Beth Steel posts loss of $118 million

Sales have declined two quarters in row

a better 2nd half?

Imports `devastating'

Shareholders back call for Pa. company to lead consolidation

April 25, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

WILMINGTON, Del. - Bethlehem Steel Corp.'s chairman told stockholders yesterday at the annual meeting that the steel maker's woes continued into the first quarter as it logged fewer sales, bigger losses and less cash.

Duane R. Dunham, who is also president and chief executive, said that things are expected to pick up in the second half of the year, but that for now the company is trying to cut costs and pursue consolidation in one form or another.

The country's third-largest steel maker lost $118 million, or 99 cents a share, during the first three months of the year on sales of $897 million. That compares with a profit of $3 million on sales of $1.2 billion in the year-ago period. It was the second quarter in a row of declining sales.

Analysts had expected, on average, a loss of 92 cents a share.

Dunham pointed to declining steel prices, a flood of imports and a slowing economy for the loss.

"I'm tired of talking about unfair trade, but it's having a devastating impact on our business and it's out of our control," he told the crowd of about 120 at a DoubleTree Hotel in Wilmington.

The Asian financial crisis of 1998 brought steel imports to the United States to a record high of 41.5 million tons, but they fell to 36 million tons in 1999. Last year, they crept up again to 38 million tons. With this oversupply, hot-rolled steel that, on average, was selling in the United States for $360 a ton in March 1997 was down to $220 a ton last month, and cold-rolled steel, which is more labor-intensive, had fallen from $500 to $330 a ton. Both products are manufactured at the Sparrows Point plant, which employs nearly 4,000.

The tonnage sold was also down. Bethlehem shipped 2 million tons in the quarter, down 15 percent from last year's quarter.

Given the fact that the domestic steel industry is highly fragmented - there are no U.S. steel companies among the world's top 10 producers - Bethlehem's management decided to support a proposal from one of its biggest investors that directed the company to take the lead in consolidation among domestic producers.

The proposal, by Greenway Partners LP of New York, passed yesterday with 97 percent of the shares cast in favor.

"To get a fair price [for steel], that will only happen through consolidation and the elimination of inefficient capacity," Alfred D. Kingsley, Greenway's senior managing partner, told the shareholders yesterday. "Bethlehem needs to be in the forefront."

Although several shareholders rose to ask how consolidation might occur and with whom Bethlehem might partner, Dunham declined to put forth any specifics.

"It's something I think about 24 hours a day, seven days a week," he said. "We are looking, but obviously I can't make that public. Bold initiatives are needed, and that's exactly what we're trying to do at this time."

Nor would Dunham comment on a shareholder's question about the chances that Bethlehem may need to file for Chapter 11 bankruptcy protection, as 17 American steel makers have done since mid-1998.

"I really can't talk about that," Dunham said. "My No. 1 goal is cash flow and liquidity. I'll just leave it at that."

As of March 31, Bethlehem's liquidity - cash, cash equivalents and funds from bank credit arrangements - totaled $135 million, compared with $315 million as of Dec. 31.

Shareholders Peter and Raisa Kotliar drove two hours and 20 minutes from their home in New Jersey to attend the meeting. They bought Bethlehem shares about three months ago when they were priced at about $2.50, thinking they were a bargain.

Shares closed yesterday at $3.34, up 67 cents.

"We figured it would be a good investment," said Peter Kotliar, who moved here from Ukraine in 1951. "We are hoping it is so."

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