Chesterton Tribune

US Steel posts 4th consecutive quarterly loss but hope for 2010

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By KEVIN NEVERS

U.S. Steel Corporation (USS) is reporting a net loss last year of more than $1 billion.

According to a statement released today, USS posted a net loss of $1.401 billion or $10.42 per diluted share in 2009, compared to a net income in 2008 of $2.112 billion or $17.96 per share.

USS also posted a net loss of $267 million of $1.86 per diluted share in the fourth quarter of 2009—its fourth consecutive quarterly loss—compared to a net loss of $303 million or $2.11 per share in the third quarter and a net income of $290 million or $2.50 per share in the year-ago period.

“We reported a modest improvement in fourth quarter results as compared to the third quarter mainly due to higher average realized prices, increased shipments, and higher utilization rates for our flat-rolled operations, primarily driven by North American automotive and service center markets, and the return to profitability of our tubular operations,” USS Chair and CEO John Surma said.

Items not allocated to segments in the fourth quarter of 2009 consisted of a pre-tax charge of $49 million related to the accrual of estimated environmental remediation costs at a former production site; this item reduced net income by $31 million or 21 cents per diluted share, the company said. A foreign currency loss also decreased net income in the fourth quarter of 2009 by $11 million of 7 cents per share, the company added.

Outlook

“We expect to report an overall first quarter 2010 operating loss in line with the fourth quarter 2009 as gradually improving business conditions are not yet fully reflected in our operating results,” Surma said. “We continue to experience improved order rates from several of our end markets. Automotive, service center, converter, and appliance customer order rates in North America and Europe are at or near their highest levels in the last 12 months, while in other markets, such as construction in North America, demand remains soft, but due to low levels of inventory and the anticipated seasonal increases in activity at the end of the first quarter, our construction order book remains stable.”

“A gradually strengthening economy should result in improvements in real demand, while apparent demand will likely be positively influenced by the restocking of the manufacturing supply chain, which we believe is underway,” Surma added. “Relatively low levels of flat-rolled products, if continued, are also expected to support improved order rates. Our tubular operations are also continuing to experience favorable demand trends, most notably in alloy product at our welded operations in East Texas. At the same time, spot market prices are increasing across all of our segments in response to increased order rates and global raw material cost pressures.”

“We continue to believe that the U.S. and global economies are in the early stages of a gradual recovery,” Surma concluded. “While we are becoming more optimistic, primarily due to improvements we are starting to see in the manufacturing sector, we remain cautious in our outlook for end-user demand.”

Flat-rolled Outlook

for First Quarter

•Flat-rolled results for the first quarter of 2010 are expected to be comparable to those of the fourth quarter “as the benefits of increases in average realized prices and shipments are reduced facility repair and maintenance costs are expected to be offset by the absence of approximately $55 million of favorable effects from LIFO inventory liquidations and adjustments to employee layoff benefits,” the company said.

•Average realized prices are expected to increase from the fourth quarter “as we expect to begin realizing the impact of increased spot market prices later in the first quarter.”

•“In response to increased order rates,” the company said, USS is currently making steel at six of its seven North American steelmaking locations. The exception is Lake Erie Works, which represents around 10 percent of the company’s annual flat-rolled raw steel capability. “Our Lake Erie Works is not operating because our labor agreement has expired and we have not yet reached a successor agreement,” the company said.

•Maintenance work on the company’s largest blast furnace, No. 14 at Gary Works, should be complete late in the first quarter, at which point all North American blast furnaces with the exception of the one at the Lake Erie Works, will be operational.

•Overall, raw steel capability utilization rates are expected to increase from the fourth quarter.

•The company has re-started its Keetac iron ore operations.

4Q Income from Operations

by Reportable Segment

•Flat-rolled reported a loss from operations of $284 million, compared to a loss of $370 million in the third quarter and a loss of $21 million in the year-ago period.

•U.S. Steel Europe (USSE) reported a loss of $3 million, compared to an income of $7 million in the third quarter and a loss of $141 million in the year-ago period.

•Tubular reported an income of $39 million, compared to a loss of $21 million in the third quarter and an income of $559 million in the year-ago period.

•Other businesses reported an income of $3 million, compared to an income of $5 million in the third quarter and an income of $21 million in the year-ago period.

•Total segment losses from operations were $245 million, compared to $379 million in the third quarter and an income of $418 million in the year-ago period.

•Total loss from operations was $329 million, compared to $412 million in the third quarter and a total income from operations of $522 in the year-ago period.

More Numbers

•The average realized price per net ton for flat-rolled was $633 in the fourth quarter ($605 in the third quarter, $805 in the year-ago period) and $651 for the year ($780 in 2008.)

•USS and USSE shipped a total of 4,654 net tons in the fourth quarter (4,158 in the third quarter, 4,198 in the year-ago period) and a total of 14,981 net tons for the year (24,448 in 2008).

•USS reported net sales of $3.354 billion in the fourth quarter ($2.817 in the third quarter, $4.502 in the year-ago period) and $11.048 billion for 2009 ($23.754 for 2008).

•Capital expenditures in 2009 totaled $472 million and consisted of largely non-discretionary environmental and other infrastructure projects.

“Only limited progress was made on certain projects of long-term strategic importance, as we substantially reduced our planned capital spending from $740 million to conserve liquidity,” the company said. “This compares to capital expenditures of $735 million for 2008 and $692 million for 2007.”

Posted 1/26/2008