Steelmaker expects growth in second half

WCI posted a 4.3 million quarterly loss as selling prices fell.
BY DON SHILLING
VINDICATOR BUSINESS EDITOR
WARREN -- WCI Steel expects to turn a profit in the second half of this year after posting two straight money-losing quarters.
The Warren steelmaker said Monday that it lost 4.3 million in the first quarter, which followed a 1.1 million loss in the fourth quarter of last year.
Weak market conditions and unplanned mill outages were blamed for the loss last quarter. Patrick Tatom, WCI president and chief executive, said market conditions are expected to improve as the year goes on, and mill production is already back to normal after the outages.
"Although expected first-half results are unacceptable, we are taking the right actions to position WCI Steel for a profitable second half," he said.
WCI recorded earnings before interest, taxes, depreciation and amortization of 34.8 million in the second half of 2006, and Tatom said WCI should top those results this year.
Before WCI gets to the second half, however, it will have to get through the second quarter.
Reduced production
Tatom said the current quarter is challenging because an outage in the mill reduced production.
The blast furnace was taken off line for a week in April because of other work going on at the mill, but crews unexpectedly needed two more weeks to get the blast furnace up and running, he said.
The mill lost 75,000 tons of steel production this quarter because of unscheduled outages.
Tatom said the quarter also started off with lower inventories than expected because an accident in the first quarter also cut production. A vessel that carries molten iron was damaged, limiting production.
Tatom said the earnings before interest, taxes, depreciation and amortization will be "modestly negative" in the second quarter. Earnings by this calculation totaled 1.8 million in the first quarter.
WCI said a dip in prices last quarter was one reason for the first-quarter loss. Its average selling price fell 39 a ton to 637 a ton in the first quarter.
The company blamed the dip on a weak market.
Despite the weakness, shipments rose in the first quarter. With lower selling prices, however, WCI's revenues from product sales fell to 195.5 million, a drop of 36.7 million.
Growth outlook
In a conference call with analysts, Tatom reiterated statements he had made in March that the company will grow.
He said WCI is considering upgrading its blast furnace and finishing operations and making acquisitions to add production capabilities.
WCI, which emerged from bankruptcy protection in May 2006, has a goal of reaching 1.5 billion in annual sales by 2010. WCI, which has 1,300 employees, is the smallest integrated steelmaker in North America. Integrated steelmakers are those that use blast furnaces to make steel from raw materials.
Tatom said Jacobson & amp; Associates, a consulting firm, ranked WCI as No. 1 among North American steelmakers in these categories: customer satisfaction, service and on-time delivery. The ranking was done for the 12 months that ended March 31.
shilling@vindy.com