United States Steel Corporation · NYSE:X
United States Steel — Q2 2019 Earnings Presentation
33 slides from United States Steel's earnings presentation, Aug 1, 2019
Slide 1: Second Quarter 2019 Earnings Presentation
Second Quarter 2019 Earnings Presentation August 1, 2019 www.ussteel.com
Slide 2: Forward-looking Statements
Forward-looking Statements These slides are being provided to assist readers in understanding the results of operations, financial condition and cash flows of United States Steel Corporation for the second quarter and full year of 2019. They should be read in conjunction with the consolidated financ
Slide 3: Explanation of Use of Non-GAAP Measures
Explanation of Use of Non-GAAP Measures We present adjusted net earnings (loss), adjusted net earnings (loss) per diluted share, earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA, which are non-GAAP measures, as additional measurements to enhan
Slide 4: Second Quarter Update
SECOND QUARTER UPDATE
Slide 5: Second Quarter 2019 Financial Highlights
Second Quarter 2019 Financial Highlights Reported Net Earnings $ Millions Adjusted Net Earnings $ Millions $592 $321 $324 $262 $291 $214 $81 $78 $54 $68 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Profit Adjusted 6% 8% 16% 2% 2% 7% 9% 9% 2% 2% Margin: Profit Margi
Slide 6: Flat-rolled Segment
Flat-rolled Segment Key Segment Statistics Select End – Market Indicators1 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Automotive 2 Shipments: 2,584 2,659 2,733 2,725 2,804 May and June sales beat expectations and SAAR of 17.4M in 000s, net tons improves over first 4 months at 16.7M. Vehicle inventories
Slide 7: U. S. Steel Europe Segment
U. S. Steel Europe Segment Key Segment Statistics Select End – Market Indicators1 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Automotive Shipments: 1,156 1,101 1,073 1,064 1,004 EU car production expected to decline 2.3% year-over-year in 000s, net tons (y-o-y) in 2019, however the V4 region2 is project
Slide 8: Tubular Segment
Tubular Segment Key Segment Statistics Select End – Market Indicators1 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Oil Prices Shipments: 201 184 216 207 195 West Texas Intermediate Oil Price at ~$55/barrel, up ~25% in 000s, net tons since the end of 2018. Imports Imports of OCTG remain high. During 2Q,
Slide 9: Second Quarter Segment EBITDA Bridges 2Q 2018 vs 2Q 2019
Second Quarter Segment EBITDA Bridges 2Q 2018 vs 2Q 2019 Flat-rolled $ Millions Commercial: The unfavorable impact is primarily the result of lower average realized prices partially offset by increased volumes. $36 Raw Materials: The unfavorable impact is primarily the result of ($39) ($27) higher c
Slide 10: Financial Flexibility
FINANCIAL FLEXIBILITY
Slide 11: Cash and Liquidity Support Execution of our Strategy
Cash and Liquidity Support Execution of our Strategy Cash from Operations $ Millions Cash and Cash Equivalents $ Millions $938 $1,515 $1,553 $826 $754 $1,000 $755 $360 $366 $651 YE 2015 YE 2016 YE 2017 YE 2018 1H 2019 YE 2015 YE 2016 YE 2017 YE 2018 1H 2019 Total Estimated Liquidity $ Millions Net D
Slide 12: Proactively De-Risked Our Debt Maturity Profile
Proactively De-Risked Our Debt Maturity Profile MaturityReduction profile in Reduction in near-term significantlycontrollableDebt overheadextended Maturity2025 maturities ~$1.8B ~$150Mnext significant EBITDA opportunity Reduction in near-term Profile debt maturity maturities June 2019: $329M $754M $
Slide 13: Strategy Overview
STRATEGY OVERVIEW
Slide 14: Building a Solid Foundation for Our Future
Building a Solid Foundation for Our Future OUR STRATEGY CRITICAL SUCCESS FACTORS . Enhance operational excellence: 1 safe, environmentally Move Down the Cost Curve responsible, reliable and cost effective operations 2 . Create operating leverage: revitalized steelmaking assets Win in Strategic Marke
Slide 15: Our Critical Success Factors
Our Critical Success Factors Move Down the Cost Curve Win in Strategic Markets Move Up the Talent Curve Improve through-cycle Increase capabilities to Attract, develop, and retain profitability: grow share in strategic top talent: markets where we can: ̶ Continue investments in ̶ Win in growing mark
Slide 16: Execution Deep Dive
EXECUTION DEEP DIVE Construction of the Fairfield EAF
Slide 17: Three Elements of Execution
Three Elements of Execution Improve Reliability Improvements in reliability to generate Execute Planned Outages throughput and efficiency benefits Strong execution positions us to extract value from investments Reduce Capital Intensity Post investment horizon … optimization of sustaining capex and m
Slide 18: Improvements in reliability to generate throughput and efficiency benefits
Improvements in reliability to generate throughput and efficiency benefits Less Unplanned Downtime on Constrained Assets Reduction in controllable1/2 overhead 1 months Unplanned Downtime in Days increased production Less Unplanned on constrained units Downtime from improved reliability1 Reduction in
