U.S. Steel 4Q Profit More Than Doubles Higher Prices, Sales Bring Two-Fold Jump in U.S. Steel Fourth-Quarter Profit By DANIEL LOVERING The Associated Press

PITTSBURGH - Higher metal prices and robust sales in Europe helped United States Steel Corp. more than double its fourth-quarter profit, but the steel maker warned of a downturn in coming months.

The sharp increase, which surpassed Wall Street projections, also reflected year-ago results that were undermined by anemic prices and production volumes, as well as costs tied to the rebuilding of the company’s main blast furnace in Gary, Ind.

The Pittsburgh-based company said fourth-quarter earnings soared to $297 million, or $2.50 per share, compared with $109 million, or 85 cents per share, during the same period a year earlier.

Analysts polled by Thomson Financial were looking for earnings of $2.21 per share on revenue of $3.73 billion.

U.S. Steel reported its results after the markets closed Monday. Its shares fell $1.10 to close at $76.88 on the New York Stock Exchange, then gained 64 cents in extended trading.

The company’s quarterly revenue climbed 8.8 percent, to $3.77 billion from $3.47 billion, with European sales growing 63 percent to $182 million from $112 million in the prior year.

The earnings included costs related to an early debt redemption and other items that cut net income by $33 million, or 28 cents per share. They also took into account a $58 million reduction in U.S. Steel’s quarterly income tax provision, partly to adjust for a higher-than-anticipated percentage of pretax earnings in Europe and the impact of accounting rules on a pension plan.

But the company’s profit fell significantly on a quarterly basis.

Fourth-quarter income from operations was $341 million, compared with $561 million in the third quarter. Income from operations in fourth quarter 2005 was $222 million. Profit dropped 29 percent, from $417 million in the third quarter.

U.S. Steel warned in November that weakening demand would likely lower production in the months ahead.

The company saw declines in its flat-rolled, European and tubular segments compared with the previous quarter.

“Our fourth quarter was significantly better than the fourth quarter last year, but weaker than the earlier 2006 quarters as inventory rebalancing and high import levels reduced domestic demand for steel,” the company said.

Many steel companies suffered in the fourth quarter from overstocked steel inventories, which drove prices lower compared with the third quarter, according to analysts.

Mark Parr, an analyst with KeyBanc Capital Markets in Cleveland, said the sequential quarterly results were “not as severe as (what) people were looking for.” Earnings were stronger in Europe and slightly weaker than expected domestically, he said.

Full-year earnings amounted to $1.37 billion, or $11.18 per share, versus $910 million, or $7 per share, in 2005. Annual sales increased to $15.72 billion from $14.04 billion.

Charles Bradford of Bradford Research/Soleil Securities in New York noted that U.S. Steel’s 2005 results were hurt by costs related to the rebuilding of the blast furnace in Gary. “That was a big, big negative,” he said.

U.S. Steel CEO John Surma cautioned that results were likely to slip in early 2007.

“We expect first-quarter results to decline from the fourth quarter, but flat-rolled demand is firming and we have restarted several domestic blast furnaces to bring our production in line with improving order rates,” he said in a statement.

First-quarter flat-rolled shipments are expected to grow compared with the fourth quarter, and higher contract prices should offset lower spot prices, the company said.

Shipments by the European business are due to increase, though tubular shipments and prices may slide as import levels and customer inventories remain high. Costs will stay in line with those in the fourth quarter, according to U.S. Steel.

On the Net:

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

UK house prices climbed by 4.2% during the last three months of 2006 with the market in Northern Ireland continuing to outperform elsewhere.

The Halifax House Price Index’s survey found that average house prices rose to 186,954 in the fourth quarter.

That pushed the annual rate of inflation up to 9.9% Northern Ireland recorded the biggest rise between October and December, with prices up 15.9% to 196,874.

Greater London remains the most expensive part of the UK to live, with average house prices pushed up to 287,176 following an increase of 6.6% in the Autumn months.

