United States Steel Corporation · NYSE:X
United States Steel — Q3 2016 Earnings Presentation
46 slides from United States Steel's earnings presentation, Nov 2, 2016
Slide 1: Third Quarter 2016 Earnings Presentation
United States Steel Corporation Third Quarter 2016 Earnings Presentation November 1, 2016 © 2011 United States Steel Corporation
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Slide 3: Forward-looking Statements
Forward-looking Statements These slides and remarks are being provided to assist readers in understanding the results of operations, financial condition and cash flows of United States Steel Corporation for the third quarter of 2016. They should be read in conjunction with the consolidated financial
Slide 4: 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), adjusted EBITDA and net debt, which are all non-GAAP measures, as additional measure
Slide 5: 2016 Outlook
United States Steel Corporation 2016 Outlook If market conditions, which include spot prices, customer demand, import volumes, supply chain inventories, rig counts and energy prices, remain at their current levels, we expect: • 2016 net loss of approximately $355 million, or a loss of $2.26 per sha
Slide 6: Operational issues and investment for the rest of 2016
6 As we move through the rest of 2016, operational issues remain a headwind for us, as we continue to recover from unplanned outages in the third quarter, while also completing our planned maintenance outages. We have identified the critical assets that require additional capital investment and incr
Slide 7: Carnegie Way – Accumulating Benefits
Carnegie Way – Accumulating Benefits 55% 12% United States Steel Corporation Carnegie Way Benefits1 – FY 2016 Impact $ Millions 1 Carnegie Way benefits are based on the incremental impact in 2016 as compared to 2015 as the base year. $645 $705$60 Previously announced Additional announced today Total
Slide 8: Carnegie Way benefits and completed projects
8 We are increasing our capabilities and training more of our employees on our Carnegie Way methodologies to support our growing pipeline of projects and accelerate the pace of project completion, allowing for it to be more self-sustaining. The Carnegie Way methodology remains a powerful driver of n
Slide 9: Carnegie Way transformation
Carnegie Way transformation Phase 1: Earning the right to grow: • Economic profits • Customer satisfaction and loyalty • Process improvements and focused investment Phase 2: Driving profitable growth with: • Innovation and Technology • Differentiated customer solutions • Focused M&A Strategic Approa
Slide 10: The Carnegie Way transformation
10 Our sights are set firmly on our future – a future we believe is filled with many exciting opportunities. All of those opportunities are made possible by our thoughtful, disciplined approach to transforming our company through what we call The Carnegie Way. The Carnegie Way is the framework for w
Slide 11: Phase 1: Earning the right to grow
Phase 1: Earning the right to grow Revitalizing our facilities • Investing in critical assets for reliability, quality and productivity • Raw Materials • Steelmaking • Finishing Carnegie Way transformation United States Steel Corporation
Slide 12: Investing in facilities to support customers
12 Taking the next steps to support our customers' needs requires an acceleration and increase in investments in our facilities. The highly successful and well-received capital markets transactions that we completed in the second and third quarters of this year give us a very strong cash and liquidi
Slide 13: Innovation, technology and differentiated automotive solutions
Gen 3 PHS Gen 1+ Gen 1 Mild Steel Vs. Aluminum Aluminum Material Formability Fracture Resistance Corrosion Resistance Tooling Cost Piece Cost Better Worse Carnegie Way transformation Innovation, technology and differentiated automotive solutions Steel is better for customers and the environment
Slide 14: Phase 2: Driving profitable growth with customers
14 Since the formation of our Commercial Entities, we have placed a high-priority on integrating with and listening to our customers to find out what they need from us, where they are headed in terms of product development and how we can create value in helping them get there. Strong quality and del
Slide 15: Business Update
United States Steel Corporation Business Update Steelmaking facilities Flat-Rolled finishing facilities Iron ore mining facilities Tubular facilities U. S. Steel Europe Operating updates
Slide 16: Operating configuration updates
16 There were no significant changes to our operating configuration in the third quarter from the standpoint of idling or restarting facilities, but we experienced unplanned outages at several of our steelmaking and finishing facilities that adversely impacted shipments from our Flat-Rolled faciliti
Slide 17: Market conditions by segment
