Beth Steel dive not easy to explain

Various factors likely caused Thursday's sell-off

Weak stock, weak market

Liquidity is down, losses substantial

shares up yesterday

September 01, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

A day after Bethlehem Steel Corp.'s stock price hit an all-time low, analysts said yesterday that a combination of factors outside the company's operation likely led to the sell-off.

Shares of Bethlehem fell as low as $1.01 Thursday before closing at $1.31, their lowest price in modern times. Nearly 2.5 million shares traded hands - about three times the amount of the prior day and about 1 million more than typically trade.

The tanking stock price came on the same day the Dow Jones industrial average slid below 10,000 for the first time since April 9. Additionally, a report released Thursday by the Commerce Department showed that consumer spending grew by a tiny 0.1 percent in July, down from the 0.5 percent increase in June.

"Basically what you have at this point is people saying, `When is this recovery going to take place?'" said Richard Henderson, a steel analyst at Pershing, a division of Donaldson Lufkin Jenrette. "You have a lot of pessimism."

Yesterday, Bethlehem's shares rose 15 cents to close at $1.46.

Although analysts said they knew of nothing company-specific that would have triggered the sell-off, Bethlehem faces a daunting financial future.

The Pennsylvania-based steel maker, which employs about 4,000 at its Sparrows Point plant in Baltimore County, had liquidity (cash, cash equivalents and available credit) of $118 million as of June 30, down 63 percent from levels six months earlier, according to its second-quarter earnings statement.

For the three months that ended June 30, it had an operating loss of $99 million on sales of $911 million. A nonrecurring charge of a just over $1 billion, related to a deferred tax asset, put the paper loss at $1.13 billion.

After receiving a flood of calls Thursday from nervous investors who were concerned about the stock's plummet, Bethlehem released a statement intended to reassure investors that the steel maker is doing what it can to improve liquidity.

Reiterating what it said in the second-quarter statement, Bethlehem noted that it has secured a $750 million financing package - to be used to cover operating costs - that is expected to be completed in the current quarter.

Analysts said the cash infusion should go a long way to boosting Bethlehem's fortunes. They also said things would be brighter for domestic steel if President Bush takes actions to restrict imports.

Bush in June ordered the U.S. International Trade Commission to investigate whether imports had done damage to the domestic steel industry.

If the commission finds the industry has been harmed, the president could implement the initiatives designed to limit imports, which would in turn boost steel prices, which have fallen about 40 percent over the past two years.

Henderson said it "appears the wind is at their back for a period, so there is hope."

But he said, as have many others, that the domestic steel industry needs to consolidate and decrease its capacity in order to remain competitive.

"Do I think there will be a shut down at Sparrows Point or Burns Harbor [a Bethlehem operation in Indiana] in the foreseeable future? My answer is no," he said.

"Who will own it, I don't know. A lot of water is going to go under the bridge in the next four or five years."

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