Reuters: Global Markets: U.S. Steel outlook disappoints, stock falls

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U.S. Steel outlook disappoints, stock falls Apr 24th 2012, 21:03 By Steve James Tue Apr 24, 2012 5:03pm EDT (Reuters) - U.S. Steel Corp's (X.N) flat-rolled business could decline in the second quarter and the European economy is still a challenge, the company said on Tuesday in a disappointing outlook that sent its stock down. But Chairman and Chief Executive Officer John Surma later painted a rosier picture, telling Wall Street analysts that order rates have picked up in the last month as demand for steel improves in most end-markets except construction. "Our order rates in the last month or so have been better than the previous two months," Surma said on a conference call. "So demand ... has been steady. "The North American market ... despite the fact that the economic recovery has been very choppy ... is still a pretty good market. The biggest missing link there is in construction." Surma said U.S. Steel was benefiting from strong demand from oil and gas drillers for tubular steel, and also from Detroit where auto production is on the upswing. "On the overall automotive market for us in North America we've been doing very well," he said. "(But) While our markets are gradually improving, the economic recovery is certainly not complete." Earlier, the steelmaker reported better-than-expected first-quarter results, saying it shipped more steel in the January-March period than in any quarter in more than three years. But it also gave a gloomy outlook for the second quarter. Results for the flat-rolled steel segment are expected to decrease due primarily to higher maintenance costs, Surma said in the company's earnings statement. Costs were expected to increase by about $50 million from the first quarter, for scheduled blast furnace and other maintenance projects. That will reduce the amount of steel the company produces. "While the economic conditions in Europe remain challenging," second-quarter results from the European business segment are expected to return a positive income from operations, U.S. Steel said. The tubular segment, which makes steel for gas and oil pipes, is expected to have similar results to the first quarter. The company's stock fell as much as 4 percent during the morning but recovered somewhat to close down 2 percent at $27.65 on the New York Stock Exchange. "The stock is down on a more muted second-quarter outlook. They are guiding to a flat quarter," said analyst Kuni Chen of CRT Capital Group. He pointed out that steel prices, which rose earlier this year, have since stalled in recent weeks. "It's a bit of a disappointment as people were expecting positive pricing and momentum to follow into the second quarter." Michelle Applebaum of Steel Market Intelligence in Chicago said steel prices had fallen back as a result of Chinese steel production and export increases in March. "When China produces more steel, the world has too much," she said. U.S. Steel posted a net loss of $219 million, or $1.52 per share, compared with a net loss of $86 million, or 60 cents a share, in the same quarter of 2011. But adjusted for items, including a $399 million loss on the sale of its Serbian operations, it showed a profit of 67 cents per share, which beat analyst expectations. Sales rose to $5.2 billion from $4.8 billion in the 2011 quarter on higher prices and shipments, the Pittsburgh-based company said. Analysts on average had expected adjusted earnings of 45 cents a share and revenue of $4.95 billion, according to Thomson Reuters I/B/E/S. U.S. Steel said first-quarter prices increased by $23 per ton to $764 per ton due to higher average realized prices on both spot and contract business. Shipments increased by 8 percent to 4.1 million net tons, the highest shipping level since the third quarter of 2008. Also on Tuesday, a competitor, AK Steel Holding Corp (AKS.N), reported a first-quarter loss as a drop in shipment volumes offset higher steel prices. AK Steel's net loss was $11.8 million, or 11 cents per share, versus a profit of $8.7 million, or 8 cents a share, in the year-ago quarter. The loss was expected and AK Steel's stock fell 1.9 percent to $7.20. (Additional reporting by Matt Daily; Editing by John Picinich and Phil Berlowitz) Link this Share this Digg this Email Reprints

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