United States Steel Corporation Flat-Rolled YTD auto sales remain slightly ahead of 2015 levels, up 0.3% Appliance unit shipments up 4% YTD through September according to the Association of Home Appliance Manufacturers (AHAM6) The Architectural Billing Index (construction leading indicator) posted t
Slide 18: Market assessment
18 We constantly monitor trends in the markets we serve, and receive updates in those markets directly from our customers as well as external publications. Based on this information our assessment of our markets is: • The automotive market continues to be a very good market for us and we expect slig
Slide 19: Third Quarter 2016 Results
Segment Earnings (Loss) Before Interest and Income Taxes $ Millions Adjusted EBITDA $ Millions 2Q 2016 4Q 2015 3Q 2015 3Q 2015 4Q 2015 1Q 2016 Note: For reconciliation of non-GAAP amounts see Appendix 4Q 2015 3Q 2015 1Q 2016 Third Quarter 2016 Results United States Steel Corporation Adjusted Net Ear
Slide 20: Third quarter net earnings and segment results
20 We reported net earnings of $51 million, or $0.32 per diluted share, for the third quarter. We reported operating income for the third quarter of $138 million at the segment level, our highest quarterly segment results since 2014. EBITDA, adjusted to exclude an unfavorable adjustment of $14 milli
Slide 21: Cash and Liquidity
Cash from Operations $ Millions 2Q 2016 1Q 2016 4Q 2015 LTM 3Q 2016 Total Estimated Liquidity $ Millions YE 2015 YE 2014 YE 2013 3Q 2016 Cash and Liquidity United States Steel Corporation Cash and Cash Equivalents $ Millions Net Debt $ Millions YE 2013 YE 2014 YE 2015 3Q 2016 YE 2013 YE 2014 YE 2015
Slide 22: Cash, liquidity and net debt
22 We ended the third quarter with $1.4 billion of cash and total liquidity of $3.1 billion. We generated cash from operations of $264 million in the third quarter. We generated cash from operations of $577 million for the first nine months of the year, and have reduced working capital by $491 milli
Slide 23: Flat-Rolled Segment
Earnings (Loss) Before Interest and Income Taxes $ Millions Average Realized Prices $ / Ton 3Q 2015 4Q 2015 1Q 2016 Third Quarter 2016 Flat-Rolled Segment 3Q 2015 4Q 2015 1Q 2016 Shipments Net tons (Thousands) 3Q 2015 4Q 2015 2Q 2016 United States Steel Corporation EBITDA $ Millions 3Q 2015 4Q 2015
Slide 24: Flat-Rolled segment commentary
24 Third quarter results for our Flat-Rolled segment improved from the second quarter as both spot and contract prices increased, and benefits from an improving product mix and our Carnegie Way initiatives continued to grow. Operational issues adversely impacted shipments from our Flat-Rolled facili
Slide 25: Tubular Segment
Loss Before Interest and Income Taxes $ Millions Average Realized Prices $ / Ton 3Q 2015 4Q 2015 1Q 2016 Third Quarter 2016 Tubular Segment 3Q 2015 4Q 2015 1Q 2016 Shipments Net tons (Thousands) 3Q 2015 4Q 2015 1Q 2016 United States Steel Corporation EBITDA $ Millions 3Q 2015 4Q 2015 1Q 2016 2Q 2016
Slide 26: Tubular segment commentary
26 Third quarter results for our Tubular segment increased compared to the second quarter, but continue to reflect the challenges of operating at very low utilization rates in a low price environment. The decrease in Tubular results for the third quarter of 2016 compared to the third quarter 2015 wa
Slide 27: U. S. Steel Europe Segment
Earnings (Loss) Before Interest and Income Taxes $ Millions Average Realized Prices $ / Ton 3Q 2015 4Q 2015 1Q 2016 Third Quarter 2016 U. S. Steel Europe Segment 3Q 2015 4Q 2015 1Q 2016 Shipments Net tons (Thousands) 3Q 2015 4Q 2015 1Q 2016 United States Steel Corporation EBITDA $ Millions 3Q 2015 4
Slide 28: European segment commentary
28 Third quarter results for our European segment increased compared to the second quarter due to higher average realized euro-based prices, partially offset by higher iron ore costs. The ongoing benefits of our Carnegie Way efforts continue to drive improved operating margins. The increase in USSE
Slide 29: Flat-Rolled Segment average realized prices and profitability
Source: Company Filings Flat-Rolled Segment Average realized prices near post-financial crisis average with increased profitability Flat-Rolled Segment $ / short ton
Slide 30: Flat-Rolled earnings power
30 The Flat-Rolled segment chart above highlights our improving earnings power despite lower average realized prices. The decisions we have made to exit unprofitable businesses, aggressively address our cost structure, optimize our facility footprint for current market conditions, and generally addr
Slide 31: Carnegie Way Transformation Improving Earnings Power
Carnegie Way Transformation Improving Earnings Power United States Steel Corporation First 9 months 2016 vs. first 9 months 2015 Flat-Rolled EBITDA $ Millions $55/ton ̶ Carnegie Way Benefits Flat-Rolled $ Millions 2015 YTD EBITDA Commercial Cost & Other Income Carnegie Way 2016 YTD EBITDA Note: For
Slide 32: EBITDA bridge commentary
