
2010 Sales Hit $6.3 Billion,
Net Income $141 Million
Steel Dynamics Inc., Fort Wayne, Ind., reported a net income of $141 million on net sales of $6.3 billion for full-year 2010. In 2009, the company lost $8 million on sales of 4.0 billion

For the fourth quarter, sales of $1.5 billion netted the company $8 million. In comparison, fourth-quarter 2009 net income was $27 million on net sales of $1.2 billion, while third-quarter 2010 net income was $19 million on net sales of $1.6 billion.

“The quarter ended on a much more positive note than it began, as our industry experienced generally increased demand resulting in sharply increased order entry and pricing for our operations,” said Keith Busse, chairman and CEO. “Early in the quarter, our flat-rolled operations suffered from low volume and pricing. However, beginning in early November, order entry increased, and was quickly followed by significant price increases related, in part, to increased scrap costs. Our long products operations also showed improvement in volume and pricing mid-quarter.”

SDI’s steel shipments for 2010 totaled 5.3 million tons, with an average external selling price of $774 per ton, vs. 2009 shipments of 4.0 million tons with an average selling price of $662 per ton. In comparison to 2009, SDI’s average ferrous scrap cost per ton charged in 2010 increased $107 per ton.

The company’s OmniSource recycling operation saw ferrous shipments of 5.2 million gross tons in 2010, 43 percent higher than shipments of 3.6 million gross tons in 2009. OmniSource provided 47 percent of the ferrous scrap purchased by SDI’s steel mills during the year. Nonferrous shipments totaled 961 million pounds, 23 percent higher than shipments of 780 million pounds in 2009.

The company’s iron-nugget start-up facility in Minnesota, Mesabi Nugget, is back in operation after downtime for equipment modifications and maintenance that cost the company $13 million. “Although 2010 iron nugget production fell short of our initial estimates, we are pleased with the superior quality of the nugget being produced.” Busse said. “We are gaining valuable development experience in refining the commercial-scale production process. As 2011 progresses, we remain very optimistic concerning Mesabi’s continued production ramp-up.”

Looking back at market share gains in 2010, company officials said they are pleased that revenues and shipping volumes rebounded strongly, returning SDI to annual profitability.

Looking ahead to 2011, the outlook for the new year is favorable, Busse said. Continual improvement in the U.S. economy could produce increased volumes for both the company’s steel and metals recycling operations. Steel consumption is expected to grow in 2011 in the automotive, transportation, energy, industrial, and the agricultural and construction equipment sectors.

“These trends support an improved operating environment for all of our segments, but it is difficult to offer a view of the entire year. Given our current activity, we anticipate substantially improved first quarter 2011 earnings for all of our segments compared to fourth-quarter results,” Busse said.

Timken
Big Gains Reported for Steel Group
The Timken Co., Canton, Ohio, reported sales of $4.1 billion for 2010, an increase of 29 percent from the prior year. Light-vehicle demand provided an early boost in sales and remained strong throughout the year. In the second half, accelerated demand in the heavy-truck, off-highway, energy and industrial distribution sectors further increased top-line growth.

“We are pleased with our performance in 2010. Our strong profitability and cash flow, leveraging this mild economic recovery, demonstrate that our efforts over the past few years to transform the company are succeeding,” said James W. Griffith, Timken president and CEO.

Timken’s Steel Group posted 2010 sales of $1.4 billion, including inter-group sales, an increase of 90 percent over 2009 sales of $714.9 million, reflecting increased demand across all of the group’s major markets. Raw material surcharges increased approximately $250 million from a year ago. The group achieved EBIT income of $146.3 million in 2010, compared with a loss of $57.9 million in 2009.

In 2011, Timken forecasts its Steel Group sales to increase 20 to 25 percent, reflecting improved demand across all market sectors, as well as surcharges.

U.S. Steel Corp.
‘Modest Improvement’
Seen in Fourth Quarter
U.S. Steel Corp., Pittsburgh, reported a net loss of $482 million for full-year 2010, an improvement from the $1.4 billion lost in 2009, but still more red ink.

Looking at the fourth quarter, the company’s loss from operations of $114 million compares favorably to the operating loss of $138 million in the third quarter, as well as the $329 million loss in fourth-quarter 2009. 

“We reported a modest improvement in our fourth-quarter operating results in comparison to the third quarter mainly due to reduced spending for facility repair and maintenance and a net gain related to asset sales. The improvements were partially offset by decreases in realized prices and a reduction in total shipments, reflecting soft steel market conditions and the traditional seasonal downtime taken by some of our customers,” said U.S. Steel Chairman and CEO John P. Surma.

Fourth-quarter results for U.S. Steel’s Flat-rolled Segment improved compared to the third quarter primarily due to reduced spending for facility repair and maintenance. The reduction in spending was partially due to the substantial completion of repairs related to the structural failure at the Gary Works facility. The company idled its Hamilton Works iron and steelmaking facilities in October, incurring a $40 million carrying cost in the fourth quarter. 

The company’s average realized prices in the fourth quarter were $657 per net ton, a decrease of $31 from the third quarter due to lower spot market and index-based contract prices. Shipments increased by 1 percent to 3.9 million net tons as customer order rates progressively improved during the quarter. The company’s raw steel capability utilization rate was 72 percent for the Flat-rolled Segment, 5 percent lower than the third quarter.

Fourth-quarter results for U.S. Steel Europe were lower than the third quarter as lower euro-based spot market transaction prices and shipments were partially offset by lower raw materials costs. The average realized price increased by $45 per ton in the fourth quarter to $793 reflecting a significant favorable foreign currency effect. Shipments decreased by 7 percent to 1.2 million tons due to reduced order rates from spot market customers and normal seasonal patterns. USSE operated at 77 percent of raw steel capability for the fourth quarter.

Results for the company’s Tubular Segment were lower than the third quarter as shipments declined by 9 percent to 386,000 tons, and the reported average realized price decreased by $55 to $1,504 per ton.  

Looking ahead to first-quarter 2011, Surma said U.S. Steel expects modest improvement. “Order rates for most customer groups and publicly reported spot market prices began to increase late in the fourth quarter, and we remain cautiously optimistic that global economic conditions will continue to improve in the first quarter.”

  
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