AK Steel falls on 4Q outlook and stock sale
CHESTER, Ohio (AP) — Shares of AK Steel Holding Corp. fell more than 17 percent on Tuesday after the company said it will book a bigger-than-expected loss for the fourth quarter due to lower steel prices and a large income tax charge.
AK Steel expects to lose between 67 cents and 72 cents per share in the quarter. That includes a charge of $35 million, or 33 cents per share, related to the value of AK Steel's deferred tax assets. The company said it will ship more steel than it did in the third quarter, but prices will fall by about 5 percent.
Last month AK Steel reported a third-quarter loss and said it would book a loss for the fourth quarter. At the time, analysts expected a loss of 11 cents per share, and since had only expanded that estimate to a loss of 22 cents per share, according to FactSet.
Shares of AK Steel fell 96 cents to close at $4.53. The stock has lost about half its value over the past 12 months.
Moody's Investors Service later on Tuesday cut its corporate rating on AK Steel one notch deeper into "junk" territory, to "B2" from "B1," citing tough conditions in the steel industry. It has a negative outlook on the rating, meaning Moody's could cut it again.
Standard & Poor's Rating Services also cut its corporate credit rating on the company one notch to "B'' from "B+" on weak financial metrics. The agency said AK Steel's financial metrics will likely remain weak due to tough competitive conditions, uneven demand, excess capacity, volatile prices and high debt levels. The rating outlook is stable.
In addition, AK Steel is selling 25 million shares of its stock. The company plans to use the proceeds from the offering to repay debt and for general purposes. The banks managing the offering can buy another 3.8 million shares.
AK Steel, based in West Chester, Ohio, had 110.6 million shares on the market as of Oct. 24. Increasing the supply of existing stock can hurt the value of existing shareholders' holdings by decreasing the percentage size of their stakes.
The company is also selling $475 million in debt through two different offerings. One is due in 2018, the other batch in 2019.