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USS posts 2019 net loss of $642M as company looks to 'best of both' strategy

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By KEVIN NEVERS

U.S. Steel Corporation (USS) is reporting a net loss in 2019 of $642 million or $3.75 per diluted share, compared to a net income in 2018 of $1.12 billion or $6.25.

In the fourth quarter USS posted a net loss of $680 million or $4 per diluted share, compared to a net income in the year-ago period of $3.34.

The full-year 2019 results include $609 million in restructuring charges, the company said in a statement released after deadline on Monday.

“We are pleased to deliver better than expected results to end the year and are excited to turn the page to 2020, where we will continue to transition the business towards our future,” USS President and CEO David Burritt said. “2019 was a year of notable strategic progress and we took swift action to reposition the business. We achieved $75 million of run-rate fixed cost reductions, we demonstrated flexibility by adjusting our 2020 capital spending to prioritize strategic investments, and we de-risked strategy execution by raising $1.1 billion of incremental credit.”

“We will take another step towards our world-competitive ‘best of both’ strategy this year as we complete two important strategic projects: the electric arc furnace at Tubular and our XG3 AHSS investment at our PRO-TEC joint venture,” Burritt added. “These projects will be yet another proof point to the market that our strategy will deliver cost and capability differentiation that is valuable to our customers, stockholders, and employees. I have never been more confident in our strategy that our investments in Big River and Endless Casting and Rolling are the right priorities. We won’t be the biggest steel company, but we will be the only ‘best of both’ steel company.”

“Best of Both”

USS announced the “best of both” strategy in October, with the $700-million purchase of a 49.9-percent ownership interest in the Big River Steel flat-rolled mini mill, with an option to acquire the remaining 50.1-percent interest within the next four years. “Our new partnership with Big River is designed to accelerate our strategy to offer the ‘best of both’ by bringing together the capabilities of integrated and mini mill production,” Burritt said at the time.

The “best of both” strategy also features a $1-billion investment in endless casting and rolling and cogeneration projects at the Mon Valley Works in Pennsylvania and a $750-million investment in the hot strip mill and other projects at Gary Works.

To “better align the company around (those) three core assets within its North American flat-rolled operating segment,” USS announced in December that it will idle “significant portions of operations” at its Great Lakes Works in River Rouge, Mich. The company attributed that decision to weak demand, lower steel prices, and the new “best of both” corporate strategy.

Steel production is scheduled to stop at Great Lakes Works on April 1. The hot-strip mill rolling facility ceased operations prior to the New Year. Approximately 1,545 workers will be laid off.

Outage at Gary Works

Meanwhile, USS is planning a 48-day outage in April of the No. 4 blast furnace at Gary Works.

The company, accordingly, will be building up stocks of inventory throughout the first quarter.

Outlook

“The company currently expects the first quarter of 2020 to be the trough for the year due to the normal seasonality of our mining operations and lower first-quarter shipments in flat-rolled as the company prepares for the April blast furnace outage at Gary works,” USS said.

2019 Numbers

--Average realized price per net ton of flat-rolled: $753 ($811 in 2018).

--Total USS and U.S. Steel Europe shipments: 15.05 million net tons (15.74 million in 2018).

--Flat-rolled steel capability at U.S. facilities: 67 percent (70 percent in 2018).

--Raw flat-rolled steel production: 11.4 million net tons (11.89 million in 2018).

--Flat-rolled capital expenditures: $943 million ($820 million in 2018).

--Intersegment shipments of flat-rolled to tubular: 258,000 tons (224,000 in 2018).

--Net sales: $12.94 billion ($14.18 billion 2018).

--Flat-rolled segment earnings before interest and income taxes: $196 million ($883 million in 2018).

--U.S. Steel Europe segment loss: $57 million (earnings of $359 million in 2018).

--Tubular segment loss: $67 million (loss of $58 million in 2018).

--Other business segment earnings: $23 million ($55 million in 2018).

--Total segment earnings before interest and income taxes: $95 million ($1.24 billion in 2018).

 

 

Posted 2/4/2020

 

 

 
 
 
 

 

 

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