AK Steel Holding Corporation (AKS) added a surcharge of $435 per ton to invoices for electrical steel products shipped in June 2011. 

The surcharge is calculated based on reported prices for raw materials and energy used to manufacture products coupled with the April 2011 purchase cost used to determine the June 2011 surcharges.

Recently, AK Steel also posted its first-quarter results delivering an EPS of 8 cents compared with 2 cents during the year-ago quarter and striding ahead of the Zacks Consensus Estimate of a loss of a cent.

Net sales as reported by the company were $1,581.1 million on the shipments of 1,423,100 tons versus $ 1,405.7 million and 1,385,800 tons in the prior-year quarter. It however, missed the Zacks Estimate of $1,609 million. The improvement in the shipments was mainly due to higher pricing, which increased 9% on a year over year basis to $1,109 per ton.

Cash and cash equivalents reduced to $54.1 million as of March 31, 2011 versus $216.8 million as of December 31, 2011.  Long-term debt of the company decreased marginally to $650.5 as of March 31, 2011 versus $650.6 million as of December 31, 2011.

Management expects second-quarter 2011 shipments to be in the range of 1,500,000 and 1,550,000 tons, indicating a substantial increase over the first quarter shipments. The company also anticipates its average per-ton selling price to be 7% higher compared with the first quarter. The operating profit is expected to be approximately $65 per ton for the second quarter of fiscal 2011.

We believe AK Steel is uniquely positioned to focus on products with high margins. Electrical steel continues to be the company’s strongest product line, with demand recovering in the U.S. and abroad, though at a slower rate. AK Steel is operating its plants at above 80% capacity and is well positioned to serve the end markets when the demand rebounds.

However, higher input costs, particularly iron ore, is eroding margins of the company. Iron ore pricing concerns have led to a negative outlook for steel manufacturers. A K Steel currently retains a Zacks #1 Rank (short-term Strong Buy rating).

Ohio-based AK Steel Holding Corporation is a leading producer of flat-rolled carbon, stainless, electrical steel and tubular products. It operates 7 steel-making and finishing plants in Ohio, Pennsylvania, Indiana and Kentucky.

The basic raw materials required for the steel manufacturing are iron ore, coal, coke, chrome, nickel, silicon, manganese, zinc, limestone, and carbon and stainless steel scrap. Natural gas, electricity and oxygen are the sources of power for steel manufacturing operations. The company competes with companies like Nucor Corporation Common Stock (NUE) and Steel Dynamics Inc. (STLD).

AK STEEL HLDG (AKS): Free Stock Analysis Report
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