US Steel Corporation reports results for Q1 2010

Wednesday, 28 April 2010 00:48:41 (GMT+3)   |  
       

United States Steel Corporation Tuesday reported a first quarter 2010 net loss of $157 million, compared to a fourth quarter 2009 loss of $267 million, and a first quarter 2009 loss of $439 million.

"We reported a significantly reduced overall loss from operations in first quarter 2010 as compared to fourth quarter 2009 mainly due to improving business conditions and a strong operating performance for our Flat-rolled segment," said US Steel Chairman and CEO John P. Surma. "In Europe, we returned to profitability and our Tubular segment had another strong quarter."

The company reported a first quarter 2010 loss from operations of $57 million, compared with a loss from operations of $329 million in the fourth quarter of 2009 and $478 million in the first quarter of 2009.

Net interest and other financial costs in the first quarter of 2010 included a foreign currency loss that decreased net income by $56 million.  The net loss resulted from the accounting remeasurement of a $1.2 billion US dollar-denominated intercompany loan to a European subsidiary, partially offset by gains on Euro-US dollar derivatives activity.  This compares to foreign currency losses in the fourth and first quarters of 2009 that also decreased net income by $11 million, and $28 million, respectively.

Results for Flat-rolled in the first quarter of 2010 improved significantly from the fourth quarter of 2009 due to the benefits of higher average realized prices and shipments; operating efficiencies; reduced costs for facility repair and maintenance, energy and facility restarts; and increased intersegment shipments to Tubular.  These benefits were partially offset by the absence of approximately $55 million of favorable fourth quarter effects from last-in, first-out (LIFO) inventory liquidations and adjustments to employee layoff benefit accruals.  Flat-rolled's raw steel capability utilization rate increased to 73 percent in the first quarter of 2010, compared to 64 percent in the fourth quarter of 2009.  US Steel further completed maintenance work on their #14 Blast Furnace at Gary Works in mid March and had all steelmaking capacity in operation, with the exception of Lake Erie Works, before the end of the first quarter.  Adjusting for Lake Erie Works and the #14 Blast Furnace outage at Gary Works, Flat-rolled operated at 94 percent of available raw steel capability in the first quarter of 2010.  Shipments increased 12 percent to 3.6 million net tons and average realized prices increased to $654 per net ton, an increase of $21 per ton from fourth quarter 2009.

First quarter 2010 results for US Steel Europe (USSE) improved from the fourth quarter of 2009 primarily due to the benefits of a 22 percent increase in shipments to 1.5 million tons. Average realized euro-based transaction prices were slightly lower than the fourth quarter as spot market price increases later in the first quarter almost completely offset the impact of lower prices early in the first quarter.  However, the reported average realized price for the segment was $50 per ton lower than the fourth quarter of 2009 due primarily to foreign currency translation effects.  Capability utilization was 87 percent in the first quarter of 2010, compared to 80 percent in the fourth quarter of 2009.  USSE completed maintenance work on the #3 Blast Furnace at USSK in early February and all five of the company's European blast furnaces were in operation for the majority of the first quarter.  

First quarter 2010 Tubular results improved from the fourth quarter of 2009 as the benefits of increased shipments were partially offset by increased costs for steel substrate. Operating rates increased at all of our major pipe facilities, most notably their welded pipe facility in East Texas.  Shipments increased by 50 percent to 310 thousand tons, primarily due to increases in welded pipe shipments.  The reported average realized price for the segment decreased by $73 per ton to $1,389 per ton as compared to $1,462 per ton in the fourth quarter of 2009 due to product mix and the impact of bottoming spot market prices towards the end of last year.

"We anticipate being profitable in all three of our operating segments in the second quarter of 2010 as gradually improving business conditions should be reflected in our operating results, most notably for our Flat-rolled segment," continued Surma. "We continue to experience healthy order rates from most of our end markets, resulting in increased production levels.  In North America, reported inventories in key end markets, such as automotive and service centers, remain below historical averages, as do flat-rolled product imports.  In Europe, imports have also remained below historical averages and reported inventories remain low across our end markets.  Our Tubular segment is also benefitting from both increased order rates, particularly for small diameter alloy oil country tubular goods (OCTG), and a continuing steady decline in reported US OCTG inventory levels from the record highs of early 2009.  In summary, we remain cautiously optimistic in our outlook for end user demand for all three of our operating segments in line with a gradual and continuing economic recovery."

Second quarter 2010 Flat-rolled results are expected to improve as compared to the first quarter of 2010.  The benefits of increases in average realized prices, higher trade and intersegment shipments, and lower energy costs are expected to be only partially offset by higher raw material costs (mainly scrap and coke) and increased facility repair and maintenance costs including facility restart costs at Lake Erie Works.  Average realized prices are expected to benefit from increases in both spot and index-based contract prices, which now reflect higher published market price assessments.  US Steel expects to complete the restart process at Lake Erie Works late in the second quarter, with their remaining steelmaking facilities expected to operate for the entire quarter.

For Q2 2010, USSE expects results to improve as compared to the first quarter of 2010 primarily due to the benefits of increases in euro-based transaction prices, partially offset by increases in raw material costs.  Shipments are expected to be comparable to first quarter levels.  USSE expects to operate at slightly higher overall utilization rates as compared to the first quarter reflecting increased raw steel production at USSK; however, USSE's raw steel availability will be limited due to operational issues with one of two blast furnaces in Serbia.  The company expects the #2 Blast Furnace at US Steel Serbia to return to full production before the end of the second quarter.

Second quarter 2010 results for Tubular are expected to improve from the first quarter of 2010.  The benefits of expected increases in average realized prices and higher shipments are expected to be only partially offset by increased costs for steel substrate.  Operating rates are expected to continue increasing throughout the quarter in line with demand trends.


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