$47-Million Profit : Bethlehem Steel Back in Black in 2nd Quarter
In the second case of favorable news from the beleaguered steel industry in two days, Bethlehem Steel reported on Wednesday a $47-million profit for the second quarter, its largest quarterly profit in six years. A year ago, Bethlehem suffered a $24-million loss.
On Tuesday, USX--the nation’s largest steelmaker--announced a $149-million quarterly profit, helped both by improvements in steel operations and, to a greater degree, higher oil prices. Its second-quarter profit last year totaled only $14 million.
The big steelmakers--former symbols of America’s industrial might--benefited from cost cutting and increased efficiency, but continue to face long-term challenges from foreign competitors as well as small “mini-mills” in the United States.
Analysts cautioned that the industry--which has been battered by foreign competition and lost $12 billion between 1982 and 1986--still faces major problems.
“This is not ‘Happy Days Are Here Again,’ ” said John Jacobson, an industry analyst with Wharton Econometrics in Bala Cynwyd, Pa. “They might be back in the red ink as soon as next quarter.”
Earlier this month, steelmakers Armco and National Steel reported quarterly profits, in contrast with losses in the same period in 1986. In its report Wednesday, Bethlehem--the nation’s No. 3 steelmaker--cited gains at its facilities in Burns Harbor, Ind., and Sparrows Point, Md., as helping its bottom line.
Stock Edges Higher
Following the earnings announcement, Bethlehem stock closed at $18.375 a share on the New York Stock Exchange, up 25 cents, with more than 1 million shares traded.
The USX results, released on Tuesday, reflected greater efficiency following a 183-day work stoppage. The strike, which virtually eliminated its steel production, ended Jan. 31 and was the longest in the history of the steel industry. Although USX, formerly U.S. Steel, remains the nation’s leading steel producer, its energy operations, including Marathon Oil and Texas Oil & Gas, now account for most of its profit.
Operating income from steel was $37 million for the recent quarter, contrasted with a loss of $59 million for the comparable 1986 period. This occurred despite a drop in revenue of 32.9%. After the strike, USX idled inefficient facilities.
“I think we have prevailed in a very difficult 1987, and I think because of what we’ve done in 1987 the remainder of the year and beyond will be even better years for USX,” the corporation’s chairman, David M. Roderick, said at a press conference on Wednesday. USX stock closed at $38.125, up 62.5 cents. It was the eighth most active issue, with more than 1.9 million shares traded.
Bethlehem and other steelmakers have benefited in recent months from improved prices, a situation reinforced by USX’s decision to refrain from aggressive discounting after the strike.
U.S. producers raised prices 4.5% during the first five months of this year, following 1986 increases of just 1.9%, according to the Commerce Department.
In addition, the weaker dollar has forced foreign competitors to raise their U.S. prices. Foreign exporters boosted prices 3.5%, following increases last year of 2.9%. The figures aren’t exact comparisons, however, because the imports may reflect a greater mix of cheaper, semi-finished products.
Tax Changes to Help
The U.S. industry has also been aided by provisions in the tax code worth about $500 million that are expected to enhance quarterly statements during the next two to three years, said Christopher Plummer, an analyst at Wharton.
Such factors helped Bethlehem to turn a profit in the latest quarter, contrasted with a loss in the year-ago quarter. USX’s profit swelled in the latest quarter from the year-ago quarter, which was affected by low energy prices.
But despite the improved performance, the U.S. steel industry has continued to lose its share of the market to foreign competitors, even as it has moved to enhance efficiency and as the weaker dollar has given it cost advantages. These problems forced LTV, the nation’s No. 2 steelmaker, to seek refuge from its creditors in a Chapter 11 bankruptcy court filing.
The outlook for steel purchases by the automobile industry is also considered uncertain in light of questions about future car sales and the increased use of plastic components in auto assembly.
“Before we make joyful noises for the long term, we want to see an improvement in the industry’s fundamental market position,” said Sheldon Wesson, a spokesman for the American Iron & Steel Institute in Washington.