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US Steel hopes for improving 1Q performance after posting 4Q loss on lower shipments, prices
U.S. Steel Corp. is hoping its first-quarter performance will improve on higher prices and better demand after a rocky year that ended in a fourth-quarter loss.
The Pittsburgh steel maker on Tuesday forecast improved business from automobile and heavy machinery equipment manufacturers, appliance makers and the energy industry. CEO John P. Surma said that he even thinks that the construction industry "may begin the long climb out of the recessionary doldrums." Construction was decimated by the financial crisis.
"We anticipate that the markets we serve will continue to improve in 2012," and that should lead to increased shipments, he told analysts during a conference call.
Investors embraced the forecast and sent shares up $1.46, or 5.1 percent, to close at $30.19.
Analysts cautioned that demand growth will likely be gradual as the global economy remains strained. Europe is suffering a crippling debt crisis and China's economic growth has slowed. Economists see healthy signals for the U.S. economy, but unemployment remains high at 8.5 percent.
"I don't think the first quarter is going to be gangbusters higher than the fourth quarter, but I think it's more representative of steady improvement," Morningstar Inc. analysts Bridget Freas said.
Other steel manufacturers, including Nucor Corp., have offered similar forecasts for the first three months of the year.
The fourth quarter was challenging for the steel industry. Customers held back on making large purchases because of uncertainty about the economy. Steel prices fell and U.S. steel makers were hurt by heavier competition from European imports, Freas said. Most companies saw a turnaround in demand late in the quarter as the U.S. economic outlook improved.
In the October-December quarter, U.S. Steel reported a net loss of $226 million, or $1.57 per share, compared with a loss of $249 million, or $1.74 per share, in the same quarter in 2010.
Excluding one-time charges that included a $51 million foreign-currency loss and an environmental remediation charge, U.S. Steel posted an adjusted loss of $164 million, or $1.14 per share.
Revenue rose 12 percent to $4.82 billion from $4.3 billion.
U.S. Steel said shale and oil drilling have driven solid demand for tubes and pipes. Its tubular shipments jumped 25 percent to 482,000 net tons, while the average price rose 14 percent.
Shipments of flat-rolled products fell 2 percent to 3.8 million net tons from the year-ago quarter. The average price rose 13 percent from the fourth quarter of 2010, but fell 4 percent from the July-September quarter.
U.S. Steel's European shipments fell 6.5 percent to 1.2 million tons. The average price fell 3 percent from the year before and 11 percent from the previous quarter.
The company sold its Serbian operations, saying that should help cut losses in its European division. It expects to take a non-cash charge of between $400 million and $450 million in the first result to reflect the sale.
For the year, U.S. Steel reported a net loss of $68 million, or 47 cents a share, compared with a net loss of $482 million, or $3.36 a share, in 2010. Revenue rose to $19.9 billion from $17.4 billion.
The company hasn't posted an annual profit since 2008.
In a related development, U.S. Steel said its board of directors declared a dividend of 5 cents per share on common stock. The dividend is payable March 10 to stockholders of record at the close of business Feb. 10.