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WARREN Quarterly figures show continued deficit



Published: Fri, May 31, 2002 @ 12:00 a.m.



The company's troubles reflect a national steel crisis.

THE VINDICATOR, YOUNGSTOWN

By CYNTHIA VINARSKY

VINDICATOR BUSINESS WRITER

WARREN -- WCI Steel has chalked up its seventh consecutive quarter in the red, losing $11.8 million in the three months ending April 30.

The Warren-based company, Mahoning Valley's only remaining integrated steelmaker and its third-largest industrial employer, has been operating at a deficit since the end of 2000. It has a work force of 1,900.

In a second-quarter report issued Thursday, the flat-rolled steel producer showed sales of $127.7 million on 355,735 tons of steel shipped. Its sales total reflected a 28.6 percent increase over its sales of $99.3 million in the same quarter a year ago.

Second-quarter sales and shipping volume were also up 42 percent and 45 percent, respectively, compared to the first quarter.

Reasons for losses

So, if sales are up and volume is up, why is the company still losing money?

WCI spokesman Tim Roberts explained that steel prices are still too low to cover the cost of production, even though there has been some improvement in recent months. An overabundance of steel in the marketplace has forced prices down.

WCI's troubles reflect a national steel crisis that has forced more than 30 domestic steel companies to file for bankruptcy protection, including LTV Steel in Cleveland and CSC Ltd., a former Warren steel-bar maker which has since closed down.

Roberts said WCI expects to see "improved results" in the third quarter, but a profit is not likely. The company has about $47 million available for borrowing under a long-standing revolving credit arrangement, Roberts said, and officials believe it will be adequate to maintain operations "at least through fiscal 2002."

"Our cash reserves are still quite low, and we have to monitor our costs very carefully in the foreseeable future," Roberts said. "Our challenge is to pay off the revolver loan and build a cash reserve so we can make some much-needed capital improvements."

Based on its current order intake rate and backlog, the company said, it expects to ship about 335,000 tons in each of the next two quarters and projects that net sales per ton will grow 10 percent in the next quarter.

Cost of products sold per ton should also increase by about 2 percent in the next quarter, the company said.

Issues in the market

But WCI's report says "significant uncertainty remains" regarding the short-term and long-term condition of the steel market, despite federal tariffs approved this year to help offset competition from cut-rate foreign steel.

The company may need to seek additional financing, the report states, if it is not able to maintain its projected volume and price levels in its third and fourth quarters.

Roberts said several steel mills have been forced to close in the past year, causing prices to increase as the glut of steel dwindled. If too many mills reopen, however, prices could stall or drop again, and that would cut WCI's sales totals.

The company's plans would also be thwarted if foreign steel dumping becomes a problem again, he said, or if federal officials approve too many exemptions to the steel tariffs enacted this year to help protect the domestic steel industry. Roberts said about one-third of the steel protected by the tariffs would be left unprotected if the exemptions are granted.

vinarsky@vindy.com




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