TRUMBULL COUNTY WCI Steel sees upswing in profits
High October profits are also expected, but earnings may drop later in the year.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- WCI Steel raked in earnings of $19.6 million in September, its most profitable month since the Warren steelmaker filed for Chapter 11 bankruptcy protection almost 14 months ago.
Equally robust results are expected in October, said WCI spokesman Tim Roberts, thanks to a continuing demand for steel products and soaring prices.
Reports filed with the U.S. Bankruptcy Court in Akron show WCI earned $20.7 million on September sales of $73.7 million. Its profits totaled $19.6 million, after deducting $1.09 million for attorney fees and other expenses related to its bankruptcy case.
The company earned $12.3 million in August, after legal and other Chapter 11 costs, on sales of $56.1 million.
WCI was buried in red ink when it filed its bankruptcy case in September 2003, but the company has reported profits in seven of the past eight months. Only in July, when most of the mill had been shut down for 42 days to accommodate a blast furnace relining, did the bottom line dip into the red, for a $9.9 million loss.
"Obviously September was an excellent month," Roberts said. "The pricing environment is quite good, our shipments were very strong and our internal costs were excellent."
The company had plenty of business this month as well, he said, but its order book is somewhat lighter for November and December.
The end of the year is typically slower for the steel industry, Roberts explained, and WCI expects some customers to order less because they have stockpiled steel.
The rising cost of raw materials and natural gas might also put a crimp on year-end profits, though the company has been able to pass the rising price of coke on to its customers in per-ton surcharges.
Looking into the new year, he said the company expects order levels to "bounce back" in January.
WCI reported it had $6.9 million in cash and cash equivalents at the end of September, up from $2.8 million the previous month.
Total assets, including accounts receivable and inventory, were $332 million, up from $299 million at the end of August.
Overall, WCI has reported a loss of $50 million on sales of $619 million since it filed its Chapter 11 case. The company spent $10.3 million so far on legal fees, financial advisers and other bankruptcy-related costs.
Judge Marilyn Shea-Stonum heard closing arguments in her Akron courtroom this week from attorneys representing WCI, its New York owner Ira Rennert and a group of secured bondholders who are vying to buy the company. Both prospective buyers plan to continue operating the mill.
The judge has no time limits to decide which buyer's plan to accept, Roberts said, and she has given the company no indication when she will rule. "We do hope it's soon, within the next month or so," he said. "The ball is in her court right now."
WCI officials have said the company will reduce its operating costs considerably if the judge approves the WCI-Rennert plan, because it comes with a contract already ratified by members of the United Steelworkers of America, Local 1375.
The pact, which would take effect immediately if the WCI plan was approved, provides cost-saving work rule changes under which many jobs would be combined. There's also a $50,000 retirement incentive for 250 of WCI's most senior workers that is expected to reduce the hourly work force, now at 1,400.
Roberts said the uncertainty of the bankruptcy case also has an impact on operating costs. Suppliers can only approve short-term contracts, so WCI loses the benefit of locking in prices with long-term contracts.