U.S. Steel Earnings Miss Estimates After Prices Drop

U.S. Steel Corp. (X) the largest U.S. producer of the metal, reported a first-quarter loss and revenue that missed analysts’ estimates after a drop in steel prices and shipments.

Excluding a charge for paying down debt, the loss was 35 cents a share, the Pittsburgh-based company said in a statement today, wider than the 22-cent average of 10 estimates compiled by Bloomberg. Sales fell 11 percent to $4.6 billion, compared with the $4.66 billion average of 11 estimates. The shares fell 2.6 percent in New York.

U.S. Steel has struggled to be profitable as global demand stagnates while output rises. Its flat-rolled segment, its largest business, saw deliveries drop 1.8 percent in the quarter. The division will post a second consecutive operating loss in the current quarter, because of higher costs, Chairman and Chief Executive Officer John Surma said in the statement.

The company’s tubular-steel business, its second-largest by revenue in 2012, is suffering from a decline in orders from oil and gas drillers. The tubular division posted a 50 percent drop in operating income with shipments sliding 19 percent. Its performance will be little changed in the current quarter, yielding break-even operating results, Surma said.

“Fundamentals have weakened since January,” Michelle Applebaum, managing partner at consultant Steel Market Intelligence in Chicago, said in an interview yesterday. “Tubular has got a perfect storm of weaker demand, increasing capacity and a surge of imports.”

Capacity Utilization

U.S. Steel fell to $17.08 at 9:53 a.m. in New York. The shares have slumped 29 percent this year, making the company the fourth-worst performer on the Standard & Poor’s 500 Index.

The first-quarter net loss narrowed to $73 million, or 51 cents a share, from $219 million, or $1.52, a year earlier.

Industrywide, steel shipments in the in the U.S. in the first two months of 2013 fell 4.9 percent to 7.01 million tons compared with a year earlier, according to the Metals Service Center Institute.

Hot-rolled steel coil, a benchmark product used in automobiles and appliances, averaged $621 a short ton in the U.S. the first quarter, down 13 percent from a year earlier, according to data from The Steel Index, a trade publication.

U.S. steelmakers used 75 percent of their capacity on average in the first quarter, compared with 78 percent a year earlier, according to data from the American Iron and Steel Institute.

Ontario Lockout

The average number of active oil and natural-gas rigs around the U.S. fell to 1,758 in the quarter from 1,990 a year earlier, according to Baker Hughes Inc. U.S. Steel got 43 percent of 2012 operating income from its tubular division, which sells steel tubes to oil and gas drillers.

U.S. Steel is among four bidders for a steel mill in Alabama being sold by Germany’s ThyssenKrupp AG that may fetch $1.5 billion to $2 billion, people familiar with the negotiations said April 25.

U.S. Steel locked out union-represented employees on April 28 at its Lake Erie plant in Nanticoke, Ontario, after their labor contract expired and the two sides failed to agree on a new accord.

(U.S. Steel scheduled a conference call at 3 p.m. New York time, which can be accessed at the company’s website: http://bit.ly/ZgMk10.)

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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