US steel posts $51 million loss in 3Q

AP News
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Posted: Oct 26, 2010 1:07 PM
US steel posts $51 million loss in 3Q

U.S. Steel Corp. said Tuesday that it is still losing money because of weak demand for its products during the uneven global economic recovery. It doesn't expect much improvement by year-end.

The Pittsburgh manufacturing giant reported a third-quarter loss of $51 million. In late July, it predicted a profit for the quarter, but tempered that outlook as the period progressed and economic growth stayed sluggish.

Although the results were better than in the third quarter of 2009, they were worse than the June-July quarter.

Compared with the second quarter, shipments and prices fell for flat-rolled steel, which is used in everything from appliances and automobiles to construction. U.S. Steel blamed the decline largely on the poor construction market and seasonal buying patterns.

Although it shipped less pipe, U.S. Steel said that was offset by higher average prices and lower raw material costs.

The quarterly loss was 35 cents per share. A year ago, U.S. Steel had a loss of $303 million, or $2.11 a share. Sales jumped 60 percent to $4.5 billion from a year ago, although they slipped 4 percent from this year's second quarter.

Chairman and CEO John P. Surma said the results reflect "the uncertain economic situation in North America and Europe."

Customers who are not under supply contracts are reducing inventory levels, while orders from those under contract reflect the "traditional downtime taken late in the fourth quarter," Surma said in a statement.

Bridget Freas, a steel analyst for Morningstar Inc., said the performance was consistent with third-quarter results released by other steel manufacturers.

"The flat-rolled market in the U.S. has been more challenged right now than it has been earlier this year," she said. "We're experiencing some volatility. I think that's what happens when you're in such a deep recession.

"Trying to get out of it, it's not always a straight path upward," she said.

U.S. Steel also reported "significantly higher" repair and maintenance costs following the failure of a railroad track that carries raw materials to a blast furnace in Gary, Ind.

U.S. Steel paid $80 million in the third quarter for repairs and inspections, an increase of $60 million over the second quarter. The company also saw $30 million in expenses from disruptions at the Gary plant.

Looking ahead, U.S. Steel expects fourth-quarter results will be similar to the third quarter because of lower average prices, shipments and production volume.

Separately, U.S. Steel declared a dividend of 5 cents per share on common stock. It is payable Dec. 10 to stockholders of record on Nov. 10.

Last week, Nucor Corp. reported a third-quarter profit but said demand had slowed for many steel products, such as those used in the still-weak housing and commercial construction sectors.

U.S. Steel shares dropped $1.61, or 3.8 percent, to $40.66 in midday trading.