Tuesday, United States Steel Corp. (X) reported its third-quarter profit that climbed more than three-folds in the third-quarter, helped by higher prices that boosted results at its tubular and flat-rolled steel segments. However, the company expects a decline in its fourth-quarter results, hurt by softening demand and prices for flat-rolled products in North America and Europe.
The Pittsburgh, Pennsylvania-based steel producer reported third-quarter 2008 net income of $919 million, or $7.79 per diluted share, compared to $269 million, or $2.27 per diluted share, in the third quarter 2007.
The results for the latest quarter included a $105 million pre-tax charge for employee signing bonuses paid according to the new labor agreements and a $23 million charge related to environmental remediation at a former production site.
U.S. Steel's quarterly net sales climbed to $7.31 billion from $4.35 billion in the corresponding quarter prior year.
Analysts, on average, polled by First Call/Thomson Financial expected earnings of $7.09 per share on revenues of $7.20 billion.
Income from operations was $1.33 billion, compared with $360 million in the third quarter of 2007.
Commenting on results, U. S. Steel CEO John Surma said, "U. S. Steel performed extremely well in the third quarter and recorded the most profitable quarter in our history. Our Flat-rolled and Tubular segments again posted record results, and tubular markets especially remained robust throughout the quarter."
Among peers, the Charlotte, North Carolina-based steel maker Nucor Corp. (NUE) reported third-quarter net income of $734.6 million or $2.31 per share, up from $381.2 million or $1.29 per share in the same quarter of last year.
For the first nine-months, U.S. Steel earned $1.82 billion, or $15.43 per share, higher than $844 million, or $7.10 per share, in the same period last year. Net sales surged to $19.25 billion from $12.34 billion a year-ago.
Commenting on U. S. Steel's outlook, Surma said, "The volatile global economic climate is having significant negative effects on our business and our forward view is limited because of low order backlogs and short leadtimes."
Hurt by softening demand and prices for flat-rolled products in North America and Europe, U.S. Steel expects a decline in its fourth quarter results, and expects to continue to operate at reduced production levels, corresponding with customer order rates.
For flat-rolled business, the company expects a sequential decrease in its fourth-quarter results on substantially lower shipments and a drop in average realized prices. Meanwhile, results for tubular segment are currently expected to be comparable to the third quarter.
Based on very weak market conditions, the company also expects results at its European operations to decline substantially in the fourth quarter.
The prices of steel and steel-making raw material such as metallurgical coal and iron ore have witnessed a rally so far in the first-half of 2008 because of the strong demand for steel, especially in developing economies. However, they are expected to fall during the remainder of 2008 and in 2009 due to higher production, especially in China, and weakening demand from OECD countries due to slowdown in economic activities.
Shares of U.S. Steel are currently up 74 cents or 2.40% at $31.56. For the past 52-weeks, the stock has been trading between $30.48 and $196.00.
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