U.S. Steel Corp. (X), the country’s largest producer of the metal by volume, reported third-quarter earnings that beat analysts’ estimates as the company’s European division made a profit.
Net income rose to $44 million, or 28 cents a share, from $22 million, or 15 cents, a year earlier, Pittsburgh-based U.S. Steel said in a statement today. Profit excluding payments associated with a new labor agreement and other one-time items was 14 cents, beating the average of 10 analysts’ estimates compiled by Bloomberg for a 1-cent loss. Sales fell 8.4 percent to $4.65 billion, the company said in the statement.
U.S. Steel’s European division reported income of $27 million, compared with a loss of $50 million a year earlier. U.S. Steel Europe used 90 percent of its capacity, compared with 71 percent a year earlier, the company said in the statement.
U.S. Steel sells premium products from its European division and some of its customers aren’t as affected by the economic crisis plaguing Italy and Spain, Mark Parr, an analyst at Keybank Capital Markets in Cleveland, said by phone before the results were announced.
The company will break even in the fourth quarter and its results will decrease in all segments as prices and shipments fall and costs rise, U.S. Steel’s Chairman and Chief Executive Officer John Surma said.
“Our results are expected to reflect continued weakness in the European and emerging market economies, as well as economic uncertainty in North America,” Surma said in the statement.
The company reduced its capital expenditures for the quarter by 43 percent to $129 million from $225 million a year earlier as Surma said he wants to maintain the company’s capital spending through operations, not borrowing.
“Like everyone else in the world, I think we’re approaching big projects right now with caution and trying to make sure that we have a pretty good view of the world going forward,” Surma said on a conference call with analysts and investors to discuss the results. “Until we have better visibility, we’ll probably not have a lot of major new projects launched.”
The price of hot-rolled steel coil, a benchmark product used in cars, trucks and appliances, averaged $635 per ton in the quarter, 7.9 percent less than a year earlier, according to data compiled by Bloomberg from Steel Business Briefing.
U.S. steelmakers used 75 percent of their capacity on average in the third quarter, compared with 76 percent a year earlier, according to data compiled by Bloomberg from the American Iron and Steel Institute. Capacity utilization has tumbled from a three-year high of 81 percent in April to 70 percent on Oct. 22.
U.S. Steel shipped 5.3 million tons of steel, compared with 5.5 million tons a year earlier.
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