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U.S. Steel lowers guidance, keeps Gary Works revitalization on track

The entrance to U.S. Steel Gary Works is shown.

U.S. Steel doubled its third-quarter profit to $291 million, but lowered its guidance for annual earnings before interest, taxes, depreciation and amortization to $1.8 billion, down from a prior estimate of $1.85 billion to $1.9 billion.

"The third quarter met our expectations and we adjusted annual guidance to $1.8 billion of EBITDA due to a longer than expected buyer strike and faster than anticipated drop in selling prices over the last two months," U.S. Steel President and CEO David Burritt said in a conference call with investors. "We view this as just a timing difference, as steel demand has remained strong and we are now seeing higher daily order rates, longer lead time and improved pricing."

The company plans to buy back $300 million in stock and redeem its bonds. 

"On asset revitalization, our $2 billion investment plan continues and everything is on track," Burritt said. "Related to labor, we have a tentative agreement with our represented employees that could be approved by mid-November, so we will hold off on detailed comments until ratification is complete. 

"We remain optimistic that the fair trade actions that President Trump has put in place will continue," Burritt said. "While we're not ready to provide details on next year, we believe we are in a good position to deliver another strong year in 2019."

In the third quarter, the Pittsburgh-based steelmaker raked in $3.7 billion in revenue, or 15 percent more than in the third quarter of 2017. U.S. Steel's flat rolled segment, which includes most of its Northwest Indiana operations, delivered 14.7 percent EBITDA margins as the company roped in $526 million in EBITDA in the third quarter.

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But steel prices have been softening of late, despite strong demand.

"We expect adjusted EBITDA for the fourth quarter to be approximately $575 million, which would result in full-year adjusted EBITDA of approximately $1.8 billion," U.S. Steel Executive Vice President and Chief Financial Officer Kevin Bradley said during the conference call. "We continue to see consistent and strong end-user consumption in our North American flat-rolled markets. We did see a pause in order rates and a decline in index pricing beginning in the third quarter, and the impacts of this dynamic are being realized in the fourth quarter. $575 million would represent margins of approximately 15 percent in the quarter, roughly 500 basis points above the fourth quarter of 2017."

U.S. Steel is moving forward with plans to invest $2 billion in asset revitalization, including $750 million in Gary Works over the next few years.

U.S. Steel General Manager of Investor Relations Dan Lesnak said the investment in upgrades would mean more down-time at Gary Works and other mills next year.

Peoples Bank profits plunged 27 percent in third quarter and are down 5.3 percent for the year because of one-time acquisition costs related to its purchase of an Illinois bank

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.