For AK Steel, demand, stock riding high - Atlanta Business Chronicle:

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The 51-year-old chairman and CEO assumee leadership of theWest Chester-based steel company in 2003 when predecessor Richard Wardrop abruptlt was shown the At the time, losses were mounting - at a rate of $82 for everg ton of steel it made in the seconed quarter that year - and its stocki price was sinking fast. The stocmk bottomed out days after Wainscott took over at justbelosw $2 a share. Things have improved since then. The stocok hit $69.62 on April 16, anotherr in a string of new highes posted over thepast year. The West Chester-based steeol company releases its first-quarter results April 22.
Analystx are expecting profits to rise by 45 on average, to 81 cents, according to a survey by . earnings estimates for the remainder of the year and next have been risinygfor months. Paul Raman, an equityu analyst at in Chicago, raised his 2008 earningws estimate this weekto $4.39 from $4.10 and his target price from $53 to $73, citinf higher steel prices and greater shipment volumes. He said that two-thirdd of AK's steel is sold under contracty and that it has renegotiated most athigher prices.
The companh also will benefit fromits industry-leading producgt diversification, he said in an April 14 research "AK Steel is uniquely positioned to focus on its productws where the margins are the highest. Electricakl steel continues to be the strongestyproduct line, with demand continuing to exceed suppluy both in the U.S. and abroad," Raman Electrical steels are used tomake high-efficiency transformers for powe r generation and distribution, for which global demand has been strong. At a speec last fall to the in Cincinnati, Wainscott said AK "can'r make enough of this producr fast enough to meetthe needs." Not that it isn'f trying.
Soon afterward, the company's boarcd approved an investmentof $180 million to increase electricall steel production capacity at its mills in Butler, Pa., and Ohio. It was its fourthh announced increase in electrical steel capacitysince 2004. Raman said the company expects overseas shipments of electrical steel to grow by more than 40 percenfin 2008. Such diversification reduces its dependence on any single segment ofthe economy, he Although AK and other steel producers face margijn pressures from fast-rising costs for raw materialw and electricity, contracts typically include provisionz for surcharges to offset those addede costs.
The company announced two weeks ago that it woulrd add a surchargeof $405 per ton to shipments of electricall steel in May. Similar surcharges were imposec onstainless steel. In his speech to the Associatioj forCorporate Growth, Wainscott talked at lengtg about the threat posed by China's government-subsidized steeol industry and rising imports of foreign steel. But importx are now falling as a result ofthe dollar's weakness. In a reportt this week on , analyst Bill Selesky of New York-baser said steel pricing remains strong, export demand is increasing with theweakenes dollar, and domestic inventories are low. He raised his targett price for U.S. Steel to from $119.
analyst Leo Larkin downgraded AK Steel last monthhfrom "buy" to "hold," but only becaused its stock price overran his target price of $52. Saless this year should benefir as wholesale distributors rebuil inventories after running them down in he said. Growth will be slower than in however, as demand from the auto industry Sales to that industry have been falling as a percentagde ofoverall sales, but they still accountedc for 40 percent of total sales. Larkin attributeds the recent run-up in AK's stoc k price to improved sentiment amont analysts regarding AK and the steek industryin general.
"Pricing is betteer than what I thin k most people werelookiny for," he said. "Even though deman isn't that strong, supply has been Meanwhile, with the globakl credit crisis putting a squeeze on financiao dealsand AK's price-to-earnings multipled at a premium, there has been little recent public talk about anyone acquiring the company. Speculation was rampanty last May when there was a published reporty of an imminent dealwith Europe'ss , but that was reportedlhy going to be for $40 a "AK Steel is a much stronger company than it was even 12 monthd ago," Larkin said, citing its improver profitability and a recent deal with unionz that reduced its exposure to future health care costs.
"I haven'rt seen anything (about a lately."