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U. S. Steel Reports Highest Full-Year Net Income Since 2008
01/28/2015 - United States Steel Corporation reported its highest full-year net income since 2008 as the Carnegie Way delivered more earnings power.
For the full-year 2014, U. S. Steel reported net income of US$102 million, or US$0.69 per diluted share, which included net charges of US$574 million, or US$3.78 per diluted share, primarily due to non-cash charges for strategic actions. For the full-year 2013, U. S. Steel reported a net loss of US$1,645 million, or US$11.37 per diluted share, which included net charges of US$1.5 billion, or US$10.61 per diluted share, primarily due to a non-cash goodwill impairment charge and non-cash restructuring and other charges.
Fourth quarter 2014 net income of US$275 million, or US$1.83 per diluted share, compares to fourth quarter 2013 net income of US$297 million, or US$1.93 per diluted share, and a third quarter 2014 net loss of US$207 million, or US$1.42 per diluted share.
(a) 2013 amounts have been revised to correct a prior period error that resulted in additional tax benefit of US$27 million.
Commenting on results, U. S. Steel president and chief executive officer Mario Longhi said, "We are pleased to report another quarter of strong operating results, which continue to reflect the significant and sustainable improvement in our earnings power from our Carnegie Way transformation efforts."
Total reportable segment and Other Businesses income from operations of US$420 million, orUS$92 per ton, for the fourth quarter of 2014 compares to income from operations of US$479 million, or US$94 per ton, in the third quarter of 2014 and income from operations of US$146 million, or US$30 per ton, in the fourth quarter of 2013.
Cash provided by operating activities was US$1.5 billion for the year ended 31 December 2014, representing a significant improvement from the year ended 31 December 2013. Additionally, we reduced net debt (total debt less cash and cash equivalents) from US$3.3 billion at 31 December 2013, to US$2.1 billion at 31 December 2014, the lowest level since 2006, primarily due to our improved cash position during 2014. As of 31 December 2014, U. S. Steel had US$1.4 billion of cash and US$3.1 billion of total liquidity compared to cash and total liquidity of US$604 million and US$2.3 billion, respectively, at 31 December 2013.
Reportable Segments and Other Businesses
Fourth quarter results for our Flat-rolled segment decreased compared to the third quarter primarily due to increased repairs and maintenance costs of approximately US$100 million due to a reline of a blast furnace at Mon Valley Works and planned blast furnace maintenance projects at Granite City and Great Lakes, which resulted in lower operating levels. Despite the lower production levels, our Flat-rolled segment still achieved income from operations ofUS$82 per ton for the fourth quarter. Shipments and average realized prices decreased from the third quarter as a result of weaker spot market conditions. Our Flat-rolled segment results continue to be adversely impacted by the acceleration of imports during 2014, but most significantly by the massive surge of imports during the fourth quarter. Full-year Flat-rolled segment results for 2014 increased as compared to 2013 primarily due to the benefits provided by our Carnegie Way efforts, increased average realized prices and reduced raw materials costs partially offset by higher energy costs.
European segment results improved slightly compared to the third quarter primarily due to higher shipments; lower raw materials costs, primarily for iron ore; and lower facility repairs and maintenance costs as scheduled maintenance was completed in the third quarter. These improvements were partially offset by negative foreign currency effects driven by the strengthening of the U.S. dollar. Additionally, a shift in product mix resulted in lower average realized euro-based prices. Full-year European segment results for 2014 increased as compared to 2013 due to the benefits provided by our Carnegie Way efforts and decreased raw materials costs partially offset by a decrease in average realized euro-based prices.
Fourth quarter results for our Tubular segment increased compared to the third quarter. Average realized prices increased primarily due to improved pricing and mix as a result of increased alloy OCTG shipments. Full-year Tubular segment results for 2014 increased as compared to 2013 primarily due to the benefits provided by our Carnegie Way efforts.
2015 Outlook
Commenting on U. S. Steel's outlook for 2015, Longhi said, "Our Carnegie Way progress so far has exceeded our expectations in this multi-year journey. We expect to continue to generate benefits from our transformation which focuses on creating value through sustainable improvements in our business model and earnings power."
We anticipate that the global economy in 2015 will expand at a moderate rate, with U.S. economic growth of approximately 3% and European economic growth of approximately 1%. Steel demand tracks directionally with GDP, and our view is that we will continue to see low single digit growth rates in each region, which is broadly consistent with worldsteel Association projections. We expect that the depressed oil prices will have a negative impact on our Tubular segment. Although this will also be a headwind for our Flat-rolled segment, we are encouraged by the potential that improved consumer spending could provide to overall flat-rolled demand. We may continue to experience high levels of imports, which we believe in many cases are unfairly traded. Moreover, our earnings from USSK are likely to be negatively affected by foreign exchange rates, particularly the strengthening of the U.S. dollar.
