US Steel shares buckle under quarterly loss, guidance cut

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US Steel shares are down 18 per cent in after-hours trading on Tuesday after it cut its full-year forecast following a quarterly loss that put its earnings well short of Wall Street’s expectations.

The company said that its net loss for the three-month period ending March 31 was $180m, or $1.03 per diluted share. Analysts surveyed by Bloomberg had expected earnings per share of 31 cents on a $50.8m profit. Pittsburgh-based US Steel said that it took a $35m adjustment “associated with the loss on the shutdown of certain tubular assets” — translating to a 20 cent-per-share hit.

US Steel blamed the loss on “operating challenges” at certain facilities. Sales, meanwhile, came in at $2.7bn for the quarter, less than the $2.95bn that Wall Street was looking for.

The US steel industry has been rallying in the weeks since US President Donald Trump was elected on a platform that included shoring up domestic manufacturing like steel and implementing protectionist trade policies against foreign rivals like China, which for years has been accused by American steel makers of dumping artificially cheap products on US shores.

US Steel’s challenges may offer Mr Trump more fodder as he considers whether foreign steel imports are harming US national security.

US Steel chief executive Mario Longhi said:

“While our segment results improved by over $200 million compared with the first quarter of 2016, operating challenges at our FlatRolled facilities prevented us from benefiting fully from improved market conditions. However, we continue to be encouraged by the strength of our European business and we are also seeing improving energy markets. Overall, improved commercial conditions more than offset higher raw materials and energy costs and increased maintenance and outage spending driven by our asset revitalization efforts.”

The company also cut its guidance for the full year. It is now looking for net earnings in 2017 of $260m, or $1.50 a share. That is less than half of the figures it had given last quarter for full-year net earnings of $535m and earnings per share of $3.08.

Regarding the outlook, Mr Longhi added:

“Market conditions have continued to improve, and we will realize greater benefits as these improved conditions are recognized more fully in our future results. We are focused on long-term and sustainable improvements in our business model that will position us to continue to be a strong business partner that creates value for our customers. This remains a cyclical industry and we will not let favorable near-term business conditions distract us from taking the outages we need to revitalize our assets in order to achieve more reliable and consistent operations, improve quality and cost performance, and generate more consistent financial results.”

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