U.S. Steel has profit in first quarter
PITTSBURGH (AP) – U.S. Steel Corp. swung to a profit in the first quarter, its financial performance rising in tandem with steel prices. It was its first profit in five quarters. The Pittsburgh-based steelmaker also announced that chairman and chief executive Thomas Usher would be stepping down as CEO at the end of September. The company had mentioned Usher’s plans to retire in a proxy statement last year as part of its long-range plans.
Chief operating officer John Surma, 49, was elected to succeed Usher as CEO, effective Oct. 1. Usher, 61, will remain as chairman until April 2007.
U.S. Steel said it earned $54 million after payment of $4 million in preferred dividends, or 47 cents per share, in the quarter ended March 31, in contrast to a loss of $40 million after paying $2 million in preferred dividends, or 40 cents per share, a year ago.
The latest results included 11 cents a share due to an accounting change. Excluding that impact, U.S. Steel earned 36 cents a share. Thomson First Call said that matched the consensus forecast of analysts it surveyed.
Revenues rose nearly 56 percent to $2.97 billion from $1.91 billion a year ago.
The company over the past year has shouldered the costs of cutting jobs, both in management and on the plant floor, the integration of new acquisitions and also high energy prices.
In the latest quarter, however, prices for steel were significantly higher than the seasonal average, which boosted profits and offset high costs for raw materials, the company said.
Shares of U.S. Steel were down $2.25, or 6.3 percent, at $33.25 in afternoon trading on the New York Stock Exchange.
Income from operations was $151 million, a vast improvement compared with last year when the company was buffeted by high pension benefits, leading to a $44 million loss.
“Results for our domestic flat-rolled business improved significantly as the quarter progressed due to strengthening demand and rising prices, with March prices ending significantly higher than the first quarter average,” said Usher. “The business further benefited from operational synergies and cost reductions we achieved in connection with the National Acquisition.”
U.S. Steel acquired Ohio’s National Steel in May and Sartid in Serbia in September as the steel industry underwent unprecedented consolidation.
The supply of coal continues to disrupt coke operations, with production hovering at just 92 percent of capacity during the first quarter. U.S. Steel said it will have to purchase 240,000 tons of coke for its domestic operations at significantly higher prices than in the first quarter.
“I’m a little surprised by the size of that purchase, even with the problems at one of their coal mines with a fire,” said Charles Bradford, an analyst with Bradford Research/Soleil Securities. “Chinese exports of coke were down big time in March, which is one of the reasons the price is so high, making the purchase even more surprising.”
Yet the benefits of healthy steel prices will be even more evident in the next quarter, with prices expected to “improve significantly” over the $52 per-ton average increase seen during the first quarter, Usher said.
“We are seeing strong steel demand as virtually all domestic steel consumers continue to benefit from a stronger economy,” Usher said. “In Europe, prices also continue to move higher as supply is tight and steel producers look to cover increasing raw materials costs.”
The company’s tubular segment is expected to benefit from similarly high prices, with shipments expected to be up by 18 percent on the year.
After a dip during the second quarter, flat-rolled steel shipments are projected to increase from the previous estimate of 15.5 million tons, to about 15.9 million tons for 2004.
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On the Net:
U.S. Steel: http://www.ussteel.com
AP-ES-04-27-04 1515EDT