netrashetty
Netra Shetty
The United States Steel Corporation (NYSE: X), more commonly known as U.S. Steel, is an integrated steel producer with major production operations in the United States, Canada, and Central Europe. The company is the world's tenth largest steel producer ranked by sales (see list of steel producers). It was renamed USX Corporation in 1991 and back to United States Steel Corporation in 2001 when the shareholders of USX spun off its steel-making assets following the acquisition of Marathon Oil in 1982. It is still the largest domestically owned integrated steel producer in the United States, although it produces only slightly more steel than it did in 1902.[3]
U.S. Steel is a former Dow Jones Industrial Average component, listed from April 1, 1901 to May 3, 1991. It was removed under its USX Corporation name with Navistar International and Primerica Corporation.
The United States Steel Corporation (NYSE: X) is the largest integrated steel manufacturer in North America.
Company Overview
While US Steel was founded as a steel producer, it expanded and acquired several different business sectors over the 20th century. By the 1980's, U.S. Steel had a very diversified business structure that included involvement in the steel, energy, agri-chemical, domestic transportation and raw materials industries. Since then, however, the company has restructured itself and returned to its roots as a company dedicated to the production of steel products. In a currently consolidating steel industry, U.S. Steel has maintained discipline in its business approach in recent years, focusing on increasing the production of its current business sectors and improving its product quality. This conservative business approach is aimed to keep the company from suffering losses in times of industry setbacks or economic downturns. On the other hand, U.S. Steel may be missing opportunities to expand its business through acquisitions similar to the strategies employed by U.S. market leaders Arcelor Mittal (MT) and Nucor (NUE).
U.S. Steel still remains dependent on key industries and regions in spite of its vertical integration efforts. In particular, U.S. Steel is dependent on the petroleum and auto industries and is highly affected by activities in China, which affect most steelmakers worldwide.
Contents
1 Company Overview
1.1 Business & Financial Metrics
1.1.1 Q4 FY 2010 Quarterly Earnings
1.1.2 Q3 FY 2010 Quarterly Earnings
1.1.3 Q2 FY 2010 Quarterly Earnings
1.1.4 Q1 FY 2010 Quarterly Earnings
1.1.5 Q4 FY 2009 and Annual Earnings Summary
1.1.6 FY 2008 Annual Summary
1.2 Business Segments
2 Trends and Forces
2.1 Steel Demand Directly Correlates to International Economic Growth
2.2 The Strength of the Auto Industry Impacts US Steel's Markets
2.3 Oil, Gas and Petrochemicals
2.4 Environmental Concerns May Impact Operations
3 Competition
4 References
Oil and gas companies purchase nearly all of its tubular steel products for use on pipelines and oil rigs. The company is the market leader in this type of steel production and sources a third of its revenue from this sector.
Automobile manufacturers consume 20% of all steel shipments to build cars and trucks. U.S. Steel is highly tied to the Big Three automakers (GM, Ford, Daimler Chrysler) which have suffered poor performance recently.
While China is driving a large portion of the increase in demand for steel, the country is also ramping up its own steel production capabilities. China's becoming a net exporter of steel could flood the market and drive down prices.
