After using up most of its $90 million cash reserve and borrowing $34.5 million, the company says it's turning the corner.
THE VINDICATOR, YOUNGSTOWN
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- WCI Steel officials remain "very upbeat" about the company's future, a spokesman said, even after reporting its eighth consecutive quarterly loss this week.
Reports filed Monday with the federal Securities and Exchange Commission indicate the Mahoning Valley's only remaining integrated steelmaker lost $8.06 million in its third quarter on net sales of about $133 million.
Losses so far this year total $45.4 million on net sales of $350 million, compared to losses of $73.4 million at this time last year.
But Tim Roberts, WCI spokesman, said officials believe the company is about to emerge from a two-year slump that's been tied to the market conditions that have thrown the entire domestic steel industry into a crisis, causing many to go bankrupt.
"Absolutely, we've turned the corner," Roberts said. "We're very upbeat about the fourth quarter and the first quarter of next year."
The company said it expects to have enough cash to operate into 2002 and meet its debt payments, but it stopped short of predicting a profitable fourth quarter for WCI. "Let's just say we are very optimistic, and our booking is good," Roberts said.
The Warren-based company, the Mahoning Valley's third-largest industrial employer, has been operating at a deficit since the fourth quarter of 2000.
At first it drew from its $90 million cash reserve to offset its losses, Roberts said. When most of that cash reserve was spent, officials began borrowing under a $100 million credit agreement with WCI's lenders.
WCI had borrowed $34.5 million under that agreement by the end of its third quarter July 31, and the lenders negotiated some changes last week that allow the company to borrow more, if needed. "The fact that the lenders were willing to sit down and amend the agreement shows that they're willing to work with us," Roberts said.
Not all of WCI's third quarter numbers were bad. The company's net sales for the quarter were up 20.7 percent, and its volume shipped was up 20 percent compared to the same quarter a year before.
Officials said the improvements in shipping volume and increased selling prices in the third quarter could be traced to several factors, including a decrease in competition from other domestic steel suppliers due to the closing of several steel mills.
New tariffs designed to reduce cheap foreign steel imports also helped the company increase its sales. Roberts said the Warren mill is at full employment, with a work force of about 1,900, and is producing at about 90 percent of capacity.
Third quarter losses would have been less if Cold Metal Products had not filed for Chapter 11 bankruptcy protection last month.
Cold Metal, based in Sewickley, Pa., was a good customer and owed $2.1 million to WCI, Roberts said. However, officials believe WCI is unlikely to collect what is owed because it is an unsecured creditor, so they decided to write-off the debt as a loss.
Based on its order rate and backlog of orders, the company expects to ship about 330,000 tons of steel in the fourth quarter, compared to 334,367 tons shipped in the third quarter.
WCI is projecting its net sales per ton will increase about 10 percent in the fourth quarter, the company's SEC report states, while production costs are expected to grow only about 2 percent.