Low steel prices in the second half of 2019 as well as the General Motors strike impacted the profitability of AK Steel in 2019, the company indicated in its earnings report on Thursday. The company, which signed a merger agreement with Cleveland-Cliffs in the last quarter of 2019, expects to close the transaction by March 13, 2020.
After making cash payments of $8.8mn in 2019 related to the Ashland Works charges and closure, the company expects to make another tranche of payment worth around $25mn related to this transaction in 2020. The company closed this facility towards the end of 2019 and has included the charges from the closure in its Q4 and 2019 earnings report.
In 2019, the steelmaker’s sales were impacted by lower steel prices, higher iron ore costs, and lower demand from the auto sector.
The company reported a 7pc drop in annual flat rolled steel shipments to around 4.8mn mt in 2019 compared with 5.1mn mt in 2018. Net sales dropped in tandem by 7pc to $6.35bn in 2019 compared to 6.81bn in 2018.
Flat rolled steel shipment dropped by almost 10pc to 1.1mn mt in Q4 2019 from 1.25mn mt in Q4 2018. Net sales in Q4 2019 fell by almost 14pc to $1445.7mn from $1677.1mn in Q4 2018.
Lower sales and additional charges towards pension settlement and the closure of Ashland Works impacted the company’s profitability. AK Steel’s net income dropped to $11.2mn in 2019 compared to $186mn in 2018, while its EBITDA was reported at $446.5mn constituting 7pc of sales compared with an EBITDA of 563.4mn or 8.3pc of sales in 2018.
The company reported a net loss of $53.9mn in Q4 2019 compared to a net income of $33.5mn during the same period in 2018. The EBITDA in Q4 was $47.2mn at 3.3pc of net sales compared with an EBITDA of $135.5mn at 8.1pc of net sales during the same period in the previous year.