Strong quarter at Beth Steel Earnings off 76%, but up 42% excluding one-time events

Sales down 1.7%

Basic materials

July 30, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Bethlehem Steel Corp. said yesterday that its second-quarter profit fell 76 percent, a decline resulting from one-time events that disguised an otherwise strong quarter, analysts said.

The Pennsylvania-based steel company reported net income of $38 million, down from $160 million in the second quarter of 1997. Net income per share after deducting preferred dividends was 23 cents, down about 83 percent from $1.33.

Sales were $1.19 billion, down 1.7 percent from $1.21 billion.

Accounting for the steep decline in profit were a $35 million second-quarter charge to close the Sparrows Point plate mill in the fourth quarter, a move that stemmed from the May acquisition of Coatesville, Pa.-based Lukens Inc.; and a gain in the year-earlier quarter of $135 million from Bethlehem's sale of its Iron Ore Co. of Canada.

Without those transactions, Bethlehem's net income for the second quarter would have been $67 million, up 42 percent from $47 million in the year-earlier period, or 47 cents per share, up 47 percent from 32 cents.

"It was just a little better than what I would have hoped," said Charles Bradford, an independent steel industry analyst based in New York.

"They're one of the very, very few steel companies to have an up quarter."

Bethlehem attributed the company's performance to lower costs and higher shipments, which more than offset lower prices. Bethlehem's sales of its noncore businesses -- including its Sparrows Point shipyard -- and lower pension expenses helped reduce costs.

Helped by its acquisition of Lukens and increases at its Sparrows Point and Burns Harbor, Ind., plants, the company shipped 2.36 million tons, up from 2.24 million tons in the year-earlier period.

"We are pleased with the continued progress of Bethlehem during this quarter," said Curtis H. Barnette, the company's chairman and chief executive officer.

During the second quarter, Bethlehem bought Lukens, improved its credit rating, increased its credit line and started construction of a new cold-rolling mill at Sparrows Point.

Just yesterday, the company said that it completed the $200 million sale of a coke battery oven at the Burns Harbor plant to an affiliate of DTE Energy Services, Inc., Barnette said.

He also for the first time specified a time for the closing of the Sparrows Point plate mill, which employs about 400. In January, when the company announced its intention to purchase Lukens, the company said it would close the mill in about a year.

Yesterday, Barnette said the mill will be closed earlier, in the fourth quarter. He said Bethlehem has not determined how many workers will retire, take jobs elsewhere with Bethlehem or be laid off.

"We're still working our way through that," he said.

The company said it is pleased with the resolution of the General Motors strikes, which have had a "limited effect" on the second and third quarters.

"If it had continued through July and August, it would have had a more material effect, especially on Burns Harbor," Barnette said. "When GM is ready for steel, Bethlehem Steel is going to be first and ready."

Barnette said the economy will continue growing, but at a slower rate. He also said he is concerned about the addition of steelmaking capacity and a recent surge in imports.

"We are reviewing the continued high levels of unfairly traded imports, and we have appropriate remedies under active consideration," Barnette said.

Bethlehem shares closed at $11, down 6.25 cents.

Pub Date: 7/30/98

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.