United States Steel Corporation (X) reported
disappointing fourth-quarter 2011 results. Net loss came in at $226
million or $1.57 per diluted share.
Excluding the $51 million of net foreign currency losses and an
$11 million after-tax environmental remediation charge, adjusted
fourth-quarter 2011 net loss came in at $164 million, or $1.14 per
diluted share, much below the Zacks Consensus Estimate loss of 82
cents per share.
For full-year 2011, U.S. Steel reported a net loss of $68
million, or 47 cents per diluted share compared with a net loss of
$482 million, or $3.36 per diluted share in full-year
2010.
Operational Performance
Revenue in the quarter improved 14.4% year over year to $5.1
billion from $4.8 billion, slightly above the Zacks Consensus
Estimate of $4.7 billion. For full-year 2011, revenue was $19.9
billion versus $17.4 billion in fiscal 2010.
U.S. Steel's reportable segments and Other Businesses reported a
loss of $43 million, or $8 per ton, in the fourth quarter of 2011,
compared with a loss of $77 million, or $14 per ton, in the fourth
quarter of 2010.
U.S. Steel reported loss from operations of $160 million
compared with a loss from operations of $114 million in the fourth
quarter of 2010. For full fiscal 2011, income from operations
was $248 million versus a loss from operations of $111 million in
fiscal 2010.
Financial Performance
Capital expenditures for 2011 was $848 million, which included
strategic projects related to coke and coke substitute production,
comprising blast furnace coal injection in Europe, a carbon alloy
facility at Gary Works and an environmentally advanced coke battery
at the Mon Valley Works' Clairton Plant; heat treat and finishing
facilities at Lorain Tubular Operations in Ohio; ongoing
implementation of an enterprise resource planning system, and
non-discretionary environmental and other infrastructure
projects. This compares with capital expenditures of $676
million for 2010.
As of December 31, 2011, U. S. Steel had $408 million of cash
and $1.8 billion of total liquidity compared with $578 million of
cash and $2.1 billion of total liquidity as of December 31,
2010.
Segmental performance
The Flat-rolled product segment loss from
operations for the fourth quarter was $24 per ton compared with
income from operations of $53 per ton in the third quarter of 2011,
driven largely by lower average realized prices and shipments
created by the uncertain economic outlook and increased domestic
supply, which perpetuated cautious purchasing patterns early in the
quarter.
Fourth quarter prices decreased by $32 per ton to $741 per ton,
reflecting lower average realized prices on spot market business as
well as index-based contracts. Market-related effects totaled
approximately $185 million compared with the third
quarter.
U.S. Steel also incurred approximately $20 million in costs
related to the ratification of the Hamilton Works labor agreement
and associated finishing facility restart costs. Accruals for
profit-based payments were down by approximately $30 million in the
fourth quarter.
The raw steel capability utilization rate of 75% in the fourth
quarter was comparable to the third quarter. For full-year
2011, Flat-rolled segment had operating income of $452
million.
Fourth quarter 2011 results for U.S. Steel Europe (USSE) were
lower sequentially, primarily due to lower average realized
euro-based prices, production volume and shipments as market demand
softened in response to the continuing difficult economic
conditions in Europe.
Operating costs also decreased sequentially, reflecting lower
raw materials and facility repair and maintenance costs, partially
offset by higher energy costs. In response to reduced spot
market prices and weak demand, a blast furnace in Serbia remained
idled and a blast furnace in Slovakia was taken off-line late in
the quarter. As a result, the European raw steel capability
utilization rate decreased to 65% for the fourth quarter. For
full-year 2011, USSE segment had an operating loss of $162 million.
Tubular’s fourth quarter 2011 results were in
line with the third quarter as average realized prices increased to
$1,711 per ton and shipments of 482 thousand tons were comparable
with the third quarter. Fourth quarter results reflect the
continued strong demand for energy-related tubular
products.
The fourth-quarter results also reflected increased maintenance
outage and repair costs as well as start-up costs for the newly
commissioned heat treat and finishing facilities at Lorain Tubular
Operations in Ohio. For full-year 2011, Tubular segment had
operating income of $316 million.
U.S. Steel Serbia
Effective January 31, 2012, U.S. Steel sold U.S. Steel Serbia
d.o.o. to the Republic of Serbia for a nominal purchase
price. In addition, U. S. Steel Kosice will receive payment
of certain intercompany balances owed by U. S. Steel Serbia for raw
materials and support services, subject to adjustment.
U.S. Steel expects to record a total non-cash charge of between
$400 and $450 million in the first quarter of 2012, which includes
the loss on the sale and a charge of approximately $50 million to
recognize the cumulative currency translation adjustment related to
the company's net investment in Serbia.
First Quarter 2012 Outlook
U.S. Steel expects to report a significant improvement in its
operating results in the first quarter of 2012 compared with fourth
quarter 2011, mainly driven by improved average realized prices and
shipments for Flat-rolled segment.
U.S. Steel expects good results for Flat-rolled segment in the
first quarter of 2012 as a result of increased average realized
prices and shipments, as improving end user demand and lower
customer inventories began to significantly improve market
conditions late in the fourth quarter of 2011.
Excluding the loss on the sale of U.S. Steel Serbia, the company
expects the first quarter 2012 results for European segment to
improve sequentially due to the elimination of operating losses
associated with Serbian operations. European spot market prices
appear to have bottomed and are expected to increase throughout the
remainder of the quarter. However, contract prices are expected to
decrease compared with the fourth quarter.
First quarter 2012 results for Tubular segment are expected to
continue to retain solid performance as the demand for oil country
tubular goods (OCTG) and line pipe remain strong. Shipments are
expected to increase modestly from the fourth quarter while average
realized prices are expected to remain comparable with the fourth
quarter.
Overall, shale resource development and oil-directed drilling
continue to drive the rig count, while natural gas drilling is
being affected by the high levels of natural gas in storage.
Total accounting costs for pension and other benefits plan are
expected to be approximately $535 million in 2012 compared with
approximately $600 million in 2011. The company’s payments for
these plans in 2011 were approximately $630 million, which included
a voluntary contribution of $140 million to main defined benefit
pension plan.
Our Take
U.S. Steel is an integrated steel producer of flat-rolled and
tubular prodand Europe. It competes in North America with
international steel giants like ArcelorMittal
(MT), BaoSteel, Posco (PKX), Nippon Steel and
ThyssenKrupp.
We maintain our Neutral recommendation on U.S. Steel with its
quantitative Zacks #3 Rank (short-term Hold rating).
ARCELOR MITTAL (MT): Free Stock Analysis Report
POSCO-ADR (PKX): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Grafico Azioni Arcelor Mittal (NYSE:MT)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Arcelor Mittal (NYSE:MT)
Storico
Da Set 2023 a Set 2024