U.S. Steel CEO David Burritt said the Pittsburgh-based steelmaker is in a good position after turning its first annual profit since 2014 last year.
"Our earnings have improved, our facilities are operating better and market conditions are supportive of continuing improvements," Burritt said in a conference call with investors last week. "We are focused on the fundamental drivers of our business — safety, quality, delivery and cost. This is how we’re establishing a foundation for future growth. There is nothing flashy or untested here, it's all about focus, discipline and execution, and we’re on it."
Burritt replaced Mario Longhi, who retired after a disastrous loss of $180 million in the first quarter. The steelmaker was expected to turn a profit because of rising prices, but Longhi's cost-cutting measures had included deferring maintenance so that U.S. Steel's mills were not productive enough to capitalize on the higher prices.
Under Burritt, the steelmaker has been investing $1.2 billion in upgrading its flat-rolled operations, including $50 million at Gary Works last year.
"Our investments in our assets are delivering results," he said. "We established a scorecard for investors to track our progress on our asset revitalization program, setting out our goals for 2017. The results are now in, and we exceeded our targets for improving quality and reliability and our more consistent results reflect this."
U.S. Steel plans to invest $275 million to $325 million this year in capital projects.
"The investments we're making in our assets and our employees are driven by our commitment to our customers," Burritt said. "Improving our quality and reliability makes us a stronger business partner and increases the value we can create. Providing stronger support for the current needs of our customers is only the first step. We're also focused on developing the next generation of steel products and solutions that will keep steel the material of choice."
The steelmaker hopes to turn an estimated profit of $1.5 billion this year if market conditions hold up. U.S. Steel aims to generate returns of 15 percent to 20 percent by 2020.
"We're seeing increased demand from our customers and have rescheduled some projects to ensure that we can make enough steel to support our customers' needs," Burritt said. "Also, we're not going to spend money just to spend money. We are executing our asset revitalization program in a very prudent, controlled and disciplined manner to ensure we get the highest possible return on our investment."
U.S. Steel, one of the largest employers in Northwest Indiana, benefited from an average price of $726 per ton of hot-rolled steel last year. It made $387 million in profit last year, or $2.19 a share.
"We've communicated our goals for improvements in quality and reliability and are committed to reaching those goals in a cost-effective and timely manner," Burritt said. "More reliable operations will improve our position with our customers and increase the consistency and predictability of our earnings. We are proud of our 2017 accomplishments and are looking forward to 2018, but realize we still have a lot of work to do."