United States Steel Corporation (X) reported a net loss of $157 million or $1.10 per share in the first quarter of 2010 compared to a net loss of $267 million or $1.86 per share in the fourth quarter and a net loss of $439 million or $3.78 per share in the year-ago quarter. This was the fifth consecutive quarter that the company has reported a net loss.
The net loss per share came in at much lower than the Zacks Consensus Estimate of a loss of $1.44. Sales came in at $3.9 billion, up 16.1% sequentially and up 42% year over year. United States Steel reports in four segments including Flat-Rolled Product, U.S. Steel Europe (USSE), Tubular Products and Other Businesses.
Management stated that overall loss reduced significantly sequentially due to improving business conditions and a strong operating performance. U. S. Steel returned to profitability in Europe and results were strong for the Tubular segment.
Segment wise, results for Flat-rolled improved significantly year over year 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.
U. S. Steel Europe (USSE) improved year over year due to the benefits of a 22% increase in shipments to 1.5 million tons. Tubular was strong having benefited from increased shipments, partially offset by increased costs for steel substrate.
Meanwhile, management continues to take actions to improve liquidity to help finance projects of strategic importance and help company meet increased working capital requirements as business conditions recover.
In March, U. S. Steel issued 7.375% senior notes worth $600 million which are due in 2020. The company made a $140 million voluntary pension contribution to its main defined benefit pension plan and repaid the $270 million of outstanding borrowings under the U. S. Steel Kosice (USSK) revolving credit facility, which matures in 2011. As of March 31, 2010, U. S. Steel had $1.4 billion of cash and debt of $3.7 billion.
Outlook
Going forward, management expects to be profitable in all three operating segments in the second quarter of 2010 as business conditions improve, particularly in the Flat-rolled segment. The recovery in business environment is expected to be slow, however.
Order rates continue to be healthy from most end-markets, resulting in increased production levels. Inventories in key end-markets in North America such as automotive and service centers remain below historical averages, and flat-rolled product imports also are below average.
The business environment is expected to show improvement in Europe as well. The Tubular segment is benefiting from both increased order rates and a decline in inventory levels. Results from USSE should get a boost from the benefits of increases in euro-based transaction prices, partially offset by increases in raw material costs.
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