The $1.8 billion charge U.S. Steel announced Friday is the first of several moves that industry analysts expect new CEO Mario Longhi will make to revitalize a company that has not had a profitable year since 2008.
Mr. Longhi, who took over Sept. 1 for John P. Surma, has been given a mandate to drastically slash costs and increase efficiency. So far, the former Alcoa executive has been largely silent about how he intends to do that. But analysts expect Mr. Longhi to rip a page from the playbook that most new CEOs rely on by getting the bad news out of the way early in his tenure.
Among the measures analysts expect is shutting at least one of the company’s plants. They cite the glut of current capacity as well as new mills being built that are targeting one of U.S. Steel’s most profitable markets: tubular products used in the oil and gas industry.
“We remain in a structurally over-supplied market,” said analyst Gordon Johnson of Axiom Capital Management in New York City. “Supply is going to continue to grow at an unhealthy clip.”
U.S. Steel Tower in downtown Pittsburgh, Pennsylvania. (Photo credit: Wikipedia)
The same day his company reported a worse-then-expected quarterly loss, U.S. Steel chairman and CEO John P. Surma told shareholders the Pittsburgh steel producer is undertaking a thorough study of how to reduce costs and is considering an iron-related joint venture with Republic Steel‘s plant in Lorain, Ohio.
Lower sales and shipments brought about the loss, Mr. Surma said.
U.S. Steel reported it lost $73 million, or 51 cents per share, versus a loss of $219 million, or $1.52 per share, in the year-ago quarter.
Sales fell 11 percent to $4.6 billion while shipments declined 3 percent to 5.5 million tons. Pricing was flat compared to fourth quarter levels but below prices in last year’s first quarter.
UNITED STATES STEEL CORPORATION COKE PLANT IN A VALLEY SURROUNDED BY HOMES AT CLAIRTON, PENNSYLVANIA. LOCATED 20… – NARA – 557213 (Photo credit: Wikipedia)
U.S. Steel today formally commissioned a new battery of ovens at its Clairton coke plant, a $500 million project the company said will preserve steelmaking jobs in the Mon Valley and improve the region’s air quality.
The project is a scaled back version of the $1 billion proposal the Pittsburgh steelmaker announced in late 2007, before the global recession decimated steel demand and caused the industry to retrench.
President and CEO John P. Surma said even after the scope was reduced, the project was the largest in the history of the Clairton plant and one of the largest in U.S. Steel’s 112-year history. He said it secures the jobs of 1,300 Clairton employees as well as the 1,400 who work at the company’s Edgar Thomson plant in Braddock and the Irvin plant in West Mifflin.