32 Steel prices rebounded sharply in the first half of 2016. Prices increased nearly 70% to their peak prices in June 2016. The market, however, was coming off of unsustainably low prices that were being distorted by a combination of heavy volumes of unfairly traded imports, falling scrap prices, an
Slide 33: Appendix
© 2011 United States Steel Corporation Appendix United States Steel Corporation
Slide 34: Major end-markets summary: Flat-Rolled
Major end-markets summary Flat-Rolled Segment United States Steel Corporation Automotive September sales rebound from a lower than expected August, increasing by a SAAR of 740,000 units. Vehicle inventory increased by 3 days to 65 days supply on October 1. Year-to-date (YTD) sales remain slightly ah
Slide 35: Market industry summary: Tubular
Market industry summary Tubular Segment United States Steel Corporation Sources: Baker Hughes, US Energy Information Administration, Preston Publishing, Internal Oil Directed Rig Count Higher oil prices led to U.S. energy companies putting more rigs back to work during the third quarter. The oil dir
Slide 36: Major end-markets summary: U. S. Steel Europe
Major end-markets summary United States Steel Corporation U. S. Steel Europe Segment Sources: Eurofer, USSK Marketing, IHS, BDS Automotive EU car production reached 4.1 million units in 3Q, a decrease of 2.5% y-o-y. EU car production is projected to grow by 2.3% y-o-y in 4Q to 4.6 million units. Tot
Slide 37: U. S. Steel Commercial – Contract vs. Spot
U. S. Steel Commercial – Contract vs. Spot Contract vs. spot mix – twelve months ended September 30, 2016 Firm 28% Market Based Quarterly * 22% Flat-Rolled Market Based Monthly * 14% Tubular U. S. Steel Europe Spot 25% Cost Based 10% Contract: 75% Spot: 25% Firm 41% Market Based Quarterly* 2% Spot 3
Slide 38: Other Items
United States Steel Corporation Other Items Capital Spending Third quarter actual $51 million, 2016 estimate $350 million Depreciation, Depletion and Amortization Third quarter actual $126 million, 2016 estimate $505 million Pension and Other Benefits Costs Third quarter actual $32 million, 2016 est
Slide 39: Safety Performance Rates
Safety Performance Rates Global OSHA Recordable Incidence Rates 2010 through September 2016 United States Steel Corporation Frequency of Injuries (per 200,000 manhours) Data for 2010 forward includes Lone Star Tubular Operations, Bellville Tubular Operations, Rig Site Services, Tubular Processing Ho
Slide 40: Carnegie Way Transformation Improving Earnings Power by segment
Flat-Rolled $ Millions Tubular $ Millions Note: For reconciliation of non-GAAP amounts see Appendix Carnegie Way Transformation Improving Earnings Power United States Steel Corporation 2015 YTD EBITDA Commercial Costs & Other Income 2016 YTD EBITDA 2015 YTD EBITDA Commercial Costs & Other Income 201
Slide 41: Net Earnings and Adjusted EBITDA included in Outlook
United States Steel Corporation Net Earnings and Adjusted EBITDA included in Outlook Reconciliation of Net Earnings to adjusted EBITDA Included in Outlook ($ millions) FY 2016 Projected net loss attributable to United States Steel Corporation included in Outlook ($355) Estimated income tax expense 4
Slide 42: Net Debt
United States Steel Corporation Net Debt Net Debt ($ millions) 3Q 2016 YE 2015 YE 2014 YE 2013 Short-term debt and current maturities of long-term debt $92 $45 $378 $323 Long-term debt, less unamortized discount 2,988 3,093 3,086 3,576 Total Debt $3,080 $3,138 $3,464 $3,899 Less: Cash and cash equiv
Slide 43: Adjusted Results ($ millions)
United States Steel Corporation Adjusted Results ($ millions) 3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015 Reported net earnings (loss) $51 ($46) ($340) ($1,133) ($173) Supplemental unemployment and severance costs and other charges ─ (23) 25 ─ 7 Loss on shutdown of Fairfield Works Flat-Rolled Operations
Slide 44: Adjusted Results ($ per share)
United States Steel Corporation Adjusted Results ($ per share) 3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015 Reported diluted EPS (LPS) $0.32 ($0.32) ($2.32) ($7.74) ($1.18) Supplemental unemployment and severance costs and other charges ─ (0.16) 0.17 ─ 0.05 Loss on shutdown of Fairfield Works Flat-Rolled
Slide 45: Adjusted EBITDA reconciliation
United States Steel Corporation Adjusted Results ($ millions) 3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015 Reported net earnings (loss) $51 ($46) ($340) ($1,133) ($173) Income tax provision (benefit) 19 (7) 14 593 (50) Net interest and other financial costs 62 81 65 87 53 Reported earnings (loss) before
Slide 46: Segment EBITDA reconciliation
United States Steel Corporation Adjusted Results Segment EBITDA – Flat-Rolled ($ millions) 3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015 2Q 2015 1Q 2015 Segment earnings (loss) before interest and income taxes $114 $6 ($188) ($88) ($18) ($64) ($67) Depreciation 87 89 91 $90 99 99 104 Segment EBITDA $201 $