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U.S. Steel Reports 2010 4th Quarter, Full-Year Results
01/26/2011 - United States Steel Corp. reported a net loss of $249 million on net sales of $4.3 billion for the fourth quarter, and a net loss of $482 million on net sales of $17.37 billion for the full year 2010.
United States Steel Corp. reported a net loss of $249 million on net sales of $4.3 billion for the fourth quarter, and a net loss of $482 million on net sales of $17.37 billion for the full year 2010.
Fourth Quarter Results — The $249 million net loss ($1.74 per diluted share) compares to a net loss of $51 million ($0.35 per diluted share) in the previous quarter (Q3 2010) and a net loss of $267 million ($1.86 per diluted share) in the year-ago fourth quarter.
"We reported a modest improvement in our fourth quarter operating results in comparison to the third quarter mainly due to reduced spending for facility repair and maintenance, including structural repairs and inspections, and a net gain related to asset sales,” said U. S. Steel Chairman and CEO John P. Surma, commenting on results. “The improvements were partially offset by decreases in realized prices and a reduction in total shipments, reflecting soft steel market conditions during most of the quarter and the traditional seasonal downtime taken by some of our customers during the latter part of the quarter."
The company reported a fourth quarter 2010 loss from operations of $114 million, compared with a loss from operations of $138 million in the third quarter of 2010 and a loss from operations of $329 million in the fourth quarter of 2009.
Other items not allocated to segments included a $21-million pre-tax net gain related to the sale of transportation assets in Alabama as well as the sale of the bar mill and bloom and billet mill assets located at Hamilton Works. These items increased net income by $11 million (seven cents per diluted share). In the previous quarter (Q3 2010), other items not allocated to segments decreased net income by $15 million (11 cents per diluted share), while in the year-ago fourth quarter, other items not allocated to segments reduced net income by $31 million (21 cents per diluted share).
Net interest and other financial costs included a foreign currency loss that decreased net income by $33 million, (23 cents per share). The net loss primarily resulted from the accounting remeasurement of a $1.6 billion U.S. dollar-denominated intercompany loan to a European subsidiary, partially offset by gains on euro-U.S. dollar derivatives activity. This compares to a foreign currency gain that increased net income by $139 million (96 cents per diluted share) in the previous quarter and a foreign currency loss that decreased net income by $11 million (seven cents per share) in the year-ago fourth quarter.
Results included a $52 million (36 cents per diluted share) unfavorable catch-up adjustment as a result of an increase in the actual annual effective tax rate. This compares to a $29 million (20 cents per diluted share) favorable catch-up adjustment in the third quarter 2010.
Full Year Results — The $482 million net loss ($3.36 per diluted share) compares with a full-year 2009 net loss of $1,401 million ($10.42 per diluted share). Net sales of $17.37 billion compare to net sales of $11.5 billion in 2009.
Loss from operations was $111 million versus a loss from operations of $1,684 million for the year 2009. The company also recorded a $97-million tax provision on its pre-tax loss of $385 million.
Capital expenditures for 2010 ($676 million) largely consisted of strategic projects primarily related to coke and coke substitute production, including blast furnace coal injection in Europe, implementation of an enterprise resource planning system, and non-discretionary environmental and other infrastructure projects. This compares with capital expenditures of $472 million for 2009.
Reportable Segments and Other Businesses — U. S. Steel's reportable segments and Other Businesses reported a loss from operations of $92 million ($17 per ton) in the fourth quarter, compared with a loss of $80 million ($14 per ton) in the previous quarter and a loss of $245 million ($53 per ton) in the year-ago fourth quarter.
Fourth quarter results for the Flat-rolled segment improved compared to the third quarter primarily due to reduced spending for facility repair and maintenance, including structural inspections and repairs, partially offset by decreased average realized prices, as publicly reported spot prices bottomed in November. The reduction in spending is partially due to the substantial completion of repairs related to the structural failure at the company’s Gary Works facility. The company’s Hamilton Works iron and steelmaking facilities were idled in October, causing the company to incur approximately $40 million in idle facility carrying costs during the fourth quarter.
