Bethlehem Steel plans to increase capital spending during 1991

CARRYING ON

January 31, 1991|By Ross Hetrick | Ross Hetrick,Evening Sun Staff

Despite a $517 million fourth quarter loss, Bethlehem Steel will increase its capital spending to about $500 million during this year.

The estimate for 1991 capital spending was part of the company's earnings report that was released yesterday. The company has been spending increasing amounts for new facilities and equipment, going from $304 million in 1988 to $421 million in 1989 and then to $488 million last year.

The increased spending does not reflect any new initiatives, but rather projects already started, according to Bethlehem spokesman Henry Von Spreckelsen.

This capital spending includes major projects at Bethlehem's Sparrows Point plant in Baltimore County where 6,713 people work. These improvements include a $200 million renovation of its hot-strip mill that was started in 1989, a $92 million project started a year ago to retool coke ovens to meet environmental standards and a new $150 million sheet-coating line, on which construction started earlier this month.

Last year, Bethlehem spent about $270 million on capital improvements at Sparrows Point, according to company spokesman G. Ted Baldwin. An estimate for capital spending at Sparrows Point alone for this year was not available, but Von Spreckelsen said it would be a "significant portion" of the capital expenditures for 1991.

Despite the fourth quarter loss, which was caused by a one-time charge for restructuring, analysts were favorably impressed by Bethlehem's earnings.

Bethlehem lost $517 million, or $6.91 a share, as the result of a $550 million charge for the proposed restructuring of its structural and rail products operation in Bethlehem and Steelton, Pa.

"I think they were much better than expected," said Charles Bradford, a steel analyst with UBS Securities Inc., an institutional brokerage firm in New York.

Without the restructuring charge, which does not involve the short-term spending of funds, net income in the fourth quarter would have been $33 million.

In comparison, the company reported a net income of $50 million, or 57 cents a share, for the 1989 fourth quarter. The company reported sales of $1.2 billion for the fourth quarter, a 5 percent increase from the 1989 fourth quarter when sales were $1.15 billion.

Without the restructuring charge, Bradford said, earnings amount to about 36 cents a share, double the 15 cents per share that he had been predicting. More significantly, the company made $19.38 per ton of steel, better than its competitor, USX Corp.

Bethlehem would have posted a profit for the year without the restructuring charge, which put the company in the red. The loss for the year was $464 million, or $6.45 a share, compared to a net income of $245.7 million, or $2.86 a share, for 1989.

Bethlehem's stock rose 75 cents yesterday. By early afternoon today, the stock was up 12 1/2 cents at $14.37 1/2 a share.

Jeffrey Miller, a steel analyst for Duff & Phelps Inc., an investment research firm in Chicago, also was pleased with the figures. "I was mildly surprised on the positive side," he said.

He also said it was good news that the company is seeking a joint venture with British Steel PLC to restructure Bethlehem's structural and rail products facilities. "They needed to do something to get more competitive," Miller said.

In the earnings report, Chairman Walter F. Williams said the recession is "having a marked effect on steel demand."

"While Bethlehem's order entry rate during the latter part of the fourth quarter of 1990 was weak, orders have strengthened during January," he said. "The decline in steel prices through 1990 appears to have bottomed out, and we plan to fully implement our recently announced price increase in the near future," he said.

In November, Bethlehem announced a price increase of about 4 percent for its products, effective Dec. 30. The increase boosted the price of a cold rolled sheet steel by $25 a ton to $638.

Last week Bethlehem announced that it will study a possible joint venture with British Steel that could cost 2,000 jobs, mainly at the company's headquarters city of Bethlehem, Pa.

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