Business & Financial Metrics
Q4 FY 2010 Quarterly Earnings
US Steel announced net losses of $249 million for the fourth quarter of 2010.[1] Driving these losses were a decrease in both steel shipments and net sales. Shipments for Q4 FY2010 decreased by 1 percent when compared to the previous quarter, totaling 5.5 million tons.[1] Net sales for the quarter totaled $4.3 billion, a 4 percent drop from the previous quarter.[1] Despite these losses, FY 2010 net losses were $919 million less than the losses the previous fiscal year.[1]
Net losses were driven primarily by losses in the flat-rolled and U.S. Steel Europe divisions of U.S. Steel financial operations. Flat-rolled sales reflected losses of $156 million for the quarter.[1] Similarly, U.S. Steel Europe posted losses of $39 million for the quarter as well.[1]
Q3 FY 2010 Quarterly Earnings
US Steel announced net losses of $51 million for the third quarter of 2010.[2] These losses were driven by losses from operations, decreased shipments, and a decrease in net sales for the third quarter. Despite losses across the board when compared to second quarter results in 2010, these earnings represent improvements from the third quarter of 2009.[2] Losses from operations were $138 million for the quarter when compared to second quarter results, but improved from losses of $412 million in year ago results.[2] Shipments also decreased by 5% when compared to the previous quarter and culminated at 5.6 million tons for Q3 FY2010.[2] Net sales decreased by 4% to $4.5 billion for the quarter, reflecting another loss from the previous quarter.[2] Net sales, however, improved from $2.8 billion in Q3 FY2009.Despite losses when compared to second quarter results in 2010, these earnings represent improvements from the third quarter of 2009.[2]
Q2 FY 2010 Quarterly Earnings
US Steel announced a net loss of $25 million for the second quarter of 2010, a drop from sales of $3.62 billion in the first quarter of 2010 but an improvement from a net loss of $157 million from the second quarter of 2009.[3] Net sales similarly improved from the second quarter of 2009, increased by 20% to $4.7 billion.[3] Shipments increased by 9% as well as compared to year-ago results, totaling 5.9 million tons.[3]
The turnaround from the second quarter of 2009 is attributable to profitability in all three operating segments.[3] Net sales from U.S. Steel's flat-rolled operating segment totaled $98 million, an increase from a loss of $362 million in the same quarter the previous year.[3] U.S. Steel Europe generated $19 million, an improvement from a loss of $53 million.[3] Tubular sales also increased, totaling $96 million as compared to the loss of $88 million seen in Q2 of 2009.[3]
Q1 FY 2010 Quarterly Earnings
US Steel posted net sales of $3.62 billion for the first quarter of 2010, as compared to $2.61 billion for the same quarter in 2009.[4] Offsetting these earnings were increased costs of sales; selling, general, and administrative expenses; and depreciation, depletion and amortization; and losses. Costs of sales increased from $3.0 billion in the first quarter of 2009 to $3.6 billion in the first quarter of 2010.[4] Selling, general, and administrative expenses also increased from $143 million to $148 million. Depreciation, depletion and amortization increased from $158 million in Q1 FY2009 to $165 million in Q1 FY2010.[4] Operating expenses totaled $3.95 billion, bringing net losses attribute to US Steel to $157 million - a 36% improvement from Q1 FY2009.[4] Despite net losses, US Steel posted increased sales in its Flat-rolled and USSE business segments. Flat-rolled sales increased from $1.6 billion in Q1 FY2009 to $2.5 billion in Q1 FY2010.[4] USSE sales increased from $622 million in year-ago standings to $964 million in the first quarter of 2010.[4] Tubular sales, however, decreased from $515 million in Q1 FY2009 to $445 million in Q1 FY2010.[4]
Q4 FY 2009 and Annual Earnings Summary
US Steel posted a net loss of $267 million for the quarter, marking a $1.86 decrease per share.[5] US Steel posted gains for the quarter in net sales, ending at $3.4 billion and marking a 19% increase from the previous quarter.[5] Increases in sales were driven by a 12% increase in fourth quarter shipments, culminating at 4.7 million tons.[5]
For the full-year, US Steel posted a net loss of $1.4 billion as compared with a net income of $2.1 billion for the FY2008.[5] Shares posted at $10.42 per diluted share for FY2009 as compared to $17.96 per diluted share in FY2008.[5] Driving these losses were losses in income across all business segments, with the most pronounced losses being in the Flat-rolled and Tubular segments.[5] Flat-rolled income was $1.4 billion for 2008 but was a loss of $1.4 billion for 2009; similarly, Tubular income dropped from $1.2 billion in 2008 to 57 million in 2009.[5]
FY 2008 Annual Summary
US Steel posted net sales of $23.7 billion for the year, with an operating income of $3.1 billion, grossing a net income of $2.1 billion[6] Net Sales were driven by a 114% increase in Tubular sales from FY 2007, generating $4.3 billion.[6] US Steel's Flat-rolled and USSE segments similarly reported growth, posting 38% and 18% sales increases respectively.[6]
Business Segments
US Steel has three primary operating segments: flat rolled; tubular products (which make up the primary domestic operations of the company); and U.S. Steel Europe. The domestic operations of U.S. Steel are vertically integrated, meaning that iron ore and coke, which are the primary raw materials used to create steel, are supplied by the company itself.[6] Integration helps to insulate the company from the price volatility of iron ore and coke and therefore enables the company to operate at lower costs than non-integrated producers. U.S. Steel is hoping to begin integrating its services in Europe as well, although currently US Steel Europe purchases most of its raw materials from independent suppliers.
