After posting its sixth consecutive quarterly loss, Geneva Steel is counting on price increases that took effect in April to work fiscal magic.
The steel mill reported a net loss of $4.57 million for the second fiscal quarter that ended March 31. That equates to a loss of 32 cents per common share. The operating loss for the quarter was $3.21 million.The quarterly loss includes a one-time, nonrecurring loan fee of $500,000 the company incurred when it set up a new financing plan.
In the first quarter of the fiscal year, Geneva reported a net loss of $3.9 million. Geneva lost a total of $8.51 million in the six months that ended March 31.
Geneva attributes its mounting losses to depressed demand and underpriced steel. Earlier this year it announced two price increases that took effect April 4. It raised the cost of hot-rolled coil $20 per ton and flat-rolled sheet and plate products $10 per ton.
Geneva also plans to raise the price of hot-rolled sheet, band and strip mill plate $20 per ton effective July 4.
"It (the losses) are a function of pricing," said Mitch Haws, director of corporate communication. "We've done a lot from the cost side. To the extent pricing recovers and shows some strength, the integrated mills will do well."
But, "when you get the benefit of price increases and to what extent remains to be seen," he said.
Steel companies have had to back off previous price increases because of depressed demand. It is more likely the current price increases will stick because of decreased availability of steel in the United States, Haws said. The amount of foreign steel brought to the United States has fallen since the government made a preliminary ruling earlier this year in favor of American steel companies who argued foreign companies were dumping and unfairly subsidizing the products they sold here.
In addition to the price increases, Geneva expects its bottom line to be boosted by increased demand for steel. It received orders for 570,941 tons during the second quarter, double the amount of tonnage ordered during the same quarter of the previous year.
"Consistent with the last quarter, bookings during April 1993 remained strong," the company's release said.