We are focused on creating economic profit throughout the business cycle. Our balance sheet and liquidity are stronger, and our healthy cash flows give us the strategic flexibility to continue to improve our performance under this set of market conditions. We are confident that the Carnegie Way will continue to deliver meaningful improvements helping to offset headwinds throughout 2015. With our strong balance sheet and continued Carnegie Way improvements, we are in a much better position to respond quickly to challenging market conditions, and our improved earnings power will enable us to be more profitable during these market conditions than we have been in the past.
Focusing on short term fluctuations in a volatile environment is contrary to the foundations of the Carnegie Way transformation. We believe that value creation comes from a sustained improvement in earnings power across the business cycle and to achieve our ultimate goal of delivering economic profit, we cannot be deterred by short term volatility in our markets. Consistent with this strategy we will provide quantitative annual earnings guidance as we believe it provides all of our stakeholders with a more informed view of our earnings potential as compared to a short term quarter to quarter perspective.
We have proven in 2014 that we can respond to challenging headwinds. As we enter 2015 with this volatile market, we face significant challenges from dramatically lower oil prices, lower steel prices, and the impact of the stronger U.S. dollar and global overcapacity on imports and our operations, but we expect our Carnegie Way journey to continue to generate additional benefits in 2015, including healthy cash flows, strong liquidity, and sustaining our improved balance sheet. Based on all of the factors described above, we expect full-year 2015 adjusted Income from Operations to be between US$550 million and US$850 million, or adjusted EBITDA of between US$1.1 billion and US$1.4 billion.
(a) Excludes intersegment shipments.
(b) Excludes U. S. Steel Canada for all periods presented.
(c) Thousands of net tons.
(d) Based on annual raw steel production capability of 22.0 million net tons for Flat-rolled and 5.0 million net tons for U. S. Steel Europe. Prior to the permanent shut down of the iron and steelmaking facilities at Hamilton Works on December 31, 2013, annual raw steel production capability for Flat-rolled was 24.3 million net tons. Subsequent to the CCAA filing and deconsolidation of U. S. Steel Canada, annual raw steel production capability for Flat-rolled is 19.4 million net tons. The quarter ended September 30, 2014, and year ended December 31, 2014, shipments and raw steel production amounts for Flat-rolled do not include U. S. Steel Canada after September 15, 2014.
(e) AISI capability utilization rates include our U.S. facilities (Gary Works, Great Lakes Works, Mon Valley Works, Granite City Works and Fairfield Works).
Fourth quarter 2014 net income of US$275 million, or US$1.83 per diluted share, compares to fourth quarter 2013 net income of US$297 million, or US$1.93 per diluted share, and a third quarter 2014 net loss of US$207 million, or US$1.42 per diluted share.
| Earnings Highlights | |||||||||||||||
| (Dollars in millions, except per share amounts) | 4Q 2014 | 3Q 2014 | 4Q 2013 | 2014 | 2013 | ||||||||||
| Net Sales | US$ | 4,072 | US$ | 4,587 | US$ | 4,269 | US$ | 17,507 | US$ | 17,424 | |||||
| Segment income from operations | |||||||||||||||
| Flat-rolled | US$ | 247 | US$ | 347 | US$ | 87 | US$ | 709 | US$ | 105 | |||||
| U. S. Steel Europe | 34 | 29 | 12 | 133 | 28 | ||||||||||
| Tubular | 121 | 69 | 32 | 261 | 190 | ||||||||||
| Other Businesses | 18 | 34 | 15 | 82 | 77 | ||||||||||
| Total reportable segment and Other Businesses income from operations | US$ | 420 | US$ | 479 | US$ | 146 | US$ | 1,185 | US$ | 400 | |||||
| Postretirement benefit expense | (24) | (26) | (56) | (114) | (221) | ||||||||||
| Other items not allocated to segments | 1 | (594) | (319) | (658) | (2,079) | ||||||||||
| Income (loss) from operations | US$ | 397 | US$ | (141) | US$ | (229) | US$ | 413 | US$ | (1,900) | |||||
| Net interest and other financial costs | 50 | 60 | 75 | 243 | 332 | ||||||||||
| Income tax provision (benefit) (a) | 72 | 6 | (601) | 68 | (587) | ||||||||||
| Less: Net loss attributable to the noncontrolling interests | — | — | — | — | — | ||||||||||
| Net income (loss) attributable to United States Steel Corporation (a) | US$ | 275 | US$ | (207) | US$ | 297 | US$ | 102 | US$ | (1,645) | |||||
| -Per basic share | US$ | 1.89 | US$ | (1.42) | US$ | 2.06 | US$ | 0.71 | US$ | (11.37) | |||||
| -Per diluted share | US$ | 1.83 | US$ | (1.42) | US$ | 1.93 | US$ | 0.69 | US$ | (11.37) | |||||
Commenting on results, U. S. Steel president and chief executive officer Mario Longhi said, "We are pleased to report another quarter of strong operating results, which continue to reflect the significant and sustainable improvement in our earnings power from our Carnegie Way transformation efforts."