[7]
Trends and Forces
Steel Demand Directly Correlates to International Economic Growth
Steel consumption levels correlate with economic growth and expansion. When the global economy is expanding, there is a rise in demand for steel, putting upward pressure on steel prices. When economic growth slows down, steel prices tend to fall. Economic expansion usually means that the primary end markets of the steel industry are performing well. These end markets represent the customers to whom companies such as U.S. Steel sell their products. When steel end markets are performing well, they will buy more steel to make more of their own product. In recent years, China has contributed to a resurgence in the demand for steel. Alongside this, the rest of the global economy’s steady growth has provided a stable environment for the steel industry.
The Strength of the Auto Industry Impacts US Steel's Markets
About 20% of the steel industry’s shipments are to Auto Makers. Several different types of steel products are used for automobiles including flat rolled sheet for auto bodies, bar products for suspension, drive shafts and axles as well as steel alloys for wheels and engine blocks. As time has gone by, the demand for steel has increased as the size of cars and trucks has increased. A shift to smaller, lighter, and more fuel efficient cars could reduce the demand for steel in the future. U.S. Steel has a lot of exposure to the auto industry, especially the Big Three automakers. Poor performance by these three companies could hurt U.S. Steel's revenues.
Oil, Gas and Petrochemicals
Tubular steel products are used to build pipelines and rigs. Rising oil prices have spurred exploration and the construction of oil rigs which has helped to maintain demand for steel from this industry. A strong hurricane season that causes a lot of damage to the oil industry's infrastructure also increases the demand for the steel parts that are needed for repairs. Average North American oil rig counts have a strong correlation with U.S. Steel's tubular product shipments.
The company's leading 21% market share in tubular products makes performance in this sector vital; nearly one-third of revenues come from this business unit.
Environmental Concerns May Impact Operations
The steel production industry is extremely energy intensive and is a heavy producer of greenhouse gases (GHG's). Facing increasing concern about global warming and simultaneous rising demands for energy worldwide, there has been significant legislation that now affects the steel industry.
The House or Representatives passed a bill to curb U.S. greenhouse-gas emissions on June 26, 2009. This bill, called Cap and Trade, will hurt integrated steel mills at US Steel (X), ArcelorMittal (MT) and Mechel Steel Group OAO (MTL) the most because they kick out the most carbon dioxide.
Nucor (NUE) and the Commercial Metals Company (CMC) primarily re-melt scrap, which emits about 2/3 less carbon than competitors. Even though Nucor and other mini-mill users might gain competitve advantage relative to integrated steel players like U.S. Steel, the net effect of the Cap and Trade Bill will hurt all domestic steel players because it will incentivize production in countries without emissions caps like Brazil.[8]
U.S. Steel is very entrenched in the United States, and as an integrated steel player will likely see its already dangerously low sub-5% profit margin decline.
