U.S. Steel shares tumbled nearly 15 percent Wednesday after the Pittsburgh steel maker reported a bigger than expected third quarter loss and drastically lowered its outlook.
“Markets have clearly not followed the trends we were observing in the late second and early third quarter,” president and CEO Mario Longhi told analysts during a conference call Wednesday morning.
He said tough market conditions, including high levels of imports, the strong U.S. dollar and the weak energy market, offset the $715 million in savings U.S. Steel expects to achieve this year from its Carnegie Way efficiency initiative. The company realized $125 million in additional savings during the third quarter from temporary cost-cutting measures it took based on deteriorating market conditions.
Mr. Longhi was encouraged by a preliminary U.S. Department of Commerce ruling Tuesday in one of three trade cases that domestic steel makers have filed against China and other countries. If it stands, the preliminary ruling would impose duties of up to 236 percent on imports of corrosion resistant steel sheet.
But Mr. Longhi cautioned that the decision is only the first step in a long, complicated process of going after unfairly traded imports from countries that have, over a number of years, developed a well-planned approach to capturing U.S. market share.
Charles Bradford, an independent metals analyst in New York, said domestic producers have seldom obtained lasting relief by pursuing trade cases, adding that foreign producers have figured out ways to get around the duties. He said imports have tapered off in recent months.
An industry group reported Wednesday that imports are down 8 percent through October but still control 30 percent of the U.S. market.
Mr. Longhi said he remains hopeful of getting a fair agreement with the United Steelworkers union without a work stoppage. Members of the union have been working under the terms of a contract that expired Sept. 1.
Late Tuesday, U.S. Steel reported a third quarter loss of $173 million, or $1.18 per share, vs. a loss of $207 million, or $1.42 per share, in the year-ago quarter. Sales fell 38 percent to $2.8 billion.
Excluding one-time items, the adjusted loss amounted to 70 cents per share. Analysts had expected the steel producer to report an adjusted loss of 20 cents per share on sales of $2.9 billion.
Mr. Longhi said U.S. Steel now expects to report earnings before interest, income taxes and other items of about $225 million for all of 2015, down sharply from the $700 million to $900 million in adjusted earnings the company had forecast in July.
U.S. Steel shares finished Wednesday at $11.06, down $1.88 They are off 59 percent this year.
Source: http://www.post-gazette.com/