United States Steel Corporation, through its subsidiaries, engages in the production and sale of steel products primarily in North America and Europe. The company operates through three segments: Flat-rolled Products, U. S. Steel Europe (USSE), and Tubular Products (Tubular).
In the preceding second quarter, the Pittsburgh, Pennsylvania-based company's net loss was $25 million, or 17 cents a share, compared $392 million, or $2.92 a share, in the year-earlier quarter. Revenue jumped to $4.68 billion from $2.13 billion. Analysts, on average, expected the company to report earnings of 7 cents per share on revenue of $1.53 billion. Total steel shipments rose to 5.9 million tons from 2.9 million tons. As a result of the significant improvements for the Flat-rolled segment in the second quarter, all of its reportable segments were profitable for the first half of 2010. The improvement in Flat-rolled results for the second quarter was primarily due to the benefit of higher average realized prices and shipments, lower energy cost and increased production volumes.
At its last earnings call in July, the company said that it expects to report an overall operating profit in the third quarter as the U.S. and European economies continue to work their way through a gradual and uneven recovery process. Operating results are expected to be below the second quarter largely due to a decrease in shipping and production volumes for its Flat-rolled segment, reflecting slower order rates, primarily from spot market customers.
Segment-wise, Third quarter 2010 results for Flat-rolled are expected to be near breakeven levels due to lower trade and intersegment shipments and production volumes and increased costs for raw materials and energy. The company expects average realized prices for the third quarter to be in line with the second quarter, as the benefits of a higher value-added mix of shipment and increased prices for both index-based contracts and recently negotiated contracts offset decreases in spot market prices.
Third quarter results for USSE are expected to be comparable to the second quarter, as the benefits of higher euro-based transaction prices are offset by increased raw material costs. The company expects slightly lower shipments due to reduced order rates from its spot market customers and normal seasonal variations.
Third quarter results for Tubular are expected to improve as compared to the second quarter. The benefits of higher average realized prices and decreased costs for steel substrate are expected to be only partially offset by the impact of lower carbon OCTG and welded line pipe shipments. The results for Other Businesses are expected to be lower in the third quarter, due primarily to the second quarter impact of a land sale by our real estate operations.
The company has benefited from a rebound in global steel demand. After a 6.6 percent contraction last year, global steel use should rise 13.1 percent to 1.272 billion metric tonnes in 2010, the World Steel Association said recently. However, continued uncertainty about the US and global economies have continued to weigh on steelmakers. According to the association, global steel demand growth will probably slow to 5.3 percent next year due to the Chinese government's efforts to cool down the real estate sector and ongoing production control. China will account for around 45 percent of world steel use 2011, according to the WSA.
In terms of stock performance, US Steel shares have lost more than 25 percent since the beginning of the year.
Full Disclosure: None.