Competition
What separates U.S. Steel from domestic competition is its focus on maintaining an integrated business model and its exposure to the tubular products market. U.S. Steel's tubular production services the high performing oil and gas industry. While Nucor (NUE) and Arcelor Mittal (MT), the other two major steel producers in the United States, have been busy with several acquisitions for growth, U.S. Steel has maintained a conservative acquisition strategy. The integrated business model that U.S. Steel has maintained in the United States and is now striving to achieve in Europe will help protect the company from industry wide downturns that could devastate steel companies that are exposed to raw material price fluctuations.
U.S. Steel is a former Dow Jones Industrial Average component, listed from April 1, 1901 to May 3, 1991. It was removed under its USX Corporation name with Navistar International and Primerica Corporation.
The United States Steel Corporation (NYSE: X) is the largest integrated steel manufacturer in North America.
Company Overview
While US Steel was founded as a steel producer, it expanded and acquired several different business sectors over the 20th century. By the 1980's, U.S. Steel had a very diversified business structure that included involvement in the steel, energy, agri-chemical, domestic transportation and raw materials industries. Since then, however, the company has restructured itself and returned to its roots as a company dedicated to the production of steel products. In a currently consolidating steel industry, U.S. Steel has maintained discipline in its business approach in recent years, focusing on increasing the production of its current business sectors and improving its product quality. This conservative business approach is aimed to keep the company from suffering losses in times of industry setbacks or economic downturns. On the other hand, U.S. Steel may be missing opportunities to expand its business through acquisitions similar to the strategies employed by U.S. market leaders Arcelor Mittal (MT) and Nucor (NUE).
U.S. Steel still remains dependent on key industries and regions in spite of its vertical integration efforts. In particular, U.S. Steel is dependent on the petroleum and auto industries and is highly affected by activities in China, which affect most steelmakers worldwide.
Contents
1 Company Overview
1.1 Business & Financial Metrics
1.1.1 Q4 FY 2010 Quarterly Earnings
1.1.2 Q3 FY 2010 Quarterly Earnings
1.1.3 Q2 FY 2010 Quarterly Earnings
1.1.4 Q1 FY 2010 Quarterly Earnings
1.1.5 Q4 FY 2009 and Annual Earnings Summary
1.1.6 FY 2008 Annual Summary
1.2 Business Segments
2 Trends and Forces
2.1 Steel Demand Directly Correlates to International Economic Growth
2.2 The Strength of the Auto Industry Impacts US Steel's Markets
2.3 Oil, Gas and Petrochemicals
2.4 Environmental Concerns May Impact Operations
3 Competition
4 References
Oil and gas companies purchase nearly all of its tubular steel products for use on pipelines and oil rigs. The company is the market leader in this type of steel production and sources a third of its revenue from this sector.
Automobile manufacturers consume 20% of all steel shipments to build cars and trucks. U.S. Steel is highly tied to the Big Three automakers (GM, Ford, Daimler Chrysler) which have suffered poor performance recently.
While China is driving a large portion of the increase in demand for steel, the country is also ramping up its own steel production capabilities. China's becoming a net exporter of steel could flood the market and drive down prices.
Business & Financial Metrics
Q4 FY 2010 Quarterly Earnings
US Steel announced net losses of $249 million for the fourth quarter of 2010.[1] Driving these losses were a decrease in both steel shipments and net sales. Shipments for Q4 FY2010 decreased by 1 percent when compared to the previous quarter, totaling 5.5 million tons.[1] Net sales for the quarter totaled $4.3 billion, a 4 percent drop from the previous quarter.[1] Despite these losses, FY 2010 net losses were $919 million less than the losses the previous fiscal year.[1]
Net losses were driven primarily by losses in the flat-rolled and U.S. Steel Europe divisions of U.S. Steel financial operations. Flat-rolled sales reflected losses of $156 million for the quarter.[1] Similarly, U.S. Steel Europe posted losses of $39 million for the quarter as well.[1]
Q3 FY 2010 Quarterly Earnings
US Steel announced net losses of $51 million for the third quarter of 2010.[2] These losses were driven by losses from operations, decreased shipments, and a decrease in net sales for the third quarter. Despite losses across the board when compared to second quarter results in 2010, these earnings represent improvements from the third quarter of 2009.[2] Losses from operations were $138 million for the quarter when compared to second quarter results, but improved from losses of $412 million in year ago results.[2] Shipments also decreased by 5% when compared to the previous quarter and culminated at 5.6 million tons for Q3 FY2010.[2] Net sales decreased by 4% to $4.5 billion for the quarter, reflecting another loss from the previous quarter.[2] Net sales, however, improved from $2.8 billion in Q3 FY2009.Despite losses when compared to second quarter results in 2010, these earnings represent improvements from the third quarter of 2009.[2]
Q2 FY 2010 Quarterly Earnings
US Steel announced a net loss of $25 million for the second quarter of 2010, a drop from sales of $3.62 billion in the first quarter of 2010 but an improvement from a net loss of $157 million from the second quarter of 2009.[3] Net sales similarly improved from the second quarter of 2009, increased by 20% to $4.7 billion.[3] Shipments increased by 9% as well as compared to year-ago results, totaling 5.9 million tons.[3]
The turnaround from the second quarter of 2009 is attributable to profitability in all three operating segments.[3] Net sales from U.S. Steel's flat-rolled operating segment totaled $98 million, an increase from a loss of $362 million in the same quarter the previous year.[3] U.S. Steel Europe generated $19 million, an improvement from a loss of $53 million.[3] Tubular sales also increased, totaling $96 million as compared to the loss of $88 million seen in Q2 of 2009.[3]
Q1 FY 2010 Quarterly Earnings
US Steel posted net sales of $3.62 billion for the first quarter of 2010, as compared to $2.61 billion for the same quarter in 2009.[4] Offsetting these earnings were increased costs of sales; selling, general, and administrative expenses; and depreciation, depletion and amortization; and losses. Costs of sales increased from $3.0 billion in the first quarter of 2009 to $3.6 billion in the first quarter of 2010.[4] Selling, general, and administrative expenses also increased from $143 million to $148 million. Depreciation, depletion and amortization increased from $158 million in Q1 FY2009 to $165 million in Q1 FY2010.[4] Operating expenses totaled $3.95 billion, bringing net losses attribute to US Steel to $157 million - a 36% improvement from Q1 FY2009.[4] Despite net losses, US Steel posted increased sales in its Flat-rolled and USSE business segments. Flat-rolled sales increased from $1.6 billion in Q1 FY2009 to $2.5 billion in Q1 FY2010.[4] USSE sales increased from $622 million in year-ago standings to $964 million in the first quarter of 2010.[4] Tubular sales, however, decreased from $515 million in Q1 FY2009 to $445 million in Q1 FY2010.[4]
Q4 FY 2009 and Annual Earnings Summary
US Steel posted a net loss of $267 million for the quarter, marking a $1.86 decrease per share.[5] US Steel posted gains for the quarter in net sales, ending at $3.4 billion and marking a 19% increase from the previous quarter.[5] Increases in sales were driven by a 12% increase in fourth quarter shipments, culminating at 4.7 million tons.[5]
For the full-year, US Steel posted a net loss of $1.4 billion as compared with a net income of $2.1 billion for the FY2008.[5] Shares posted at $10.42 per diluted share for FY2009 as compared to $17.96 per diluted share in FY2008.[5] Driving these losses were losses in income across all business segments, with the most pronounced losses being in the Flat-rolled and Tubular segments.[5] Flat-rolled income was $1.4 billion for 2008 but was a loss of $1.4 billion for 2009; similarly, Tubular income dropped from $1.2 billion in 2008 to 57 million in 2009.[5]
FY 2008 Annual Summary
US Steel posted net sales of $23.7 billion for the year, with an operating income of $3.1 billion, grossing a net income of $2.1 billion[6] Net Sales were driven by a 114% increase in Tubular sales from FY 2007, generating $4.3 billion.[6] US Steel's Flat-rolled and USSE segments similarly reported growth, posting 38% and 18% sales increases respectively.[6]
Business Segments
US Steel has three primary operating segments: flat rolled; tubular products (which make up the primary domestic operations of the company); and U.S. Steel Europe. The domestic operations of U.S. Steel are vertically integrated, meaning that iron ore and coke, which are the primary raw materials used to create steel, are supplied by the company itself.[6] Integration helps to insulate the company from the price volatility of iron ore and coke and therefore enables the company to operate at lower costs than non-integrated producers. U.S. Steel is hoping to begin integrating its services in Europe as well, although currently US Steel Europe purchases most of its raw materials from independent suppliers.
