Why US Steel increased despite a loss in the second quarter (Part 2 of 10)
Overview of second quarter results
U.S. Steel (X) reported sales of $4.4 billion, which was down almost 1% from last quarter. The total steel shipments stood at 5.02 million tons, which was down 2% from last quarter. The capacity utilization of its North American facilities fell to 75%. In contrast, it was a healthy 98% for European operations. The lower capacity utilization in North American operations was a result of shutdowns at some plants due to the impact of adverse weather conditions earlier this year.
Profitability in second quarter
U.S. Steel posted a net loss of $0.12 per share in its second quarter earnings. When adjusted for special items the earning per share (or EPS) was $0.17 which is down 50% from its results last quarter. This can be seen in the previous chart. For valuation purposes the one off items are normally excluded. It’s income from continued operation that analysts and investors look at.
What impacted the profitability of U.S. Steel in the second quarter?
We’ve seen that the net profit fell by half in the second quarter, even after adjusting for special items. There were several factors that contributed to this decline, the prime one being the impact of adverse weather and the resulting disturbances in some production sites of U.S. Steel. Its facilities in the Great Lakes wasn’t operational for almost half of the last quarter. The company incurred around $150 million for various shutdowns and repairs associated with these disruptions. This impacted its profitability in a big way.
In the next sections we’ll analyze how the various segments of U.S. Steel contributed to its overall performance in the second quarter. It’s important to note that ArcelorMittal (MT), Nucor Corporation (NUE), Reliance Steel & Aluminum (RS), and SPDR S&P Metals and Mining ETF (XME) are alternate ways of assessing the steel industry.
Browse this series on Market Realist:
- Part 1 - Overview: US Steel Corporation
- Part 3 - Why the flat rolled segment is the Achilles heel of US Steel
- Part 4 - Why the tubular segment is the most lucrative for US Steel
- Basic Materials Industry