U.S. Steel reports $44 million profit
U.S. Steel Corp., the nation's largest producer, reported third-quarter earnings that beat analysts' estimates as the company sold more tubular products used in oil and natural gas drilling than expected.
The tubular segment, which includes a plant in McKeesport, had “solid results,” even as oil and gas drilling slowed and imports rose, but the steelmaker expects lower results for the final three months of 2012, CEO John P. Surma said.
The Downtown-based company's flat-rolled and European segments earned money but remain challenged by a lagging global economy.
Overall, U.S. Steel reported a $44 million profit, or 28 cents a share, for the July-September period, double the $22 million, or 15 cents, profit from a year ago. Sales declined by 8 percent to $4.65 billion.
Excluding one-time items, analysts' projected a 1-cent loss, the average of 10 estimates compiled by Bloomberg.
U.S. Steel released results while other publicly traded companies postponed reports. Financial markets remained closed for a second day because of Superstorm Sandy.
Surma said an increase in oil exploration offset reduced natural gas drilling in the first half of the year, then “oil-directed rig counts began to decrease, after reaching a peak in August” and gas rig counts also dropped.
As a result, the tubular segment reported operating income of $102 million, down from $103 million in the second quarter and $134 million a year ago.
“The whole industry is under pressure,” Aldo Mazzaferro, a New York-based analyst at Macquarie Securities USA Inc., said before the earnings were announced. “Since early September we've started to see weaker demand and utilization rates falling and steel prices falling and scrap falling so it's setting ourselves up for a fourth quarter that's going to look, on average, worse than the third. It's pretty certain to me that's going to be the case.”
U.S. Steel's flat-rolled steel products segment, profitable in the third quarter, is expected to post a loss for the current period because of lower average realized prices, lower shipments and other factors.
Economies will remain weak in Europe and emerging markets, Surma said, and the European business should be “around break-even” in the fourth. The tubular business should make a profit but well below the third quarter.
U.S. Steel shipped 5.3 million tons of steel, compared with 5.5 million tons a year earlier.
The company recorded a $27 million tax benefit for the quarter and said its three-year contract with the United Steelworkers, effective Sept. 1, resulted in a $22 million after-tax charge, or 13 cents a share, for lump sum payments of $2,000 per worker.
The deal covering more than 16,000 employees calls for a 2 percent wage increase on Sept. 1, 2013, a $500-per-employee payment in 2014 and a 2.5 percent raise in January 2015.
Two projects designed to make U.S. Steel self-sufficient in coke-making are nearly complete, Surma said, including construction of the C Battery at the Mon Valley Works' Clairton plant.
Crews are putting final sections of steel into the project, machinery is being commissioned and the first coal charge toward starting production should occur in November. Full coke production should start in early 2013, at an annual rate of nearly a million tons.
Bloomberg News contributed to this report.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Westmoreland used car dealers indicted in fraud
- Steelers offensive line targeting injury-free performance as key
- Struggling Pirates SS Mercer finding himself out on infield’s left side
- Starkey: Patriots’ legacy forever stained
- DOJ program goal: Increased trust between law enforcement, community
- Plum witnesses seen entering grand jury building in Dormont
- Natrona Heights native helped bring ‘American Ninja Warrior’ to Pittsburgh
- Developer hopes to make Allegheny Center a tech hub
- Fayette woman accused of stealing $24K from youth football league
- Murray Energy expects to lay off as many as 1,800 more
- Former Ringgold guidance counselor facing sex charges