United States Steel Corporation reports improved 2016 second quarter results and stronger cash and liquidity position
United States Steel Corporation (NYSE: X) reported a second quarter 2016 net loss of $46 million. This compared to a second quarter 2015 net loss of $261 million, and a first quarter 2016 net loss of $340 million.
Commenting on results, U. S. Steel President and Chief Executive Officer Mario Longhi said, “Our second quarter results improved significantly from the first quarter as our European segment posted its best results since the third quarter of 2008 and our Flat-Rolled segment returned to profitability. Our improving cost structure continues to drive increases in our margins and the recent increases in steel prices started to be reflected in our results. Also, our successful debt offering, continued reductions in working capital, and increasing cash generation significantly improved financial flexibility and our cash and liquidity position. While market conditions have improved recently, we remain focused on lowering our break-even point and working closely with our customers to improve our market position and create value for all of our stakeholders."
Segment loss before interest and income taxes was $7 million, or $2 per ton, for the second quarter of 2016 compared with segment loss before interest and income taxes of $252 million, or $70 per ton, in the first quarter of 2016 and segment loss before interest and income taxes of $104 million, or $27 per ton, in the second quarter of 2015.
We generated positive operating cash flow of $313 million for the six months ended June 30, 2016. As of June 30, 2016, U. S. Steel had $820 million of cash and $2.4 billion of total liquidity. Second quarter results for our European segment increased compared to the first quarter. Higher average realized euro-based prices combined with higher volumes, favorable raw material prices, improved operating efficiencies, and increased Carnegie Way benefits contributed to better results.
Commenting on U. S. Steel’s outlook for 2016, Longhi said, “The significant improvements we have made to our earnings power through our Carnegie Way transformation will become more apparent as market prices recover from the very low levels at the end of 2015. While we began to realize some benefit from recent price increases in the second quarter, we will see better average realized prices, primarily in our Flat-Rolled and European segments, in the second half of the year. The steel industry continues to face challenging conditions as a result of global overcapacity and unfair trade practices. We remain focused on improving our trade laws and their enforcement, and we are encouraged that final affirmative determinations in recent trade cases have been a catalyst for increasing steel prices. Our Carnegie Way journey continues to create improvements in our business model that will enable us to be profitable across the business cycle."
If market conditions, which include spot prices, customer demand, import volumes, supply chain inventories, rig counts, and energy prices, remain at their current levels, we would expect:
• 2016 net earnings to be approximately $50 million, or $0.34 per share, and adjusted EBITDA to be approximately $850 million.
• Results for our Flat-Rolled and European segments should each be higher than their 2015 results and results for our Tubular segment should be lower than their 2015 results.
• To be cash positive for the year, including approximately $400 million of cash benefits from working capital improvements in 2016, primarily related to better inventory management, driven by improved sales and operations planning practices, helping to offset growing accounts receivables balances.
We believe market conditions will change, and as changes occur during the balance of 2016, our net earnings and adjusted EBITDA should change consistent with the pace and magnitude of changes in market conditions.
U. S. Steel Košice was visited by nearly 100 diplomats from Brussels