Bethlehem Steel nears profit in second quarter But contract deadline looms at 2 big plants


Bethlehem Steel Corp. came close to breaking into the black in the second quarter as the beleaguered steelmaker announced yesterday that it posted a loss of $5.3 million -- about one-tenth the loss it suffered a year earlier.

And with the trend expected to continue, Bethlehem is likely to post a profit in the current quarter, according to Curtis H. Barnette, the company's chairman and chief executive. It would be Bethlehem's first quarterly profit in three years.

Bethlehem's financial recovery could be imperiled, however, if a strike begins Sunday at its two major steel operations, at Sparrows Point in Baltimore County and Burns Harbor, Ind. There is also fear among analysts that Tuesday's ruling that lifted a number of steel import duties could spur more steel imports and knock down recent domestic steel price increases.

Despite these concerns, Mr. Barnette said he expects a profit because of the company's "aggressive and comprehensive" efforts to cut costs, increasing sales of high-value prod

ucts and the improving steel market.

Profits in the third quarter might reach $15 million to $20 million, according to Jeffrey F. Miller, a steel analyst for Duff & Phelps/MCM Investment Research Co. in Chicago. He expects earnings in the fourth quarter to be even higher.

Bethlehem closed yesterday at $14.75 a share, down 12.5 cents.

The smaller loss, equal to 18 cents a share, came after several years of strenuous efforts by the company to cut costs by closing operations and reducing its work force and improving quality. The company employs 22,000 workers, down from 44,500 in 1985, and has invested $4 billion over the past decade in new equipment.

Bethlehem credited much of its improved results with cost savings at the Sparrows Point and Burns Harbor plants. The company was also able to sell more profitable, higher-priced products, such as galvanized steel.

Meanwhile, the United Steelworkers of America said local unions at Sparrows Point and Burns Harbor voted over the past few days to give their representatives authority to call a strike at midnight Saturday when their contract expires.

A strike would include 5,000 union members at Sparrows Point and 5,500 workers at Burns Harbor, Bethlehem spokesman Henry Von Spreckelsen said. The Burns Harbor operations also includes a galvanizing line in Lackawanna, N.Y., which has 500 workers.

Other plants in Bethlehem and Steelton, Pa., have separate contracts and would not be affected. The last companywide steel strike at Bethlehem was in 1959.

For its part, Bethlehem said in its statement yesterday that it would begin an "orderly phase down" of the two plants "if it appears that the parties will not reach agreement by the contract deadline." Mr. Von Spreckelsen said such a phase down had not begun as of yesterday.

Both sides still say they can reach an agreement in time. And Mr. Miller of Duff & Phelps concurs.

"They'll probably come up with some agreement at the last minute," he said. "A strike is not in the interest of either side."

Concern about imports was raised Tuesday when the International Trade Commission lifted temporary trade duties against $1.5 billion worth of steel imports from 15 countries.

While the ITC voted to maintain most duties on steel plate and coated steel, it lifted the additional import tax on hot-rolled and cold-rolled steel, which is used to make cars, appliances and a variety of products.

Mr. Miller said steel imports should not be a factor in steel prices for the rest of the year because of the lag time in shipping steel.

"I'm not expecting a real problem with prices," he said. However, imports might influence the market next year, he said.

Over the past six months, steel companies have announced price increases of 8 percent to 10 percent. Despite these announced increases, actual prices received by Bethlehem in the second quarter were about the same as last year's second quarter, the company said.

Bethlehem ....... Ticker ..... Yesterday's

Steel Corp. ..... Symbol ..... Cls. . Chg.

..... ..... BS ........... 14 3/4 . - Period ended

June 30 .... ... 2nd qtr. ..... Year ago ....... Chg.

Revenue ...... $1,117,400 ..... $1,014,300 .... +10.2%

Net Income ..... $(5,300) ...... $(51,700) ........ --

Primary EPS ..... $(0.18) ........ $(0.76) ........ --

....... ......... 6 mos. ....... Year ago ....... Chg.

Revenue ...... $2,137,800 ..... $2,009,700 ..... +6.4%

Net Income .... $(46,600) .... $($338,010) * ...... --

Primary EPS ..... $(0.72) ........ $(4.58) * ...... --

Figures in thousands (except per share data)

* Includes a charge of $250 million, or $3.27 a share, for changes in accounting principles.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad