By Dow Jones Business News,
January 27, 2014, 09:45:00 PM EDT
PITTSBURGH-- U.S. Steel Corp. reported a wider loss in the latest quarter, while indicating the road to sustainable
profitability was a long one.
Despite an improved pricing environment due to strong demand from auto makers, U.S. Steel posted a net loss of $122
million, or 84 cents a share, as hefty maintenance costs in the quarter compounded pressures of ongoing labor and
pension costs. A year ago, the company lost 35 cents a share in the fourth quarter of 2012. The latest quarter also
includes a $302 million charge related to closing operations in Hamilton, Ontario.
Both revenues and sales were lower in the quarter with the company reporting $4.3 billion in sales on shipments of 4.9
million tons. A year ago, the company reported sales of $4.5 billion on shipments of 5.2 million tons.
It was the first full quarter under new chief executive Mario Longhi, who took over from John Surma in September.
Beset by high labor costs and pension obligations, U.S. Steel has now lost money in seven of the past nine quarters.
In a statement, Mr. Longhi said results would improve "moderately" in the first quarter. "We are on a multiyear journey
to grow by improving our balance sheet and achieving sustainable profitability," he said.
For the year, the net loss widened to $2.1 billion from $124 million while sales declined to $17.4 billion from $19.3
billion in 2012.
The outlook for the steel business is brightening in the U.S., mostly thanks to a healthy appetite for steel from auto
makers, who are expected to sell 16 million vehicles this year, up from 10.4 million in 2009. The benchmark price for
U.S. hot-rolled coil is up 10% to around $675 per ton since the beginning of the year.
Mr. Longhi was hired to cash in on this wave of demand. In the fall, he launched "Project Carnegie", a hat tip to
steel baron Andrew Carnegie, a cost-cutting program meant to trim $75 million. "We are encouraged by our early progress'
on the project, he said Monday without offering specifics. He is scheduled to brief analysts and reporters on Tuesday
The market has viewed his performance favorably so far. U.S. Steel stock is up 10% in the last three months. It closed
Monday at $25.28. It briefly edged above $30 at the beginning of the year.
Investors have praised Mr. Longhi's cost-cutting measures, such as permanently closing lines in Hamilton, and trimming
production in Gary, Indiana.
On Monday, U.S. Steel won a Supreme Court case that recognize its right to not pay unionized employees for the time
they spend putting on safety gear before starting their shifts. The decision is expected to have only a marginal impact
on the company.
Write to John W. Miller at firstname.lastname@example.org
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