AK Steel Holding Corporation

February 27, 2015 AK Steel Holding Corporation NEUTRAL Current Recommendation Prior Recommendation Outperform Date of Last Change 04/03/2014 Current Price (02/26/15) $4.46 Target Price $4.75 (AKS-NYSE) SUMMARY We are retaining our Neutral recommendation on AK Steel. The company s profit for fourth-quarter 2014 tumbled on higher operating costs. Adjusted earnings, however, topped the Zacks Consensus Estimate. Sales surged year over year on higher shipments and beat expectations. AK Steel should benefit from the strength in the automotive market and higher shipments of carbon steel products to automakers in 2015. The company is also investing to internally procure about half of its iron ore and coal requirements. It should also gain from its acquisition of Severstal Dearborn. However, AK Steel is exposed to a volatile pricing environment and remains affected by high levels of steel imports. SUMMARY DATA 52-Week High $11.19 52-Week Low $3.74 One-Year Return (%) -28.64 Beta 2.23 Average Daily Volume (sh) 9,070,711 Shares Outstanding (mil) 181 Market Capitalization ($mil) $807 Short Interest Ratio (days) 4.69 Institutional Ownership (%) 76 Insider Ownership (%) 2 Annual Cash Dividend $0.00 Dividend Yield (%) 0.00 5-Yr. Historical Growth Rates Sales (%) 1.0 Earnings Per Share (%) N/A Dividend (%) 0.0 using TTM EPS N/A using 2015 Estimate 9.7 using 2016 Estimate 5.4 Zacks Rank *: Short Term 1 3 months outlook 3 - Hold * Definition / Disclosure on last page Risk Level * High, Type of Stock N/A Industry Steel-Producers Zacks Industry Rank * 216 out of 267 ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 1,370 A 1,405 A 1,331 A 1,465 A 5,570 A 2014 1,384 A 1,531 A 1,594 A 1,998 A 6,506 A 2015 1,905 E 1,925 E 1,935 E 1,881 E 7,646 E 2016 7,900 E *Note: Quarterly revenues may not add up to the annual figure due to rounding-off. Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 -$0.07 A -$0.15 A -$0.12 A $0.09 A -$0.24 A 2014 -$0.40 A $0.02 A $0.12 A $0.14 A -$0.40 A 2015 $0.06 E $0.11 E $0.14 E $0.15 E $0.46 E 2016 $0.82 E *Note: EPS in 2013 do not add up to the annual figure due to rounding-off. EPS in 2014 do not add up to the annual figure due to one-time adjustments. Projected EPS Growth - Next 5 Years % 5 2015 Zacks Investment Research, All Rights reserved. www.zacks.com 10 S. Riverside Plaza, Chicago IL 60606

OVERVIEW Ohio-based AK Steel Holding Corporation (AKS) is a leading producer of flat-rolled carbon, stainless, electrical steel and tubular products. It operates 8 steel-making and finishing plants, 2 coke plants and 2 tube manufacturing plants in Ohio, Pennsylvania, Indiana, Kentucky, Michigan and West Virginia. In 2014, around 88% of the company s revenues came from the U.S. market and the remaining 12% from other countries. With respect to shipments by products, stainless/electrical, coated, cold-rolled, tubular, hot-rolled and secondary accounted for 14%, 46%, 20%, 2%, 16% and 2% of the company s overall shipments in 2014. With respect to markets, Automotive, Infrastructure and Manufacturing, and Distributors & Converters represented 53%, 18% and 29% of the company s sales in 2014. As a large percentage of AK Steel s sales come from the automotive sector, its steel volumes are inextricably linked to this industry. The steel products include aluminum-coated stainless steel, coilcoated steel, cold-rolled coated steel, electro-galvanized steel, hot-dipped galvanized steel and hot-rolled steel. The company s steel products are also consumed by the industrial machinery and equipment as well as the construction sectors. The basic raw materials required for steel manufacturing are iron ore, coal, coke, chrome, nickel, silicon, manganese, zinc, limestone, and carbon and stainless steel scrap. Natural gas, electricity and oxygen are the sources of power for the steel manufacturing operations. REASONS TO BUY AK Steel mainly focuses on products with high margins. Carbon, stainless and electrical steel continue to be the company s strongest product line. The revival in demand in the U.S. and abroad bodes well for the company. AK Steel is well positioned to serve the end markets when demand rebounds. The company expects increased shipments driven by the year-over-year increase in North American light vehicle production. Bright annealed stainless material is one of the company s strongest product lines, demand for which is expected to remain high due to increasing demand from appliance makers. AK Steel should benefit from the strong momentum in the automotive market. Automakers are witnessing higher production and sales, which is driving the shipments of the company s stainless steel products. AK Steel witnessed continued strength in the automotive market in 2014. Automotive contribution to the company s revenues was 53% for the year. AK Steel expects to continue to gain market share in 2015. The company s shipments to auto customers rose 12% year over year in 2014 and is expected to be higher this year. Automotive builds are expected to rise 2%-3% year over year in 2015. The company is currently developing third-generation, advanced high-strength carbon steels for its automotive customers that are considerably stronger than current product offerings. It expects solid demand for its carbon and stainless steel products from its automotive customers to continue in 2015. AK Steel s state-of-the-art, highly-efficient electric arc furnace at its Butler Works has provided greater flexibility with respect to product mix, and is expected to minimize the company s need to purchase merchant slabs. The furnace has the capacity to produce roughly 400,000 more tons of steel annually. Moreover, the acquisition of the Severstal Dearborn plant is expected to boost AK Steel s future earnings and improve its credit profile and liquidity. The buyout has provided the company an access to highly modernized and upgraded steelmaking equipment and facilities. With the acquisition, AK Steel now expects its annual shipments to exceed 7.5 million tons. The company envisions potential costs synergies of around $50 million from the acquisition in 2015. Equity Research AKS Page 2

