U. S. Steel Posts 2012 Net Loss, Largely Related to Serbia Divestiture
01/29/2013 - For the third consecutive quarter all three of U. S. Steel Corporation's reportable segments had positive operating results despite the uncertain global economic environment, the company reports.
United States Steel Corporation reported a fourth quarter 2012 net loss of US$50 million compared to third quarter 2012 net income of $44 million and a fourth quarter 2011 net loss of $211 million. For full-year 2012, U. S. Steel reported a net loss of $124 million which included a net loss of $353 million primarily due to the sale of U. S. Steel Serbia. For full-year 2011, U. S. Steel reported a net loss of $53 million which included an $11 million after-tax environmental remediation charge. Net loss for the fourth quarter 2012 included a $9 million favorable settlement related to a supplier contract dispute. Net income for the third quarter 2012 included a $22 million after-tax charge for employee lump sum payments as provided in the new labor agreement. Net loss for the fourth quarter 2011 included $51 million of net foreign currency losses and an $11 million after-tax environmental remediation charge.
Commenting on results, U. S. Steel chairman and CEO John P. Surma said, "For the third consecutive quarter all three of our reportable segments had positive operating results despite the uncertain global economic environment. Lower drilling and project line pipe activity, as well as continued high import levels, significantly reduced our Tubular segment's results. For our Flat-rolled segment, our profitability was negatively affected by the uncertain domestic fiscal situation as well as continued high levels of flat-rolled steel imports."
The company reported a fourth quarter 2012 reportable segment and Other Businesses income from operations of $59 million, or $11 per ton, compared to income of $171 million, or $32 per ton, in the third quarter of 2012 and a loss of $26 million, or $5 per ton, in the fourth quarter of 2011. For the year 2012, reportable segment and Other Businesses income from operations was $855 million versus $669 million for the year 2011.
For the full year 2012, the company recorded a tax provision of $131 million on its pre-tax income of $6 million. The tax provision does not reflect any tax benefit for pre-tax losses in Canada, which is a jurisdiction where it has recorded a full valuation allowance on deferred tax assets. In addition, no material tax benefit was recorded on the $399 million loss on the sale of U. S. Steel Serbia in 2012.
As of 31 December 2012, U. S. Steel had $570 million of cash and $2.4 billion of total liquidity compared to $408 million of cash and $1.8 billion of total liquidity at 31 December 2011. In 2012 net debt as reflected on the balance sheet was reduced by approximately $450 million as cash from operations in excess of capital spending was used to repay borrowings on our credit facilities and increase cash on hand.
Reportable Segments and Other Businesses
Flat-rolled fourth quarter results remained positive but decreased from the third quarter due to lower average realized prices and shipments, partially offset by lower operating costs. Average realized prices and shipments were lower compared to the third quarter, as cautious purchasing patterns continued in light of the uncertain global economic outlook and the domestic fiscal situation and compressed mill lead times. Operating costs decreased due to lower raw materials and repairs and maintenance costs partially offset by higher natural gas costs.
Flat-rolled fourth quarter results remained positive but decreased from the third quarter due to lower average realized prices and shipments, partially offset by lower operating costs. Average realized prices and shipments were lower compared to the third quarter, as cautious purchasing patterns continued in light of the uncertain global economic outlook and the domestic fiscal situation and compressed mill lead times. Operating costs decreased due to lower raw materials and repairs and maintenance costs partially offset by higher natural gas costs.
Fourth quarter results for the European segment remained positive but lower than the third quarter. Average realized prices decreased reflecting lower spot market and quarterly contract pricing, while shipments remained comparable to the third quarter. Operating costs decreased compared to the third quarter primarily due to lower raw materials costs partially offset by higher energy costs.
Fourth quarter results for our Tubular segment were well below third quarter results. Average realized prices and shipments decreased as end users reduced drilling activity and project line pipe purchases were delayed. Inventory management and continued high import levels also adversely affected order rates as we approached year-end. Operating costs increased due to lower production levels.
Outlook
Commenting on U. S. Steel's outlook for the first quarter, Surma said, "We continue to be challenged by uncertain global economic and steel market conditions. We expect a slight improvement in the European and Tubular segment operating results with Flat-rolled segment results expected to be near breakeven. Total reportable segment and Other Businesses operating results are expected to be comparable to the fourth quarter."
Commenting on U. S. Steel's outlook for the first quarter, Surma said, "We continue to be challenged by uncertain global economic and steel market conditions. We expect a slight improvement in the European and Tubular segment operating results with Flat-rolled segment results expected to be near breakeven. Total reportable segment and Other Businesses operating results are expected to be comparable to the fourth quarter."
“We expect Flat-rolled segment results to be near breakeven in the first quarter. Steel buyers in North America continued to exhibit caution early in the year, but recent increases in our daily order entry rates suggest increased spot market demand as the quarter progresses. We expect higher shipments in the first quarter than the fourth quarter with increases across many of our industry segments. Average spot prices are expected to be higher than the fourth quarter as recently announced price increases take effect. Lower prices for market-based contracts, which tend to lag the spot market, are expected to offset the higher spot market prices with overall first quarter average realized prices for the Flat-rolled segment being comparable to the fourth quarter. Raw materials costs are expected to decrease slightly as lower coal prices are partially offset by higher scrap prices. Total operating costs are expected to be slightly higher compared to the fourth quarter.
“First quarter results for our European segment are projected to improve compared to the fourth quarter due to a significant increase in shipments. Despite continued economic challenges, shipments are anticipated to increase due to additional contract volume and improving spot market activity caused by service center and distributor restocking. Average realized prices are expected to decrease due to a higher mix of hot-rolled shipments as well as the effect of lower firm contract prices, which are partially offset by increasing spot market prices. Iron ore costs are projected to increase in the first quarter.
“We expect first quarter results for our Tubular segment to improve compared to the fourth quarter due to decreased operating costs and a slight increase in shipments as drilling activity begins to improve. Average realized prices are expected to be slightly lower as compared to the fourth quarter, while operating costs are expected to decrease due to reduced repairs and maintenance costs and improved operating efficiencies.”
