United States Steel Reports 2012 First Quarter Results
04/25/2012 - United States Steel Corp. reported a net loss of $219 million on net sales of $5.172 billion for the first quarter of 2012.
United States Steel Corp. reported a net loss of $219 million on net sales of $5.172 billion for the first quarter of 2012.
The $219 million net loss ($1.52 per diluted share) compared to a net loss of $211 million ($1.46 per diluted share) for the previous quarter (fourth quarter 2011), and a net loss of $86 million ($0.60 per diluted share) for the year-ago first quarter.
Adjusted first quarter 2012 net income was $110 million ($0.67 per diluted share), including adjustments for a $399 million after-tax loss on the sale of U. S. Steel Serbia (USSS), which was completed on January 31, 2012; a $58 million after-tax gain on the sale of transportation assets; and a $12 million after-tax gain on property tax settlements.
"We reported a significant improvement in our operating results in the first quarter as compared to the fourth quarter, mainly driven by improved average realized prices and shipments for our Flat-rolled segment,” said U. S. Steel Chairman and CEO John P. Surma, commenting on results. Our Tubular segment had another strong performance reflecting the continued strength of oil-directed drilling. U. S. Steel Europe results, excluding the loss on the sale of U. S. Steel Serbia, improved but continue to reflect the challenging economic situation in the region."
The company also reported $295 million in reportable segment and Other Businesses income from operations, which compares with a loss of $26 million in the previous quarter (fourth quarter 2011) and income of $4 million in the year-ago first quarter.
Other items not allocated to segments in the first quarter of 2012 included the $399 million pre-tax loss on the sale of USSS; an $89 million pre-tax gain of on the sale of transportation assets; and a $19 million pre-tax gain related to property tax settlements. This compares to a pre-tax environmental remediation charge of $18 million for other items not allocated to segments in the fourth quarter of 2011.
Historically, we have disclosed certain foreign currency gains or losses included in net income. These foreign currency gains or losses primarily resulted from the accounting remeasurement of a U.S. dollar-denominated intercompany loan to a European entity. Because of significant changes in economic facts and circumstances, including the sale of U. S. Steel Serbia, the first quarter 2012 foreign currency remeasurement effect was minimal and is expected to be minimal going forward.
Net interest and other financial costs in the fourth quarter of 2011 included a foreign currency loss that decreased net income by $51 million (35 cents per diluted share). For the year-ago first quarter, net interest and other financial costs included a foreign currency gain that increased net income by $81 million (56 cents per share).
Reportable Segments and Other Businesses - U. S. Steel's reportable segments and Other Businesses reported income from operations of $295 million ($52 per ton), compared with a loss of $26 million ($5 per ton) in the previous quarter (fourth quarter 2011) and income of $4 million ($1 per ton) in the year-ago first quarter.
The company said that income from flat-rolled operations improved significantly from fourth quarter 2011 primarily due to higher average realized prices and shipments resulting from improved end user demand and some inventory replenishment by spot customers. Prices increased by $23 per ton (to $764 per ton) due to higher average realized prices on both spot and contract business. Shipments increased 8% (to 4.1 million net tons), the highest shipping level since third quarter 2008. Additionally, operating costs decreased as a result of operating efficiencies and reduced energy and facility maintenance costs. First quarter results also reflected the absence of the approximately $75 million loss on the pellet sales transactions recorded in the fourth quarter 2011. The Flat-rolled segment’s raw steel capability utilization rate was 83% for the quarter, an increase from 75% in the fourth quarter.
Excluding the loss on the sale of USSS, the company said that U. S. Steel Europe (USSE) results improved significantly from the fourth quarter reflecting $17 million of operating losses at the company’s former Serbian operations prior to the sale, which compares to a loss of $67 million in the previous quarter (fourth quarter 2011). U. S. Steel Kosice (USSK) reported an operating loss of $17 million, which compares to a loss of $22 million in the previous quarter (fourth quarter 2011). Although average realized prices for USSK declined slightly from the fourth quarter 2011, spot market prices improved progressively throughout the quarter largely as a result of a mini-restocking cycle, reversing the declining trend experienced in the fourth quarter. The company completed maintenance work on a blast furnace in Slovakia and the furnace was restarted in late January, which resulted in a raw steel capability utilization rate for USSK of 92% for the first quarter, an increase from the fourth quarter rate of 75%.
Tubular first quarter results improved from the previous quarter as demand for oil country tubular goods and line pipe remained strong. Shipments of 529,000 tons represented a record quarterly shipping level and an 10% increase from the previous quarter (fourth quarter 2011). Average realized prices increased slightly to $1,727 per ton; however the increases were partially offset by higher substrate costs.
Outlook- Commenting on U. S. Steel's outlook for the second quarter, Surma said, "We expect all three of our operating segments to reflect positive results from operations with total segment results consistent with the first quarter. Our European segment is expected to return to positive income from operations reflecting improved average realized prices. Our Tubular segment is expected to perform well with results similar to the first quarter. Our Flat-rolled segment results are expected to decrease due primarily to higher maintenance costs."
The company expects shipments and average realized prices for the Flat-rolled segment to remain comparable to the first quarter, as end user demand remains stable and spot market inventories appear to be aligned with end user demand. Maintenance costs are expected to increase by approximately $50 million over the first quarter, primarily for spending related to scheduled blast furnace and other maintenance projects. All other operating costs are expected to be comparable with the first quarter.
The company noted that while the economic conditions in Europe remain challenging, second quarter results for its European segment are expected to improve compared to the first quarter. Average realized prices are expected to improve as higher spot market prices carry over into the second quarter and quarterly contract prices increase. USSK shipments and utilization rates are expected to be in line with the first quarter as modest seasonal improvements offset a slowdown in the restocking cycle. Operating costs are expected to be comparable to the first quarter.
The company also expects second quarter 2012 results for its Tubular segment to remain consistent with the solid performance achieved in each of the past three quarters. Average realized prices are expected to remain near first quarter levels, and shipments are expected to remain strong, although slightly below the record levels of the first quarter. The company noted that end users continue to rebalance their inventory positions as oil-directed drilling continues to drive the rig count, while natural gas drilling is being negatively affected by high storage levels and low prices. Operating costs are expected to be lower due to reduced spending levels.