Total reportable segment and Other Businesses income from operations of US$420 million, orUS$92 per ton, for the fourth quarter of 2014 compares to income from operations of US$479 million, or US$94 per ton, in the third quarter of 2014 and income from operations of US$146 million, or US$30 per ton, in the fourth quarter of 2013.
Cash provided by operating activities was US$1.5 billion for the year ended 31 December 2014, representing a significant improvement from the year ended 31 December 2013. Additionally, we reduced net debt (total debt less cash and cash equivalents) from US$3.3 billion at 31 December 2013, to US$2.1 billion at 31 December 2014, the lowest level since 2006, primarily due to our improved cash position during 2014. As of 31 December 2014, U. S. Steel had US$1.4 billion of cash and US$3.1 billion of total liquidity compared to cash and total liquidity of US$604 million and US$2.3 billion, respectively, at 31 December 2013.
Reportable Segments and Other Businesses
Fourth quarter results for our Flat-rolled segment decreased compared to the third quarter primarily due to increased repairs and maintenance costs of approximately US$100 million due to a reline of a blast furnace at Mon Valley Works and planned blast furnace maintenance projects at Granite City and Great Lakes, which resulted in lower operating levels. Despite the lower production levels, our Flat-rolled segment still achieved income from operations ofUS$82 per ton for the fourth quarter. Shipments and average realized prices decreased from the third quarter as a result of weaker spot market conditions. Our Flat-rolled segment results continue to be adversely impacted by the acceleration of imports during 2014, but most significantly by the massive surge of imports during the fourth quarter. Full-year Flat-rolled segment results for 2014 increased as compared to 2013 primarily due to the benefits provided by our Carnegie Way efforts, increased average realized prices and reduced raw materials costs partially offset by higher energy costs.
European segment results improved slightly compared to the third quarter primarily due to higher shipments; lower raw materials costs, primarily for iron ore; and lower facility repairs and maintenance costs as scheduled maintenance was completed in the third quarter. These improvements were partially offset by negative foreign currency effects driven by the strengthening of the U.S. dollar. Additionally, a shift in product mix resulted in lower average realized euro-based prices. Full-year European segment results for 2014 increased as compared to 2013 due to the benefits provided by our Carnegie Way efforts and decreased raw materials costs partially offset by a decrease in average realized euro-based prices.
Fourth quarter results for our Tubular segment increased compared to the third quarter. Average realized prices increased primarily due to improved pricing and mix as a result of increased alloy OCTG shipments. Full-year Tubular segment results for 2014 increased as compared to 2013 primarily due to the benefits provided by our Carnegie Way efforts.
2015 Outlook
Commenting on U. S. Steel's outlook for 2015, Longhi said, "Our Carnegie Way progress so far has exceeded our expectations in this multi-year journey. We expect to continue to generate benefits from our transformation which focuses on creating value through sustainable improvements in our business model and earnings power."
We anticipate that the global economy in 2015 will expand at a moderate rate, with U.S. economic growth of approximately 3% and European economic growth of approximately 1%. Steel demand tracks directionally with GDP, and our view is that we will continue to see low single digit growth rates in each region, which is broadly consistent with worldsteel Association projections. We expect that the depressed oil prices will have a negative impact on our Tubular segment. Although this will also be a headwind for our Flat-rolled segment, we are encouraged by the potential that improved consumer spending could provide to overall flat-rolled demand. We may continue to experience high levels of imports, which we believe in many cases are unfairly traded. Moreover, our earnings from USSK are likely to be negatively affected by foreign exchange rates, particularly the strengthening of the U.S. dollar.
We are focused on creating economic profit throughout the business cycle. Our balance sheet and liquidity are stronger, and our healthy cash flows give us the strategic flexibility to continue to improve our performance under this set of market conditions. We are confident that the Carnegie Way will continue to deliver meaningful improvements helping to offset headwinds throughout 2015. With our strong balance sheet and continued Carnegie Way improvements, we are in a much better position to respond quickly to challenging market conditions, and our improved earnings power will enable us to be more profitable during these market conditions than we have been in the past.
