Bethlehem Steel loss narrowed in quarter

Steelmaker's sales rose for last 3 months and year

January 23, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Bethlehem Steel Corp. reported a narrower fourth-quarter loss yesterday due to higher prices and a better product mix, but low seasonal demand, a weak economy, and retirees' pension and health care costs continued to weigh heavily on its bottom line.

The steelmaker reported a $439 million loss, or $3.35 per share, on sales of $896.6 million for the three months that ended Dec. 31. That compared with a loss of $557 million, or $4.27 per share, on revenue of $719.9 million for the year-earlier period.

The results included a required $176 million charge related to the federal government's termination of Bethlehem's under-funded pension plan, $76 million in costs related to the layoff of 535 workers at a Steelton, Pa., plant and more than $100 million in noncash charges for asset impairment and environmental liability.

Excluding these so-called "unusual items," Bethlehem said, its net loss was $72 million in the quarter, compared with a $170 million loss posted for the corresponding period last year.

Bethlehem - which is considering the sale of its operating assets, including the Sparrows Point plant in Baltimore County, to International Steel Group Inc. - said sales were buoyed by the automotive industry, which stimulated consumer demand with rebates and low- or no-interest financing.

"Steel consumption in the automotive market remains strong; however, consumption in other markets is depressed due to seasonal shutdowns and continued weakness in capital investment," Robert S. "Steve" Miller Jr., Bethlehem's chairman and chief executive officer, said yesterday in a statement.

Miller said the company expects steel industry shipments to rise 4 percent this year, with continued strength from sales to automakers. Automakers are prime customers for Bethlehem because they buy precision-coated steel products that yield better profit margins for the steelmaker. But the machinery and construction markets are expected to remained depressed, he said.

Sales up 7 percent

For the year, Bethlehem's net sales increased 7 percent to $3.57 billion, while its net loss lessened to $699.6 million from $1.95 billion in 2001. Bethlehem filed for Chapter 11 bankruptcy protection in October 2001.

Analysts said yesterday that Bethlehem's higher sales and better prices for much of the year were due to the shutdown of the former LTV Corp. and other steel plants, which left steel users with less supply. ISG, which bought LTV's mills in March 2002, restarted steel production two months later.

To a slightly lesser extent, analysts said, the three-year tariffs imposed by President Bush in March helped Bethlehem and other domestic steel producers. The tariffs are intended to give weaker steel companies a chance to reorganize and merge with healthier rivals.

The move toward steel industry consolidation began this month. Just three days after ISG's offer for Bethlehem on Jan. 6, U.S. Steel Corp. offered to buy bankrupt National Steel Corp. for $750 million.

Bethlehem said yesterday that management expected to make a recommendation to the board of directors on ISG's $1.5 billion offer Jan. 29.

Price run-up

Bethlehem and other domestic steel companies "were helped by the tariffs, but supply was tight early this year because of the shutdown of former LTV," said Leo Larkin, an with Standard & Poor's.

Wayne Atwell, a Morgan Stanley steel industry analyst, said there was a "huge run in price" last year for hot-rolled steel - a commodity product used by manufacturers to make more value-added steel products.

Prices for hot-rolled steel doubled by midyear to $400 a ton. The price has since softened to about $300 a ton, Atwell said.

Charles Bradford, a steel industry analyst, said that, without the former LTV and others making steel, steel users had to pay more for steel.

"Last year was one of the best steel markets of all time," Bradford said. "If you can't make money in that kind of environment, you've got a problem."

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