Lingering impacts from the harsh winter will put a chill on U.S. Steel’s second quarter performance, president and CEO Mario Longhi cautioned Wednesday, sending shares of the Pittsburgh steel producer lower.
Mr. Longhi said that while all steel-makers were affected by the harsh winter, U.S. Steel felt the brute force of the weather the most because of its reliance on Lake Superior to move iron ore pellets from its Minnesota mines to its steel plants. Icy conditions on the lake are the worst in more than 30 years, lengthening the time it takes ore boats to make the crossing and crimping steel production, he told analysts and investors during a conference call.
The result will be a second-quarter loss for the company’s flat roll business and operating profits below the $154 million reported for the first quarter.
Late Tuesday, U.S. Steel reported first-quarter net income of $52 million, or 34 cents per share, vs. a loss of $73 million, or 51 cents per share, in last year’s first quarter. Sales fell 3 percent to $4.45 billion while shipments were off 7 percent to 5.1 million tons.
Mr. Longhi also said the Carnegie Way, the company’s ambitious efficiency and cost-cutting initiative, will generate additional savings of $140 million this year. That brings total annualized savings from the project to $290 million, he said.
“It’s something that should differentiate us going forward. No question about it,” Mr. Longhi responded when asked whether the initiative is more than the routine cost-trimming all steel producers do.
In addition to the iron pellet issue, steel production at U.S. Steel’s Great Lakes Works near Detroit has been idled since last month, when a large pipe damaged the roof sheltering one of its steel-making furnaces. Mr. Longhi said production should resume by the middle of May.
Analysts pressed him for a cost of the outages, but Mr. Longhi said, “I don’t think we have a figure we can offer you at this point.”
He said the company is doing everything it can to meet customer commitments. When one analyst asked him to comment on reports that the outages have allowed rival producers to take business from U.S. Steel for the rest of the year, Mr. Longhi said most customers are not responding that way because of the benefits they realize from partnering with the company.
John Ferriola, Nucor chairman, CEO and president, told analysts last week that the Charlotte, N.C.-based steel producer has gained some additional business because of some customers having problems getting enough steel from their regular suppliers.
“We will take the business, conditioned upon the fact that it stays on our books and awarded to Nucor throughout the rest of the calendar year,” he said.
U.S. Steel shares closed Wednesday at $26.02, down 32 cents.
Len Boselovic: 412-263-1941 or email@example.com First Published April 30, 2014 10:21 AM