AKS Subject To Most Pressure Among Steel Producers, Goldman Sachs Reports

AK Steel Holding (NYSE: AKS) reported 4Q2010 diluted EPS of a loss of $0.89 “versus our/consensus estimate of a loss of $0.72/$0.62,” Goldman Sachs reports.

“Adjusting for some one-time charges, the adjusted net EPS was a loss of $0.49,” Goldman Sachs writes. “AKS's adjusted operating loss of $60 per ton was better than our estimate of a loss of $94 and its own prior guidance of $80.

“For 1Q2011, the company expects shipment volume to increase by 7% and prices by $8% (or $82 per ton) but operating profit to break even, indicating costs are moving up faster than the prices. This guidance is significantly below our expectations of a $37 per ton profit in 1Q and implies that the company will report a loss versus our/consensus estimate of $0.26/$0.07.”

Goldman Sachs said that it sees AKS as subject to the most cost pressure among steel producers.

“We should see more clarification on its iron ore cost assumptions in 1Q guidance as spot market iron ore prices (which generally determine the contract prices) have move up sharply,” Goldman Sachs adds. “We believe that cost pressure will increase further in 2Q which could override most of the benefit of higher expected prices.”

Goldman Sachs maintains its Sell rating on AKS shares; its price target and estimates are under review pending the conference call.