Bethlehem Steel Corp. said yesterday that the continuing effects of cheap imports and renovation costs led to a third-quarter net loss of $90 million, or 77 cents per share.
The country's No. 3 steel producer said the loss, which compares with a profit of $37 million, or 21 cents a share, in the year-ago quarter, was caused in large part by the relining of its blast furnace at its Sparrows Point plant in Baltimore. That project, along with renovations at other plants, lowered the steelmaker's profit by about $50 million.
"We are very disappointed with our third-quarter results," said Chairman and Chief Executive Officer Curtis H. Barnette. "Our shipment levels and prices were depressed because of unfairly traded steel imports, and we incurred substantial additional cost in connection with extensive and planned modernization and other outages."
Barnette said this year's domestic steel prices were down 7 percent from 1998 levels -- the largest aggregate decline in almost 20 years.
"For Bethlehem, a 1 percent price change means a loss of $40 million in net sales," he said.
Net sales in the quarter that ended Sept. 30 were $958 million, down 16 percent from last year's third quarter.
In the first nine months of the year, the net loss was $145 million -- $1.35 a share -- with sales of $2.9 billion. In the comparable period last year, net income was $143 million on sales of $3.47 billion.
Bethlehem shut down its "L" blast furnace, which supplies molten iron to the rest of the plant, for 10 weeks during the summer, starting it up again in mid-August. The project cost more than $100 million. Additionally, the company spent about $70 million to update its basic oxygen furnace, which turns the molten iron from the blast furnace into steel.
The Bethlehem, Pa.-based company was not alone in its disappointing earnings report. USX-U.S. Steel, the country's top steel producer, lost $26 million in the third quarter.
"All of the [vertically integrated steel producers] lost money this quarter," said Waldo T. Best, an analyst at Morgan Stanley Dean Witter & Co. in New York.
He said that along with the problems enumerated by Barnette, the company may have been hurt in the third quarter by its negotiations with the United Steelworkers of America. The two sides signed a labor contract in August, but companies that rely on steel may have stocked up on material earlier in the year because of fears that the two sides would not reach an agreement and the supply of steel would dwindle, Best said.
Best said he rates the stock as neutral because capital expenditures have weakened its cash flow. But, he said, he sees the company's fortunes improving next year.