“All parts of the UK have seen substantial house price gains over the past decade with Northern Ireland recording the biggest gain since 1996, boosted by a 53% rise in 2006,” Halifax’s Martin Ellis said.

“A fundamentally sound economic background will underpin another healthy year for the housing market this year,” he added.

“High levels of employment, continuing economic growth and a persistent lack of supply should ensure that house prices increase further.

“Higher interest rates, greater pressure on household finances and subdued real earnings growth will, however, curb housing demand.”

The lender predicts that house prices will rise nationally by 4% during 2007.

MOSCOW: Russian President Vladimir Putin said on Tuesday the world’s second biggest oil exporter may cut output, signalling his resolve to force Belarus to climb down in a trade dispute that has halted pipeline exports to Europe.

As the impact of a two-day-old stoppage to the Druzhba (’Friendship’) pipeline system spread across the region, Putin ordered his government to discuss possible production cuts by Russian oil firms.

The European Union deplored the escalation of a tit-for-tat trade row between energy power Russia and Belarus, the erstwhile ally across whose territory Druzhba pumps over a million barrels per day.

But hopes of a quick resolution receded after Putin’s remarks. Russian officials have kept a Belarussian delegation to Moscow cooling its heels.

Putin told top government officials “to discuss with Russian companies the possibility of reducing oil output in connection with the problems arising from transit through Belarus”.

The European Union urged Russia and Belarus to settle the dispute, which took out supplies to Poland and Europe’s biggest economy Germany on Sunday night and has since cut off Slovakia, Hungary and the Czech Republic.

“It is not acceptable for suppliers or transit countries to take measures without consultation. Of course this is a matter for concern,” EU Commission President Jose Manuel Barroso said on a visit to Berlin.

Chancellor Angela Merkel of Germany, which imports a fifth of its oil via the Druzhba pipeline, backed Barroso on the unilateral cuts. “That hurts trust and it makes it difficult to build a cooperative relationship based on trust,” she said.

OIL ‘THEFT’

Russia said on Monday it had been forced to shut down Druzhba because Belarus was siphoning off oil illegally to secure payment in kind for a transit tariff Minsk imposed last week.

The oil supply cut was reminiscent of a stand-off last year between Russia and Ukraine that hit gas supplies to Europe. It escalates a dispute between Russia and longtime ally Belarus, which have imposed punitive oil levies on each other.

Belarussian Deputy Prime Minister Andrei Kabyakov flew to Moscow for talks with his Russian counterpart but failed to start negotiations.

“The Russian side told us… they are not yet ready for talks,” Belarus’ First Deputy Economy Minister Vladimir Naidunov told reporters in Moscow.

The International Energy Agency said that European oil markets would cope with the halt of the 1.2 million barrels per day pipeline, one of the world’s biggest, as the nations involved had working stocks of several days.

“Should disruption from the Druzhba pipeline prove more prolonged, each of the refineries could source crude supplies from alternative routes and some of them are already organising alternative supplies,” the IEA said.

The Czech Republic said on Tuesday it had already tapped a reserve of between 52,000 and 55,000 tonnes of crude oil stored in Slovakia, which would cover its needs for four days.

Analysts said both countries would have to find a compromise quickly to avoid taking a serious economic hit.

“Russia’s export pipeline structure cannot offer alternative routes for the volumes supplied to Europe via Druzhba, and thus a mutually acceptable agreement will have to be reached,” Aton brokerage said in a note.

It added that Russian firms would also put pressure on both countries to find a compromise. A trader with a Western major said he expected some firms to start declaring force majeure — inability to meet export commitments — if no compromise was found by Thursday or Friday.

For a factbox on Druzhba pipeline click on [ID:nL08812526].

For a factbox on refiners served by Druzhba [ID:nL09815694].

For a factbox on alternative export routes [ID:nL0938570]

20070109 130919+0000

MORE