AK Steel seen posting another quarterly loss

PITTSBURGH — Steel producer AK Steel Holding Corp. is scheduled to report its second-quarter earnings Tuesday. Below is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Like other steel companies, AK Steel has been forced to reduce production and lay off workers in recent months because of a slump in steel orders triggered by the global economic slowdown.

AK Steel has posted losses for the past two quarters, and the West Chester, Ohio-based company has forecast another loss for the latest quarter. Results have taken a beating from the auto industry, including the Detroit automakers and their suppliers, which accounted for about a third of the company's revenue last year.

Production cuts at General Motors Co. and Chrysler LLC have stunted demand for AK Steel's metal, used in exhaust systems and other vehicle parts. Both automakers, which just emerged from bankruptcy protection, have slashed output of cars and trucks as they confront skittish consumers whose penny pinching has pushed down U.S. auto sales to the worst levels in more than two decades.

Larger domestic steel companies, such as Nucor Corp., may sell a higher percentage of their steel to the construction industry — one of the biggest markets for the metal in North America.

After enduringa dramatic decline that started late last year, the steel industry appears to be showing signs of improvement, with prices and production rising in recent weeks. But the market for the metal remains far weaker than it was a year ago, when surging demand and prices helped steel makers notch record profits.

AK Steel also makes steel used in appliances and industrial equipment, as well as energy efficient steel used in power transformers, lighting systems and electrical motors.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters, on average, expect AK Steel to report a loss of 51 cents for the three months ended in June, down from $1.29 per share during the same period last year. They expect revenue of $824.4 million, compared with $2.24 billion in the year-earlier quarter.

ANALYST TAKE: Gimme Credit analyst Carl Blake saw hope in AK Steel's recent price hike for hot-rolled sheet steel — used in autos, office furniture and appliances, and considered the industry's benchmark product — and higher steel orders from U.S. distributors.

AK Steel could be a "major beneficiary of a recovery in the auto sector, as well as a rebound in consumer spending," he wrote in a client note.

Goldman Sachs analyst Sal Tharani described AK Steel as "one of the best-positioned companies in the current environment because of its high exposure to auto and other flat steel markets and high sensitivity to flat steel pricing."

WHAT'S AHEAD: AK Steel executives have said they expect the company's operations to return to profitability later this year.

Renewed demand from the automakers, which have resumed production at some plants that had been idled, could boost AK Steel's orders, according analysts. Lower prices for iron ore, a key steel-making ingredient, also could help the company.

STOCK PERFORMANCE: In the second quarter, AK Steel's shares more than doubled, climbing to $19.19 from $7.77 per share. But that was still more than two-thirds below its high of $66.47 reached on July 31 of last year.