Slide 19: Execution at the Mon Valley BOP
Strong execution positions us to extract value from investments at the Mon Valley BOP ̶ 85% of Mon Valley BOP Asset ̶ 200k additional tons on a key Reduction in controllable Reduction in controllable Revitalization work complete constrained asset overhead overhead ̶ Source of high quality, low cost
Slide 20: Execution at the Gary BF #14
Strong execution positions us to extract value from investments at the Gary BF #14 Reduction in controllable Reduction in controllable overhead overhead Pulverized Natural Coal ̶ Suite of initiatives to optimize Gas Injection blast furnace fuel rates at Coke Gary Works ̶ Enabled by Asset Revitalizat
Slide 21: Post investment horizon: optimization of sustaining capex and M&O
Post investment horizon … optimization of sustaining capex and M&O Current Investment Mix After Strategic Investments Mix $2.5 Billion $1.9 Billion Sustaining Capex + Maintenance & Outage Expense1 Sustaining Capex + Maintenance & Outage Expense1 35% 30% Sustaining Capital Spending Maintenance & Outa
Slide 22: Executing strategic investments in line with expectations
Executing strategic investments in line with expectations On track At risk Off track Run-Rate Execution Technology Investments Investment EBITDA Status Mon Valley Endless Casting & Rolling $1,200M $275M 1 (2019 – 2022 investment) Tubular EAF $280M $80M 2 (2019 – 2020 investment) USSK Dynamo Line 3 (
Slide 23: Investments in technology generate balanced benefit streams
Investments in technology generate balanced benefit streams to de-risk value realization Run Rate EBITDA Contribution from Strategic Projects $ in millions ~$10 ~$30 ~$170 Technology ~$390 Enabled ~$180 Capability Cost Energy Other Exit Enhancement Improvement Efficiencies Rate Mon Valley 1 Endless
Slide 24: Options available to fund our strategic investments
Options available to fund our strategic investments ~$1.6B ~$1.6B 2022 ~$90M High Yield ~$400+M Market (opportunistically) 2021 ~$690M Upsize ~$300M U.S. ABL ~$280M USSK Revolver ~6% expected blended coupon rate2 2020 ~$610M Vendor Supported ~$300M Financing Environmental 2019 ~$220M ~$300M Revenue
Slide 25: Appendix
APPENDIX
Slide 26: Second Quarter Segment EBITDA Bridges 1Q 2019 vs 2Q 2019
Second Quarter Segment EBITDA Bridges 1Q 2019 vs 2Q 2019 Flat-rolled $ Millions Commercial: The unfavorable impact is primarily the result of lower average realized prices partially offset by the seasonal impact from $48 higher third party pellet sales. $28 Raw Materials: The favorable impact is pri
Slide 27: Total Corporation Adjusted EBITDA Bridges
Total Corporation Adjusted EBITDA Bridges 2Q 2018 vs 2Q 2019 $ Millions 2Q 2018 vs 2Q 2019 $ Millions ($86) $2 ($72) $29 ($41) $451 ($48) $451 ($123) ($7) $278 $278 2Q Commercial Raw Maintenance Other 2Q 2Q Flat- U. S. Steel Tubular Other 2Q 2018 Materials & Outage 2019 2018 rolled Europe 2019 1Q 20
Slide 28: Reconciliation of segment EBITDA
Reconciliation of segment EBITDA Segment EBITDA – Flat-rolled 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 ($ millions) Segment earnings before interest and income taxes $224 $305 $328 $95 $134 Depreciation 92 87 98 104 110 Flat-rolled Segment EBITDA $316 $392 $426 $199 $244 Segment EBITDA – U. S. Steel
Slide 29: Reconciliation of net debt
Reconciliation of net debt Net Debt YE YE YE YE 1H ($ millions) 2015 2016 2017 2018 2019 Short-term debt and current maturities of long- $45 $50 $3 $65 $70 term debt Long-term debt, less unamortized discount and 3,093 2,981 2,700 2,316 2,345 debt issuance costs Total Debt $3,138 $3,031 $2,703 $2,381
Slide 30: Cash Conversion Cycle
Cash Conversion Cycle Cash Conversion Cycle 4Q 2018 2Q 2019 $ $ millions Days millions Days Accounts Receivable, net $1,659 42 $1,638 43 + Inventories $2,092 58 $2,166 61 − Accounts Payable and Other Accrued $2,477 72 $2,565 71 Liabilities = Cash Conversion Cycle 28 33 Accounts Receivable Days is ca
Slide 31: Reconciliation of reported and adjusted net earnings
Reconciliation of reported and adjusted net earnings ($ millions) 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Reported net earnings attributable to U. S. Steel $214 $291 $592 $54 $68 December 24, 2018 Clairton coke making facility fire ─ ─ ─ 27 10 United Steelworkers labor agreement signing bonus and ─
Slide 32: Reconciliation of adjusted EBITDA
Reconciliation of adjusted EBITDA ($ millions) 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Reported net earnings attributable to U. S. Steel $214 $291 $592 $54 $68 Income tax (benefit) provision 12 23 (339) 8 (7) Net interest and other financial costs 75 59 60 49 54 Reported earnings before interest and
Slide 33: Investor Relations
INVESTOR RELATIONS Kevin Lewis General Manager 412-433-6935 klewis@uss.com Eric Linn Manager 412-433-2385 eplinn@uss.com www.ussteel.com