AK Steel is investing in securing around half of its iron ore pellet and coal requirements internally. The company is making good progress with its first coal mine (North Fork) at AK Coal and is ramping up mining volumes. The company expects the cost of coal at AK Coal to be 25% to 30% lower than market prices. It is also making significant progress with its iron ore pellet project at Magnetation. The pellet plant is expected to provide 50% of the company s iron ore pellet requirements. Production of first pellets started in Sep 2014 with a ramp up to full capacity is expected in 2015. The company expects Magnetation to be at full production run rate of about 3 million tons per year. Both these strategic investments are expected to improve the company s cost structure and strengthen its position in the years ahead. AK Steel should also benefit from the favorable pricing trend for key raw materials such as iron ore, coke and coal. Declining prices for these inputs should acts in its favor. The company expects to gain considerably from lower steelmaking input costs in 2015. REASONS TO SELL AK Steel is exposed to macroeconomic uncertainties, stemming from the weakness in Europe and sluggish growth in Asia. Moreover, electrical steel prices remain under pressure in overseas markets given the challenging operating environment. Decline in scrap prices has further put pressure on steel pricing. The U.S. market is seeing increased imports of steel products. This, in addition to the oversupply, is further pressurizing prices and prospects of steel producers. Imports of flat-rolled finished carbon and steel products jumped around 60% between 2013 and 2014. AK Steel witnessed over 11 million tons of flat-rolled carbon steel imports in 2014 versus less than 7 million tons in 2013. Increased supply is putting pressure on pricing in the domestic market. AK Steel s cost structure is higher than its peer group due to greater reliance on external supply of raw materials, such as carbon scrap, purchased slabs, iron ore and purchased coke. Iron ore is the key raw material in steel manufacturing operations. AK Steel pays nearly double for iron ore pellets compared to its integrated competitors, who consume their own pellets. Although the company is investing heavily to procure around 50% of its input requirements internally, benefits from such move are not expected in the near future. While construction and housing sectors have shown signs of revival of late, they still are not out of the woods. The recession in 2008 led to lower demand, prices and shipments for AK Steel s products. Lower prices and shipments led to a reduction in revenues in 2009. The company, in 2011, witnessed a significant decline in sales of grain-oriented electrical steel products globally, due to the weak economy that led to soft consumer spending on new electric power transmission and distribution transformers. In addition, duties on the import of electrical goods in China further affected AK Steel s sales. Equity Research AKS Page 3

RECENT NEWS AK Steel's Q4 Earnings Trump Estimates January 27, 2015 AK Steel saw lower profit in fourth-quarter 2014 on higher operating costs, but its earnings topped expectations. The company posted a profit of $13.5 million or $0.07 per share in the quarter, a roughly 62% fall from $35.2 million or $0.26 per share logged in the year-ago quarter. Barring costs related to pension/other post retirement benefits and acquisition of Severstal Dearborn, the company s earnings were $0.14 per share, outstripping the Zacks Consensus Estimate of $0.06. For the full year, the company registered adjusted net loss of $0.40 per share, higher than the Zacks Consensus Estimate of a loss of $0.15. AK Steel completed the planned outage at its Ashland Works blast furnace in Kentucky in the fourth quarter. The company made capital spending of $18 million and took charges of $31 million related to the outage and the resultant lower production levels in the quarter. AK Steel feels that the reline of the Ashland Works blast furnace hearth will better position it to provide stable blast furnace operations in the future. Revenues, Pricing and Shipments Revenues soared roughly 36% year over year to $1,997.6 million in the reported quarter, surpassing the Zacks Consensus Estimate of $1,924 million. Shipments jumped around 42% year over year to 2,010,200 tons, aided by strong automotive demand and Dearborn acquisition which the company completed in Sep 2014. The acquisition contributed $477 million in sales and 596,000 tons of shipments in the quarter. Average selling price slipped 4% year over year to $987 per ton in the reported quarter, impacted by increased proportion of hot-rolled coil shipments in the overall sales mix due to the Dearborn acquisition. For 2014, sales climbed 17% year over year to $6.51 billion, ahead of the Zacks Consensus Estimate of $6.45 billion. Shipments jumped 16% year over year to 6,132,700 tons on Dearborn takeover and higher auto demand. Cost and Margins Operating costs jumped roughly 37% year over year to $1,923.1 million in the quarter, partly due to costs associated with blast furnace outage. Operating income for the quarter rose around 18% year over year to $74.5 million, aided by higher sales. Financials AK Steel ended 2014 with cash and cash equivalents of $70.2 million, up roughly 55% year over year. Long-term debt climbed 63% year over year to $2,452.5 million. Outlook AK Steel plans to announce detailed guidance for first-quarter 2015 in March. Equity Research AKS Page 4

