US Steel Posts Billion Dollar Loss for Q4

“The $815 million of Carnegie Way benefits we realized in 2015 show that we continue to make significant progress on our journey toward our goal of achieving economic profit across the business cycle,” said CEO Mario Longhi in a statement. “Our progress is real and it is substantial, but our fourth quarter and full-year results show that it is not yet enough to fully overcome some of the worst market and business conditions we have seen.”

Low spot prices, import volumes and supply chain inventory levels are all challenging current market conditions. Total 2015 adjusted EBITDA was $202 million. In 2016 US Steel expects EBITDA to be at breakeven levels.

The positive news for the company was the generation of cash flow of $359 million for the year.

“We’re still in great cash position, paying off $300 million worth of debt, and we still got $2.4 billion worth of liquidity,” Burritt said on Wednesday’s earnings call. “So we feel extraordinarily comfortable where we are today. But living in this paranoid world of steel, we certainly have to adapt whatever’s there.”

The U.S. flat-rolled segment was negatively impacted by foreign imports high levels of supply chain inventory in fourth quarter. The average realized price dropped $30 to $642 per ton on U.S. flat-rolled steel shipments of 2.6 million tons. Capacity utilization rates were around 60 percent for the quarter and year.

Tubular shipments fell to 127,000 tons for the quarter compared to 448,000 tons in Q4 2014.

Longhi commented on trade cases noting that the use has prevailed significantly over China, one of the “biggest heavy hitters.” He expects the trade cases to have a meaningful impact on the market in the second half of this year.

“It’s a complicated process,” said Longhi. “And you know, Commerce has limited resources at this time. So we have to make sure that they do have all the proper information and that they don’t succumb to the devious approaches in a way in which some of the other countries and companies have articulated their answers.”

Looking forward at the market, CFO David Burritt said US Steel is ready to adapt to changing market conditions:

“So, based upon where you’d see the markets going or where we see the markets going, we’re going to adapt to whatever economic circumstances are out there. And our Carnegie Way, as we say, everything is on the table. And so, we’re going to look at opportunity. We don’t talk about financings. We don’t talk about M&A. We’re not going to talk about divestitures. We do look at all aspects of our business, and we have some intelligent choices to make if conditions get worse or if conditions get better. We have to see how things play out throughout the year.”