Just a year after turning its first annual profit in half a decade, U.S. Steel is back deep in the hole, with a $1.5 billion loss for 2015.
The Pittsburgh-based steelmaker lost $10.32 per diluted share, including $1.2 billion in non-recurring items such as restructuring costs. U.S. Steel's annual results were so dismal one market observer said the 115-year-old company, the first in American history to make $1 billion, must present a survival plan.
Wall Street however was pleased because U.S. Steel's net loss of $999 million or $6.83 per market share in fourth quarter beat analysts' expectations. U.S. Steel stock shot up 85 cents per share to around $7.77 a share within an hour of announcing the result, because of the better-than-expected performance in the fourth quarter.
The steelmaker made a profit of $275 million during the same period in 2015, but has been beset by a surge of cheap, often subsidized imports that have dragged down prices and damaged the entire domestic steel industry.
U.S. Steel, the second largest domestic steelmaker after Nucor, says it still has strong liquidity and positive cash flow despite the harsh market conditions. Chief Executive Officer Mario Longhi said his Carnegie Way cost-cutting initiative, an ongoing effort to make the company more efficient, yielded $815 million in savings last year.
"The $815 million of Carnegie Way benefits we realized in 2015 show that we continue to make significant progress on our journey toward our goal of achieving economic profit across the business cycle," Longhi said. "Our progress is real and it is substantial, but our fourth quarter and full-year results show that it is not yet enough to fully overcome some of the worst market and business conditions we have seen."
Excluding one-time items, U.S. Steel lost $262 million, or $1.79 per share, in 2015. The Pittsburgh-based steelmaker, which has been idling mills and laying off workers nationwide, reported a cash flow of $359 million and total liquidity of $2.4 billion, including $755 million in cash.
The company's flat-rolled segment, which includes the Gary Works mill, lost $116 million last year, including $88 million in the fourth quarter. Flat-rollled had been U.S. Steel's most profitable division in 2014, earning a net income of $709 million. Flat-rolled prices dropped by $30 a ton in the fourth quarter because of imports U.S. Steel says are dumped or subsidized.
U.S. Steel is forecasting break-even earnings before interest, taxes, depreciation or amortization, or EBITDA, in 2016, unless market conditions improve.
"We are facing significant headwinds and uncertainty in many of the markets we serve but remain focused on continuing to improve our cost structure, developing differentiated solutions for our customers and creating more reliable and agile operating capabilities," Longhi said.
"We have a strong and growing pipeline of Carnegie Way projects that will provide benefits in our operating segments and all other areas of our company," he said. "The substantive changes and improvements we are making continue to increase our earnings power. We are working hard every day to serve our customers and are well positioned to respond to improving market conditions."