[7]
Trends and Forces
Steel Demand Directly Correlates to International Economic Growth
Steel consumption levels correlate with economic growth and expansion. When the global economy is expanding, there is a rise in demand for steel, putting upward pressure on steel prices. When economic growth slows down, steel prices tend to fall. Economic expansion usually means that the primary end markets of the steel industry are performing well. These end markets represent the customers to whom companies such as U.S. Steel sell their products. When steel end markets are performing well, they will buy more steel to make more of their own product. In recent years, China has contributed to a resurgence in the demand for steel. Alongside this, the rest of the global economy’s steady growth has provided a stable environment for the steel industry.
The Strength of the Auto Industry Impacts US Steel's Markets
About 20% of the steel industry’s shipments are to Auto Makers. Several different types of steel products are used for automobiles including flat rolled sheet for auto bodies, bar products for suspension, drive shafts and axles as well as steel alloys for wheels and engine blocks. As time has gone by, the demand for steel has increased as the size of cars and trucks has increased. A shift to smaller, lighter, and more fuel efficient cars could reduce the demand for steel in the future. U.S. Steel has a lot of exposure to the auto industry, especially the Big Three automakers. Poor performance by these three companies could hurt U.S. Steel's revenues.
Oil, Gas and Petrochemicals
Tubular steel products are used to build pipelines and rigs. Rising oil prices have spurred exploration and the construction of oil rigs which has helped to maintain demand for steel from this industry. A strong hurricane season that causes a lot of damage to the oil industry's infrastructure also increases the demand for the steel parts that are needed for repairs. Average North American oil rig counts have a strong correlation with U.S. Steel's tubular product shipments.
The company's leading 21% market share in tubular products makes performance in this sector vital; nearly one-third of revenues come from this business unit.
Environmental Concerns May Impact Operations
The steel production industry is extremely energy intensive and is a heavy producer of greenhouse gases (GHG's). Facing increasing concern about global warming and simultaneous rising demands for energy worldwide, there has been significant legislation that now affects the steel industry.
The House or Representatives passed a bill to curb U.S. greenhouse-gas emissions on June 26, 2009. This bill, called Cap and Trade, will hurt integrated steel mills at US Steel (X), ArcelorMittal (MT) and Mechel Steel Group OAO (MTL) the most because they kick out the most carbon dioxide.
Nucor (NUE) and the Commercial Metals Company (CMC) primarily re-melt scrap, which emits about 2/3 less carbon than competitors. Even though Nucor and other mini-mill users might gain competitve advantage relative to integrated steel players like U.S. Steel, the net effect of the Cap and Trade Bill will hurt all domestic steel players because it will incentivize production in countries without emissions caps like Brazil.[8]
U.S. Steel is very entrenched in the United States, and as an integrated steel player will likely see its already dangerously low sub-5% profit margin decline.
Competition
What separates U.S. Steel from domestic competition is its focus on maintaining an integrated business model and its exposure to the tubular products market. U.S. Steel's tubular production services the high performing oil and gas industry. While Nucor (NUE) and Arcelor Mittal (MT), the other two major steel producers in the United States, have been busy with several acquisitions for growth, U.S. Steel has maintained a conservative acquisition strategy. The integrated business model that U.S. Steel has maintained in the United States and is now striving to achieve in Europe will help protect the company from industry wide downturns that could devastate steel companies that are exposed to raw material price fluctuations.
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