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WEST CHESTER TWP. — AK Steel Corp.'s first-quarter net income surged 60 percent, beating analyst predictions despite a dip in shipments.

The area steelmaker posted a net income of $101 million, or 90 cents per share, compared to $62.7 million, or 56 cents per share, in first-quarter 2007 when it was in the final months of a yearlong lockout at its Middletown Works facility. Net sales also jumped to $1.79 billion from $1.72 billion.

Analysts surveyed by Thomson Financial expected earnings of 82 cents a share on revenues of $1.78 billion.

The company said in January it expected first-quarter shipments to be comparable with 2007, but shipped 1.1 percent less. However, the drop was offset as AK pushed the average price for a ton of hot rolled steel to $1,135, a 5.3 percent increase.

James Wainscott, president and CEO of AK Steel, said this year's seven carbon steel spot market increases have been in response to higher demand and input costs. For example, iron ore pellets have jumped 90 percent on the world market in 2008.

"These are extraordinarily costly times for us and our selling prices must reflect this," Wainscott said.

The company said it expects second-quarter shipments to increase about 8 percent to 1.7 million tons, with the per-ton selling price rising $100, Wainscott said.

"Our second quarter has the potential to be our best-ever of any quarterly performance in the history of the company," Wainscott said.

However, maintenance costs also will rise by about $40 million, mostly due to scheduled blast furnace maintenance at Middletown Works, spokesman Alan McCoy confirmed.

The outage began two weeks ago and should be completed by the end of this week, McCoy said.

AK shares dipped despite the positive posting, falling $2.80 to close at $65.10 Tuesday.

AK Steel posts first-quarter gain

After posting a $101.1 million income for first-quarter 2008, AK Steel officials said they expect next quarter to be record-setting.

The company increased its income 60 percent over the same period in 2008, and pushed net sales to $1.79 billion. Officials said they plan to push its income up another 8 percent in the second quarter.

Shipments should surge to 1.7 million tons with the average selling price at approximately $100 per ton higher compared to the first quarter of 2008.

James Wainscott, president and CEO of AK Steel, said they expect more spot market price increases in the next quarter. The company already has announced seven carbon steel increases, pushing the average price to $1,135 per ton.

"Obviously, what happens in the future with pricing will depend, in part, on the value of the dollar, the forward cost curve for steelmaking inputs, and a host of other factors, not the least of which is demand," Wainscott said.

The steelmaker said it expects to generate record operating profit in the second quarter of 2008 of approximately $125 per ton.

"We continue to do what we can to position the company for future success. We are re-investing heavily in the business to reduce our costs and improve our self-sufficiency," Wainscott said.

Part of that investment includes reducing the company's raw material costs such as coke, an essential component in making steel. AK's oven at Middletown Works is only able to produce about 75 percent of their coke needs, forcing the company to buy the rest on the open market.

However, AK Steel is working on a partnership with Tenn.-based SunCoke to supply coke and electricity from a new facility SunCoke is proposing to build in Middletown.

"We continue to work through some permitting and other contingencies but, upon completion, this new, state-of-the-art coke battery will produce about 550,000 tons of coke annually and 50 megawatts of electricity exclusively for AK Steel," Wainscott said.

Last month, the Middletown Planning Commission approved rezoning a 157-acre tract of land for the $340 million coke plant.

The plan still needs to be confirmed by Middletown City Council, which next meets May 6.

Contact this reporter at (513) 705-2843 or jlander@coxohio.com.

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