Bethlehem Steel Corp. yesterday sent a shock wave through Wall Street by slashing its quarterly dividend rate in half and reporting operating losses for second quarter and first six months of 1977.
The dividend reduction was the first by a major American corporation since Consolidated Edison Co. of New York took a similar step in mid-1974.
Bethlehem, the nation's second-largest steel manufacturer and Maryland's largest private employer, launched a bitter attack on the federal government in reporting its weakened financial performance.
Chairman Lewis W. Foy, in a statement from the firm's headquarters in Bethlehem, Pa., complained that "pricing in the steel industry has been under de facto government control for 15 years" while employment costs and prices for purchased products have continued to soar.
Imports have been accelerating "at an unprecedented rate" and required enviromental spending have "mushroomed," Foy declared.
A Carter administration spokesman, while conceding that "steel industry probably has been the target of more than its share of investigations, study and criticism," took issue with Foy's statement on price controls.
Except for nationwide economic controls from mid-1971 through mid-1974, this official noted, steel and other American industries have been free to set prices. The fact that a steel price boost again was singled out for criticism by the federal government last week "is not tantamount to de facto controls . . . our policy is one of attempting to bring about voluntary cooperation with business and labor . . . we will continue to comment because steel is important to the U.S. economy," the spokesman added.
Bethlehem said it suffered a pre-tax loss from actual business quarter of $22.2 million and an operating loss of $75.4 million for the first six months of 1977.
Once current and deferred income tax credits were added, Bethlehem actually posted overall profits for the 1977 periods - although down sharply from last year.
Yet income for the second quarter, for example, was $34.8 million (80 cents a share) compared with $54.4 million ($1.25 a share) in the 1976 period. The profits were made possible by $57 million of tax credits.
For the full six months, Bethlehem had a tax credit of $85 million and profits were $96.6 million (22 cents a share) compared with $82.8 million (1.90 a share) in the January-June period last year. Quarterly sales rose slightly to $1.46 billion from $1.44 billion; first-half sales were $2.73 billion vs. $2.71 billion.
In view of the earnings performance and "because the outlook for Bethlehem and the American steel industry is uncertain for a number of reasons." Foy said, "the board concluded that it was prudent to reduce" the quarterly payout rate.
Bethlehem will start paying 25 cents a share quarterly on Sept. 10 to stockholders of recrod on Aug. 10, compared with the previous rate of 50 cents quarterly, in existence since mid-1974. If the lower dividend rate sticks for a full year, yesterday's decision will provide the firm some $43 million in additional operating capital.
When news of the operating losses and reduced dividend were slashed to Wall Street yesterday, the New York Stock Exchange halted trading in Bethlehem stock - which came under immediate selling pressure.
No traders in Bethlehem were executed for about two hours and the company's stock finished the day down $5.50 a share to $23.75 on a heavy volume of $394.900 - the most active Big Board issue.