U.S. Steel Corp. late Thursday announced a string of closings and layoffs to preserve cash as the struggling Pittsburgh-based steelmaker confronts lower prices and falling demand for its products amid the global pandemic.
At the same time, the company announced a first-quarter loss of $391 million, or $2.30 per share — its third quarterly loss in a row.
As the fallout from COVID-19 began to emerge and as oil and gas markets sank, “We adjusted our footprint, fortified our balance sheet and aggressively cut costs,” CEO David B. Burritt said in a press release announcing the first-quarter results.
In a filing with the U.S. Securities and Exchange Commission, U.S. Steel said it would temporarily idle the #1 blast furnace at its Edgar Thomson plant in the Mon Valley and the #6 blast furnace at Gary Works in Indiana, effective immediately.
Other cost-cutting moves include indefinitely idling iron ore production at its Keetac mine and adjusting production at its Minntac mine, both in Minnesota, and indefinitely idling its Lone Star Tubular operations and Hughes Springs coupling production facility in Texas.
The steelmaker said it had issued or plans to issue the required Worker Adjustment and Retraining Notification (WARN) layoff notices with states affected by the moves that cover about 6,500 employees, but said it “expects the actual number of employees affected to be closer to 2,700.”
In addition to idling the #1 blast furnace at Edgar Thomson in Braddock, the plant’s #3 blast furnace and finishing operations at the Irvin plant in West Mifflin are operating at reduced levels, spokeswoman Amanda Malkowski said in an email Thursday. She declined to say how many workers would be affected.
“There may be some adjustments to workforce levels ... but they will not be significant enough to trigger WARN notices,” she said. The company employs about 16,000 people in the U.S. and roughly 27,000 worldwide.
The most recent actions, combined with other production cutbacks announced in March, mean that seven of U.S. Steel’s 10 blast furnaces have been idled. The company also announced in March that it was indefinitely suspending the $1.5 billion in upgrades planned for the Mon Valley. The project, which includes an endless casting and rolling line and a cogeneration facility, had been set to break ground in September.
U.S. Steel is taking “swift and meaningful actions” to ensure its long-term survival, Mr. Burritt said in a conference call with analysts Friday morning. “These are unprecedented market conditions that require extraordinary actions to conserve cash,” he said.
“We’ll have to see how long this COVID-19 lasts. But we’re on it, we’ve got it and we’re optimistic about the future,” Mr. Burritt said, contending that the company is entering the current economic downturn in a stronger position that in other recessions, including the 2008 global financial crisis.
In line with U.S. Steel’s previously announced plan to extract cash from its iron ore assets, the company said it granted Canada’s Stelco Inc. an option to acquire a 25% interest in its Minntac mining operations. Under the agreement, Stelco paid $20 million upon signing the deal, with $80 million to be paid over the remainder of 2020. Stelco will pay another $500 million to exercise the option any time before Jan. 31, 2027.
U.S. Steel’s loss for the first quarter compares with a profit of $54 million, or 31 cents, in the same quarter last year.
Excluding special items, the adjusted loss was $123 million, or 73 cents per share — which beat the Zacks consensus estimate of a loss of 80 cents.
Sales for the quarter skidded 21.5% to $2.75 billion from $3.5 billion a year earlier.
“Challenging days are ahead, but I am confident in the men and women at U.S. Steel ...,” Mr. Burritt said in a statement. “Decisive actions helped us exceed our first-quarter guidance.”
In the conference call, chief financial officer Christine Breves said the company expects the second quarter to be the low point for the year, with financial results “meaningfully lower” than the first quarter.
First-quarter results were released after the close of the stock market Thursday. In early trading Friday, shares were up 56 cents, or 7 percent, to $8.24.
Patricia Sabatini: PSabatini@post-gazette.com; 412-263-3066.
This story was updated at 11 a.m., May 1, 2020.
First Published: April 30, 2020, 10:17 p.m.