Focusing on short term fluctuations in a volatile environment is contrary to the foundations of the Carnegie Way transformation. We believe that value creation comes from a sustained improvement in earnings power across the business cycle and to achieve our ultimate goal of delivering economic profit, we cannot be deterred by short term volatility in our markets. Consistent with this strategy we will provide quantitative annual earnings guidance as we believe it provides all of our stakeholders with a more informed view of our earnings potential as compared to a short term quarter to quarter perspective.
We have proven in 2014 that we can respond to challenging headwinds. As we enter 2015 with this volatile market, we face significant challenges from dramatically lower oil prices, lower steel prices, and the impact of the stronger U.S. dollar and global overcapacity on imports and our operations, but we expect our Carnegie Way journey to continue to generate additional benefits in 2015, including healthy cash flows, strong liquidity, and sustaining our improved balance sheet. Based on all of the factors described above, we expect full-year 2015 adjusted Income from Operations to be between US$550 million and US$850 million, or adjusted EBITDA of between US$1.1 billion and US$1.4 billion.
| UNITED STATES STEEL CORPORATION | |||||||||||||||||
| PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited) | |||||||||||||||||
| Quarter Ended | Year Ended | ||||||||||||||||
| Dec. 31 | Sept. 30 | Dec. 31 | December 31, | ||||||||||||||
| 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||
| OPERATING STATISTICS | |||||||||||||||||
| Average realized price: ($/net ton) (a) | |||||||||||||||||
| Flat-rolled | 775 | 777 | 750 | 772 | 735 | ||||||||||||
| Flat-rolled U.S. Facilities(b) | 775 | 786 | 757 | 782 | 740 | ||||||||||||
| U. S. Steel Europe | 600 | 671 | 692 | 667 | 706 | ||||||||||||
| Tubular | 1,625 | 1,567 | 1,509 | 1,538 | 1,530 | ||||||||||||
| Steel Shipments: (a) (c) | |||||||||||||||||
| Flat-rolled (d) | 3,015 | 3,692 | 3,470 | 13,908 | 14,644 | ||||||||||||
| U. S. Steel Europe | 1,108 | 987 | 1,029 | 4,179 | 4,000 | ||||||||||||
| Tubular | 448 | 428 | 414 | 1,744 | 1,757 | ||||||||||||
| Total Steel Shipments | 4,571 | 5,107 | 4,913 | 19,831 | 20,401 | ||||||||||||
|
Flat-rolled U.S. Facilities Steel Shipments(b) |
3,015 | 3,240 | 3,066 | 12,376 | 13,349 | ||||||||||||
| Intersegment Shipments: (c) | |||||||||||||||||
| Flat-rolled to Tubular | 381 | 439 | 363 | 1,712 | 1,699 | ||||||||||||
| Raw Steel Production: (c) | |||||||||||||||||
| Flat-rolled (d) | 3,664 | 4,675 | 4,474 | 16,962 | 17,867 | ||||||||||||
| Flat-rolled U.S. Facilities(b) | 3,664 | 4,133 | 3,890 | 15,218 | 16,678 | ||||||||||||
| U. S. Steel Europe | 1,313 | 1,111 | 1,205 | 4,788 | 4,598 | ||||||||||||
| Raw Steel Capability Utilization: (d) | |||||||||||||||||
| Flat-rolled | 75 | % | 86 | % | 73 | % | 80 | % | 74 | % | |||||||
| Flat-rolled U.S. Facilities(e) | 75 | % | 85 | % | 80 | % | 78 | % | 86 | % | |||||||
| U. S. Steel Europe | 104 | % | 88 | % | 96 | % | 96 | % | 92 | % | |||||||
(b) Excludes U. S. Steel Canada for all periods presented.
(c) Thousands of net tons.
(d) Based on annual raw steel production capability of 22.0 million net tons for Flat-rolled and 5.0 million net tons for U. S. Steel Europe. Prior to the permanent shut down of the iron and steelmaking facilities at Hamilton Works on December 31, 2013, annual raw steel production capability for Flat-rolled was 24.3 million net tons. Subsequent to the CCAA filing and deconsolidation of U. S. Steel Canada, annual raw steel production capability for Flat-rolled is 19.4 million net tons. The quarter ended September 30, 2014, and year ended December 31, 2014, shipments and raw steel production amounts for Flat-rolled do not include U. S. Steel Canada after September 15, 2014.
(e) AISI capability utilization rates include our U.S. facilities (Gary Works, Great Lakes Works, Mon Valley Works, Granite City Works and Fairfield Works).
