U.S. Steel 4Q Profit More Than Doubles
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
