This summary is based on the fourth quarter fiscal 2008 earnings call conducted by United States Steel Corp. (X) on January 27, 2009.
Management:
U.S. Steel Chairman and CEO: John Surma
EVP and CFO: Gretchen Haggerty
Manager, IR: Dan Lesnak
Key Investor Issues:
- Full year net income was $2,130 million or $18.11 per share versus $879 million or $7.40 per share in 2007.
- Net sales rose from $16,873 million in 2007 to $23,817 million in 2008.
- During the quarter, the company repurchased 260,000 ordinary shares for $14 million.
Fourth Quarter Financial Highlights:
The reported Q4 2008 earnings of $2.65 per diluted share included 65 cents per share net effect of $150 million pre-tax gain from a contingency reversal.
- The earnings also include a $28 million pre-tax charge to exit the drawn-over-mandrel tubular business.
- Excluding the above items, earnings were $2.00 per share, which exceeded the consensus estimate.
In the fourth quarter, the North American flat-rolled segment had an operating loss of $2 million.
- This is a reflection of the reselling prices as spot prices continued to fall, lower shipments and the unfavorable cost impact of operating at a utilization rate of less than 45%.
- The management highlighted this as the lowest quarterly utilization rate since 1983 as customer demand remained severely depressed.
- The unfavorable impact from the above items was partially offset by net favorable inventory effects of $90 million, primarily from LIFO inventory liquidations and lower raw material and energy costs.
- Shipments for Q4 totaled 2.8 million tons, down 38% from the third quarter and average selling prices decreased just over 11% compared with the third quarter.
The company recorded an operating loss of $134 million for the fourth quarter in the European segment.
- This was only the second time to record a quarterly loss since entering Europe in 2000.
- This result reflected decreased selling prices, lower shipments and the adverse cost effects resulting from low operating rates.
- The utilization rate fell to 51% for the quarter.
- Shipments were just over 900,000 tons or 36% lower than the third quarter.
- The selling prices declined by 22% to an average selling price of $847 per ton.
Tubular segment posted a record Q4 performance with operating income at $559 million.
- Operating income per ton increased by $309 to $1,118 per ton, primarily due to higher selling prices.
- The average realized price in Q4 increased by $285 per ton from Q3 and shipments remained strong at 500,000 tons for the quarter.
Capital spending totaled $197 million in the fourth quarter.
- The full year capital spending was recorded at $735 million.
- This was lower than the earlier estimate of $860 million.
- The amounts exclude spending by the variable interest entities of $67 million in Q4 and $161 million for the full year related to the non-recovery coke battery project at Granite City.
- The company also spent $140 million in 2008 to acquire the remaining interest in the Clairton 1314B partnership and three pickle lines in Canada.
- The management projects 2009 total capital spending at approximately $740 million.
Significant North American capital projects for 2009 include construction of a new coke battery at the Clairton coke operations.
- The management also plans the completion of co-generation facility at Granite City, sourced primarily by the steam produced from the non-recovery coke battery.
- In Europe, 2009 capital spending will focus on various environmental projects.
Depreciation, depletion and amortization totaled $141 million in the quarter and $605 million for the year.
- Depreciation is expected to be about $650 million in 2009.
- Defined benefit and multi-employer pension and OPEC costs for the quarter totaled $70 million.
- The company made cash payments for pension and OPEC of $193 million.
- In 2008, defined benefit and multi-employer pension and OPEC cost were $227 million.
- The management made full year cash payments for pensions and OPEC of $739 million, including $140 million of voluntary contributions to the main defined benefit pension plan.
- The company anticipates 2009 pension and OPEC cost to be roughly $360 million versus $227 million in 2008.
- Excluding any voluntary contributions, the management expects cash pension and OPEC payments to be approximately $535 million in 2009.
Net interest and other financial costs totaled $23 million in the fourth quarter compared with $46 million in the third quarter.
