Bethlehem earnings down for quarter Lower prices blamed

demand called 'solid'

August 01, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

Lower prices hurt Bethlehem Steel Corp. last quarter, but the industrial giant's chairman says demand is solid, especially in the company's 5,000-worker Sparrows Point mill in Baltimore County, and that profit margins are expected to improve.

"Sparrows Point in general is experiencing very strong demand for its flat-rolled products," Curtis H. Barnette, Bethlehem Steel's chairman and chief executive, said yesterday. "The construction industry requirements are very strong."

The country's second biggest steelmaker said profit fell to $26.6 million for the second quarter. That was a 56 percent decline from the same quarter last year, even though steel shipments increased by 2.3 percent.

What Bethlehem Steel was able to charge for flat-rolled steel, for example, plunged by a fifth last year and has recovered only slightly this year, said Richard Aldrich, who covers the steel business for Lehman Brothers in New York.

But thanks to increasing demand, "most steel companies believe that prices will continue to go up in the third quarter," Aldrich said.

"Offsetting that may be labor-cost increases, which really won't hit in a big way until the fourth quarter," the Lehman Brothers analyst said.

An arbitrator on Tuesday chose Bethlehem Steel's proposal over that of the United Steel Workers for a three-year contract for 11,000 hourly workers. The deal will increase the company's hourly wage costs about 3 percent, Barnette said.

Also yesterday, Barnette warned that four unprofitable divisions, including the company's BethShip ship-repair business at Sparrows Point, could be closed or sold if their results don't improve.

No shutdowns decided

The other units are Centec Roll Corp., BethForge Inc. and Bethlehem Structural Products Corp., all in the company's home town of Bethlehem, Pa. Together the divisions employ 3,400, of which about 600 work at BethShip.

But Barnette said no shutdown decisions have been made.

"It is nothing new in terms of our strategy," the chairman said. "Just good disclosure requires us to bring to attention the fact that these divisions continue to be unprofitable."

And he had kind words for BethShip, saying that it is still adjusting to its new strategy of pursuing jobs on foreign ships, that it has a decent order backlog and that, while unprofitable, its cash flow is positive.

If Bethlehem Steel's results looked anemic compared with last year's second quarter, they seemed robust next to this year's first quarter, when profits disappeared and the company broke even.

While analysts expect rising demand from a resurgent economy to lift profit margins for U.S. steelmakers later this year, they're not so sure about next year. The stronger dollar has given new life to import steel, and new domestic competition is on the way, too. Steelmakers are expected to add 19 plants in the next four years. "There's new capacity coming on stream," Aldrich said.

Bethlehem Steel's per share profit came to 14 cents in the second quarter compared with 45 cents in the year-earlier period. Analysts had called for 15 cents. Revenue declined to $1.24 billion from $1.25 billion.

The company's common stock rose 37.5 cents per share to $10.125 yesterday.

Pub Date: 8/01/96

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