Average realized prices in the fourth quarter were $657 per net ton, a decrease of $31 from the previous quarter (Q3 2010) due to lower spot market and index-based contract prices. Shipments increased by 1% to 3.9 million net tons as customer order rates progressively improved during the quarter. The raw steel capability utilization rate was 72% for the Flat-rolled segment, 5% lower than the third quarter.
Fourth quarter results for U. S. Steel Europe (USSE) were lower than the previous quarter as lower euro-based spot market transaction prices and shipments were partially offset by lower raw materials costs. The reported average realized price increased by $45 per ton to $793 per ton reflecting a significant favorable foreign currency translation effect. Euro-based transaction prices, which were lower than the third quarter, were more than offset by a favorable mix of value-added contract shipments, reflecting the company’s progress in its long-term strategy to increase our value-added product sales. Shipments decreased by 7% to 1.2 million tons due to reduced order rates from spot market customers and normal seasonal patterns. USSE operated at 77% of raw steel capability for the fourth quarter.
Tubular results were lower than the previous quarter as the impact of lower shipments and average realized prices was partially offset by lower costs for purchased rounds and hot-rolled bands, which are priced on a monthly basis. Shipments decreased by 9% to 386 thousand tons, and the reported average realized price decreased by $55 to $1,504 per ton.
Outlook — “We expect to report a modest improvement in reportable segment results in comparison to the fourth quarter 2010,” said Surma, commenting on U. S. Steel's outlook for the first quarter. “Order rates for most customer groups and publicly reported spot market prices began to increase later in the fourth quarter and we remain cautiously optimistic that global economic conditions will continue to improve in the first quarter."
“Flat-rolled results for first quarter 2011 are expected to improve compared to the fourth quarter 2010 as the benefits of increased average realized prices, shipments and production volumes are expected to be partially offset by higher raw materials costs, primarily for scrap and coal,” continued Surma. “Average realized prices are expected to increase from fourth quarter 2010 as we expect to begin realizing the benefits of increasing spot and some market-based contract prices throughout the first quarter. Increases in some of our index-based contract prices should be realized in the second quarter as higher published market price assessments enter the index calculations. Raw steel capability utilization is expected to increase from the fourth quarter of 2010 as all of our blast furnaces are expected to operate for the majority of the period except for Hamilton Works, which is subject to a labor dispute.
“First quarter 2011 results for USSE are expected to improve compared to the fourth quarter 2010 as the benefits of increased shipments and production volumes are expected to be partially offset by higher raw materials costs,” continued Surma. “Euro-based transaction prices are expected to improve during the first quarter. Increases in some of our index-based contract prices should be realized in the second quarter as higher published market price assessments enter the index calculations.
“Our raw steel capability utilization rate is expected to increase in the first quarter 2011 as we have restarted a blast furnace at U. S. Steel Serbia that was idled during the fourth quarter,” added Surma. “We expect all five blast furnaces to operate during the first quarter.
“We expect our Tubular operations to remain profitable in the first quarter,” continued Surma. “We anticipate that shipments will improve slightly as customer inventory levels appear balanced and end users pursue their 2011 drilling programs. Average realized transaction prices are expected to be in line with fourth quarter levels as announced price increases begin to take effect throughout the quarter.
“Overall, compared to the fourth quarter, we expect lower results due to monthly increases for purchased rounds and hot-rolled bands that will not be fully realized in Tubular product prices in the quarter,” said Surma.
Surma added that the company expects total costs for pension and other benefits plans to be approximately $590 million in 2011 compared to $428 million in 2010. Company payments for these plans in 2010 were $534 million, which included a voluntary contribution of $140 million to our main defined benefit pension plan.
