AP News, January 29th, 2008
United States Steel Corp. on Tuesday reported substantially lower fourth-quarter profit as acquisition-related costs, job cuts in Europe, lower prices and outage costs weighed down results. Its shares fell nearly 7 percent.
For the three months ended in December, the Pittsburgh-based company earned $35 million, or 29 cents per share, an 88 percent decline from $297 million, or $2.50 per share, during the same period a year earlier.
Sales grew 20 percent to $4.54 billion from $3.77 billion.
The quarterly results include charges of $69 million related to inventory adjustments following two major acquisitions and $57 million for a voluntary early retirement program at the company's operation in Slovakia, U.S. Steel Kosice.
Those charges cut fourth-quarter earnings by $117 million, or 98 cents per share, the company said.
The results fell far short of Wall Street profit estimates, but exceeded revenue predictions. Analysts polled by Thomson Financial were looking for earnings of $2.19 per share on sales of $4.30 billion. Estimates typically exclude one-time items.
U.S. Steel's shares dropped $7.49, or 6.8 percent, to close Tuesday at $102.58.
During the quarter, U.S. Steel completed a $1.2 billion acquisition of the Canadian steel maker Stelco Inc., expanding its presence in North America and making it the world's fifth-largest steel producer.
Earlier last year, U.S. Steel bought Lone Star Technologies Inc., a Dallas-based welded pipe maker, for $2 billion.
U.S. Steel said results for its flat-rolled steel business fell significantly from the previous quarter because of blast furnaces shutdowns, lower prices and higher production costs. Flat-rolled steel is used in products such as automobiles and appliances.
A quarterly decline in European operations came amid a drop in euro-based prices as high imports, particularly from China, and large inventories depressed prices and order rates. Outages curtailed production and raw material and energy costs grew.
U.S. Steel's tubular steel business saw a slight improvement on a quarterly basis, with higher prices and lower costs that were partially offset by lower shipments. But it declined significantly from the prior-year period.
Timna Tanners, an analyst with UBS Investment Research, said unplanned outages at U.S. Steel's Canadian operations apparently had a negative impact on the quarterly results.
"And light capacity utilization hurt all segment margins," she wrote in a client note.
Analyst Mark Parr of KeyBanc Capital Markets said, "excluding all the non-operating issues and the negative impact of Stelco, earnings were still disappointing."
For the full year, U.S. Steel's net income fell to $879 million, or $7.40 per share, from $1.37 billion, or $11.18 per share, in 2006.
The annual results were reduced by $158 million, or $1.33 per share, because of inventory adjustments, a work force reduction charge, an early debt redemption expense and several tax charges, U.S. Steel said.
John P. Surma, U.S. Steel's chairman and chief executive, said the company expects first quarter results to continue to reflect "volatile cost and pricing dynamics" in its three major business segments.
In a conference call with analysts and reporters, Surma noted that U.S. Steel had warned of possible fourth quarter weakness in October, but that the Stelco purchase had not been completed and was not part of the outlook.
"Overall, we should be in a good position as 2008 progresses to take advantage of favorable supply side conditions, our expanded product and geographic positions in North America, and our new galvanizing line" in Slovakia, he said in a statement.
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U.S. Steel: http://www.ussteel.com
