U.S. Steel says economic slowdown to hit fourth quarter
(Reuters) - U.S. Steel Corp (X.N), the top steel producer in the United States by volume, warned that its current quarter would be hurt by the global slowdown, joining rivals Nucor Inc (NUE.N) and AK Steel Holding Corp (AKS.N) in forecasting weak results.
Steel prices have plummeted in recent months as a result of weak demand in China, the world's largest producer and consumer.
"Our results are expected to reflect continued weakness in the European and emerging market economies, as well as economic uncertainty in North America," Chief Executive John Surma said in a statement.
U.S. Steel said it expects fourth-quarter results to decline in its flat-rolled and tubular businesses in the Americas and Europe.
The World Steel Association expects steel consumption to rise just 2.1 percent this year, compared with 6.2 percent growth last year.
U.S. Steel expects operating results to break even in the current quarter, compared with an income of $171 million in the third quarter.
The company, however, said new spot orders, slated for delivery later this quarter, were getting higher prices, with market conditions improving in North America.
"There is potential for the market to recover between December and February driven by increased seasonal demand but trends seem fairly anemic," said CRT Capital Group analyst Kuni Chen, who expects steel prices to average $680 per ton in 2013, compared with $655 this year.
The company forecast a loss in its flat-rolled business due to lower shipments and prices, and higher operating costs.
U.S. Steel plans to complete maintenance projects on several North American blast furnaces in the current quarter and expects maintenance and outage costs to be about $25 million higher than the third quarter, CEO Surma said on a conference call with analysts.
The company said profit in its tubular business, which caters to the oil and gas industry, would slide from the third quarter due to decreasing drilling activity.
U.S. Steel said it expects its Slovakia-based European business results to break even.
The company has bid on U.S. and Brazilian steel mills, owned by Germany's biggest steelmaker ThyssenKrupp (TKAG.DE), Reuters reported.
Members of labor union United Steelworkers in September ratified a contract with U.S. Steel that gives 16,000 workers at the company's U.S. facilities up to a 4.5 percent increase in wages over the next three years.
The company said a $2,000 per employee lump sum payment made earlier this month under the new contract led to a $35 million pre-tax charge in the third-quarter.
Under the agreement, a lump sum of $500 per employee will be payable in the second quarter of 2014, Chief Financial Officer Gretchen Haggerty said on the conference call.
THIRD-QUARTER NET PROFIT DOUBLES
Net profit doubled to $44 million, or 28 cents per share, in the third quarter, from $22 million, or 15 cents per share, a year earlier.
Revenue fell 8 percent to $4.7 billion, while selling costs fell about 6 percent.
Adjusted profit was 23 cents a share, while analysts' expected the company to break even per share, according to Thomson Reuters I/B/E/S.
The Pittsburgh-based company said total shipments slipped 4 percent in the third quarter to 5.3 million tons.
The stock, which has fallen 24 percent this year, closed at $21.15 on Friday on the New York Stock Exchange. Major U.S. stock markets were closed on Monday and Tuesday due to Hurricane Sandy.
(Reporting by Swetha Gopinath and Garima Goel in Bangalore; Editing by Don Sebastian, Supriya Kurane)
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