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WALL STREET U.S. Steel sees rise in profits



Published: Wed, January 26, 2005 @ 12:00 a.m.



The steel industry is expected to do well in 2005.

PITTSBURGH (AP) -- United States Steel Corp. reported a profit for the fourth quarter that easily beat Wall Street expectations as the steelmaking giant rode a wave of rising steel prices.

The company said it earned $462 million, or $3.55 per share, for the quarter ending Dec. 1 in contrast to a loss of $22 million, or 26 cents per share, a year ago.

The results beat the expectations of analysts surveyed by Thomson First Call, who were looking for profits of $2.71 a share.

Sales during the final three months of the year were up nearly 47 percent, to $3.9 billion from $2.68 billion a year ago.

While profits jumped in all the company's major segments, U.S. Steel reported profits of $376 million for flat-rolled steel, more than 15 times what it earned a year ago. The cost of flat-rolled steel averaged $623 per ton for the year, way up from the $423 per ton U.S. Steel was getting one year ago, but down from $627 per ton during the third quarter, the company reported.

Good outlook

There is little to indicate that 2005 will not be another strong year for U.S. Steel, said Daniel Roling, of Merrill Lynch.

U.S. Steel said it may adjust profits upward for the quarter, pending a $44 million property tax settlement involving the company's Gary Works in Indiana.

The company expects strong pricing on flat-rolled steel to continue in 2005, but said energy costs and tight supplies of raw materials would hold down profits. Flat rolled shipments are expected to trend downward from slightly more than 15.6 million tons last year to 15.4 million tons in 2005, as the company shuts down a blast furnace in Gary during the third quarter.

For the year, the Pittsburgh-based company earned $1.08 billion, or $8.44 a share, versus a loss of $463 million, or $4.64 a share, in 2003.

Revenue was $14.1 billion versus $9.45 billion a year ago.

"Favorable global steel markets coupled with our acquisitions and ongoing cost reduction efforts resulted in record income for U.S. Steel for both the fourth quarter and full year," said John Surma, president and chief executive officer. "Noteworthy accomplishments during 2004 included successful integration of the National [Steel Corp.] and Serbian facilities we acquired in 2003, and substantial cash generation."

Other segments

In addition to flat-rolled steel, the company reported substantial profit increases in its other major segments, including European sales and tubular products.

European profits on the quarter were $136 million, compared with $37 million during the fourth quarter in 2003.

The tubular segment, which has been fueled by demand from energy, oil and gas companies, was $113 million, compared with a loss of $6 million during the same quarter last year.

During 2004, U.S. Steel contributed $295 million to its main defined benefit pension plan and $30 million to a Voluntary Employee Benefit Association trust.

The company retired about $560 million in debt, Surma said, prompting Standard & amp; Poor's and Moody's Investors Service to upgrade U.S. Steel's credit rating.

"Earnings and cash flows should continue strong during 2005, with the company focusing on paying down debt, as well as contributing to its employee benefit plans, returning cash to shareholders, and strategic bolt-on acquisitions," said Roling, the Merrill Lynch analyst.

The company released its earnings report after the market closed Monday.

Shares of U.S. Steel rose 79 cents, or more than 1.5 percent, to $51.16 on the New York Stock Exchange on Tuesday.




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