AK Steel’s 2Q17
Previously, we looked at AK Steel’s (AKS) 2Q17 revenues. In this article, we’ll look at the company’s 2Q17 EBITDA (earnings before interest, tax, depreciation, and amortization) and free cash flows.
AK Steel generated adjusted EBITDA of $142 million in 2Q17, which was similar to the sequential quarter. However, the company’s 2Q17 adjusted EBITDA rose 43% as compared to the corresponding period last year. Other steel companies (CLF) saw mixed results in regards to EPS. While Nucor’s (NUE) 2Q17 EBITDA fell on a sequential basis, U.S. Steel (X) reported a sharp quarter-over-quarter increase in its 2Q17 EBITDA.
As noted previously, AK Steel has lowered its exposure to some of the lower margin commodity-grade steel products (XME). Because of more value-add products in its product mix and higher steel prices, AK Steel managed to increase its adjusted EBITDA margin to 9.2% in the first half of 2017 as compared to 6.0% in the corresponding period last year.
2Q17 cash flows
Along with profitability metrics, markets also look for free cash flows in steel companies’ earnings report. AK Steel generated free cash flows of $147 million in 2Q17 as compared to $3.8 million in 1Q17. However, since there is a seasonality in cash flows due to working capital build-up in the first quarter, it’s pertinent to look at year-over-year figures. AK Steel had generated free cash flows of $111 million in 2Q16. The yearly increase in AK Steel’s 2Q17 cash flows looks encouraging, especially given the fact that the company incurred higher maintenance expenditure in the quarter.
In the next and final part of this series, we’ll look at the key takeaways from AK Steel’s 2Q17 earnings call.