AK Steel's Q3 Earnings Top, Shares Sag on Outage Concern November 4, 2014 AK Steel logged a net loss of $7.2 million or $0.05 per share in third-quarter 2014 compared with a loss of $31.7 million or $0.23 per share in the year-ago quarter. Losses narrowed year over year as the company saw a healthy rise in sales in the quarter on higher shipments, offsetting an increase in operating costs. Barring acquisition-related costs, the company s earnings were $0.12 per share, topping the Zacks Consensus Estimate of $0.09. Despite the forecast-topping results, AK Steel s shares fell around 14.7% after the company warned that a planned outage at its Ashland Works blast furnace in Kentucky will hurt results in the fourth quarter. Revenues, Pricing and Shipments Revenues climbed roughly 20% year over year to $1,593.8 million in the reported quarter, well ahead of the Zacks Consensus Estimate of $1,485 million. Shipments went up around 18% year over year to 1,462,900 tons, aided by shipments from Severstal Dearborn acquisition and increased carbon steel shipments to the automotive and infrastructure and manufacturing markets. Average selling price increased roughly 2% year over year to $1,089 per ton in the reported quarter mainly due to increased spot market price of carbon steel products. Cost and Margins Operating costs rose roughly 17% year over year to $1,530.1 million due to expenses related to the company s acquisition of Severstal Dearborn and unfavorable impact of unplanned outage at Ashland Works. Operating income for the reported quarter jumped nearly two-and-a-half-fold year over year to $63.7 million. Financials AK Steel exited the quarter with cash and cash equivalents of $60.8 million, down roughly 7% year over year. Long-term debt climbed 70% year over year to $2,406.4 million. Outlook AK Steel plans to announce detailed fourth-quarter 2014 guidance in Dec 2014. The company, however, said that it expects fourth-quarter results will be hurt by outage at Ashland Works. Equity Research AKS Page 5

VALUATION AK Steel is currently trading at a discount to the peer group based on estimated earnings for 2015 and 2016. Over the last five years, the company s shares have traded in a range of 11.4X to 81.6X trailing 12- month earnings. Our Neutral recommendation on the stock indicates that it will perform in line with the broader market. Our price target of $4.75 is based on 10.3X our 2015 earnings estimate. Key Indicators F1 F2 Est. 5-Yr EPS Gr% P/CF 5-Yr High 5-Yr Low AK Steel Holding Corporation (AKS) 9.7 5.4 5.0 5.0 N/A 81.6 11.4 Industry Average 15.9 10.5 12.7 8.1 17.4 94.1 9.1 S&P 500 16.8 15.7 10.7 15.3 18.5 19.4 12.0 Companhia Siderurgica Nacional (SID) 39.1 2.2 19.4 39.4 4.9 Commercial Metals Company (CMC) 11.6 9.9 12.6 7.8 16.6 124.3 13.7 Usinas Sider (USNZY) 1.4 20.4 7.2 Ryerson Holding Corporation (RYI) 3.4 2.8 10.0 TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow P/B Last Qtr. P/B 5-Yr High P/B 5-Yr Low ROE D/E Last Qtr. Div Yield Last Qtr. EV/EBITDA AK Steel Holding Corporation (AKS) 3.1 33.7 1.2-9.6-31.9 0.0 9.4 Industry Average 1.0 1.0 1.0-5.9-1.7 1.2 5.6 S&P 500 5.3 9.8 3.2 25.5 2.1 Equity Research AKS Page 6

Earnings Surprise and Estimate Revision History Equity Research AKS Page 7

DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of AKS. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1126 companies covered: Outperform - 15.5%, Neutral - 75.6%, Underperform 8.2%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 th group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively. Equity Research AKS Page 8