Apr 30, 2003 By Todd Spangler Ap Business Writer 3 min read

PITTSBURGH (AP) – U.S. Steel Corp. reported Tuesday its loss narrowed to $38 million in the first quarter despite increases in natural gas costs and the price of paying pension benefits. The results beat Wall Street expectations, and its shares rose.

The Pittsburgh-based steel giant said its loss translates to 40 cents a share in the January-March period in contrast to a loss of $83 million, or 93 cents a share, a year ago.

Excluding special items, its loss amounted to $17 million, or 19 cents per share, in the latest quarter. That was a smaller deficit than the consensus forecast for a loss of 28 cents a share by analysts polled by Thomson First Call.

Revenue climbed to $1.91 billion from $1.43 billion a year ago.

Mark Parr, an analyst with McDonald Investments Inc., said the loss from operations may have been bigger than the company had projected but was largely in line with expectations. “Operationally, the quarter was in line. … Domestically, it was a little weaker than expected.”

Chairman and CEO Thomas Usher said shipments of flat-rolled and tubular steel were up slightly in the quarter. But natural gas prices rose $54 million from the same period last year, and pension and retirement benefits increased by $61 million.

“On a positive note, we achieved several important strategic milestones in early 2003 which will transform U.S. Steel into a more globally competitive steel company,” Usher said.

It announced last week that it will purchase National Steel in an $850 million deal and expects to complete the deal by the end of June.

U.S. Steel has also reached a new labor agreement with the Steelworkers union – one that will also cover National workers.

As part of the deal with Steelworkers, U.S. Steel says it will not spin off raw materials facilities and transportation assets it had previously planned to get rid of in a $500 million deal. The union agreement is expected to be ratified next month. The company’s Kosice operation in the Slovak Republic, meanwhile, continues to be a bright spot. Kosice reported income of $64 million, or $54 per net ton, compared with a loss of $1 million, or $1 a net ton, in the same quarter last year. It also operated at 97 percent capacity throughout the quarter.

U.S. Steel is looking to continue its eastern European success by agreeing to buy Serbia’s largest steel mill from state-owned Sartid Co. for $23 million. The company has also submitted an offer to acquire Poland’s largest steel company. Looking ahead, the company said a softening in orders is expected to have an impact late in the second quarter. While U.S. Steel expects flat-rolled shipments to improve, average realized prices are predicted to decline because of weakening spot markets. Second quarter income could also be hurt by a $40 million scheduled repair of the company’s largest blast furnace in Gary, Ind.

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On the Net:

U.S. Steel: http://www.ussteel.com