U.S. Steel said Friday that it will take a $1.8 billion noncash impairment charge related to its 2007 acquisitions of Canadian steel maker Stelco and Texas tube producer Lone Star Technologies.
The Pittsburgh steel producer said the noncash charge will not affect its liquidity or its compliance with debt agreements.
The charge, which amounts to $12.39 per share, will be reflected in third-quarter results, which the company is expected to report on Oct. 29. Before the announcement, analysts were forecasting the company would post a loss of 39 cents per share on sales of $4.3 billion.
U.S. Steel said $1 billion of the charge is attributable to writing down the value of Stelco, a sheet steel producer that was acquired at a cost of $1.1 billion. The company blamed the write-down on "the protracted economic recovery and excess global steelmaking capacity."
The Canadian operation has been plagued by labor strife that has idled several of its mills for lengthy periods of time. Workers at a mill in Nanticoke, Ontario, ratified a five-year contract in September, ending a lockout that began in April. An 11-month work stoppage at a plant in Hamilton, Ontario, ended in 2011.
The company said the other $800 million is attributable to its purchase of Lone Star, which makes tubular goods for the energy market. U.S. Steel cited "the adverse price and volume effects of an increased supply of welded tubular products." High levels of imports and the plans of domestic producers to add capacity are to blame for that, the company said.
The announcement was made after Wall Street closed. U.S. Steel shares finished Friday at $23.98, up 32 cents. At that price, U.S. Steel's market capitalization -- the value of its outstanding shares -- is $3.5 billion.
Its stock price has jumped 34 percent since Sept. 1 when former Alcoa executive Mario Longhi was promoted to CEO. In April, Mr. Longhi was put in charge of a comprehensive initiative to reduce costs and boost efficiency. The company has provided little specific information on how it intends to achieve those objectives.
Mr. Longhi replaced John P. Surma, who will remain executive chairman and retire from the company and board at the end of the year.
Len Boselovic: email@example.com or 412-263-1941. First Published October 18, 2013 8:00 PM