United States Steel Corporation · NYSE:X
United States Steel — Q3 2017 Earnings Presentation
55 slides from United States Steel's earnings presentation, Nov 1, 2017
Slide 1: Third Quarter 2017 Earnings Presentation
United States Steel Corporation Third Quarter 2017 Earnings Presentation October 31, 2017 © 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 2017. 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, segment EBITDA, and net debt which are all non-GAAP measures, as ad
Slide 5: 2017 Outlook
United States Steel Corporation 2017 Outlook If market conditions remain at their current levels, we expect: • 2017 net earnings of approximately $323 million, or $1.83 per share, 2017 adjusted net earnings of approximately $300 million, or $1.70 per share, and consolidated adjusted EBITDA of appro
Slide 6: Focus on operations, revitalizing assets, developing talent
6 We remain focused on our operations, revitalizing our assets, and developing our talent. We are seeing operating improvements in the assets in which we are investing. This increases our confidence that we will achieve the 2020 improvement targets we have disclosed. We believe the attention to our
Slide 7: Flat-Rolled Segment asset revitalization program
Flat-Rolled Segment asset revitalization program A comprehensive program to: • Improve our profitability and competitiveness • Meet the increasing expectations of our customers A structured and flexible program: • Smaller and less complex projects to reduce execution risk • Adaptable to changing bus
Slide 8: Asset revitalization program is a comprehensive investment plan
Our Flat-Rolled segment asset revitalization program is a comprehensive investment plan with a continuous focus on improving safety, quality, delivery, and cost. As we revitalize our assets, we expect to increase profitability, productivity, operational consistency, and reduce volatility. This progr
Slide 9: Projected capital spending by production process
Blast furnace BOP, QBOP & slab caster Hot strip mill Cold mill & finishing unit Steel Making Hot Rolling Finishing Iron Making ▪ Converting raw materials to liquid iron ▪ Converting liquid iron to liquid steel ▪ Converting liquid steel to steel slabs ▪ Converting slabs to hot rolled coils ▪ Pickling
Slide 10: Asset revitalization capital spending of approximately $1.2 billion
10 We currently expect capital spending for our asset revitalization program to be approximately $1.2 billion from 2017 through 2020. We are investing in our assets throughout the entire production process, with targeted improvements in operating efficiency, unplanned downtime, reliability, quality,
Slide 11: Project update
Project update United States Steel Corporation Production Process Completed Project Future Project Iron Making • Great Lakes D4 BF Cooling Water Piping & Instrumentation • $2 million invested • Completed in 3Q 2017 • Improves reliability and operational control • Gary Works #6 BF Outage • $26 millio
Slide 12: Completed projects and additional projects planned
12 We have completed numerous projects so far this year, started hundreds more, and are in the planning and development stage for additional projects for 2018. A selection of completed projects are below: Iron Making - Great Lakes D4 BF Cooling Water Piping & Instrumentation • Extensive repairs and
Slide 13: Performance Scorecard
Quality % Improvement vs. 2016 Base Reliability (including Unplanned Maintenance Downtime) % Improvement vs. 2016 Base United States Steel Corporation Capital Spending $ Millions Performance Scorecard EBITDA improvement $ Millions $275-$325 M 2020 Target 2017 Target $1,200 M 2020 Target 2017 Target
Slide 14: Performance scorecard metrics and targets
14 We have developed a performance scorecard that includes two financial and two non-financial metrics for tracking our progress on implementing our Flat-Rolled Segment asset revitalization program. We believe these metrics will effectively demonstrate how successfully we are implementing the progra
Slide 15: Annual maintenance and outage expense, Flat-Rolled
YTD 2017 Actual FY 2017 Forecast $1,325 FY 2016 Actual $972 $950 FY 2015 Actual $964 $ Millions Annual maintenance and outage expense Flat-Rolled Segment United States Steel Corporation Note: YTD 2017 is nine months ended 9/30/2017
Slide 16: Flat-Rolled maintenance and outage expense outlook
16 We currently expect total maintenance and outage expense for our Flat-Rolled Segment to be approximately $1.325 billion in 2017. This amount includes all normal maintenance and outage expense as well as maintenance and outage expense related to our asset revitalization program, and is a $375 mill
Slide 17: Business Update: Operating updates
United States Steel Corporation Business Update Iron ore mining facilities Steel making facilities Flat-Rolled finishing facilities Tubular facilities U. S. Steel Europe Operating updates
Slide 18: Flat-Rolled facilities operating status
At our Flat-Rolled segment iron ore mining operations, we are operating both our Minntac and Keetac facilities. Our Keetac facility successfully resumed pellet production on February 24, 2017 after having been idled for nearly two years. The restart of Keetac helps support our third party pellet sal
Slide 19: Global Safety Performance
Global OSHA Recordables Frequency of Injuries (per 200,000 manhours) Total Severity Performance Frequency of Days Lost/Restricted (per 200,000 manhours) Global Safety Performance United States Steel Corporation Days Away From Work Frequency of Injuries (per 200,000 manhours) 0.73 1.02 0.97 0.88 0.94
Slide 20: Zero harm culture and safety benchmarks
20 Our objective is to attain a sustainable zero harm culture supported by leadership and owned by an engaged and highly skilled workforce, empowered with the capabilities and resources needed to assess, reduce, and eliminate workplace risks and hazards. Global OSHA Recordables • 2017 Recordable Rat
Slide 21: Financial Flexibility
Cash from Operations $ Millions Total Estimated Liquidity $ Millions Financial Flexibility United States Steel Corporation Cash and Cash Equivalents $ Millions $541 $580 $299 $267 3Q 2017 3Q 2016 YTD 2016 YTD 2017 Net Debt $ Millions $1,694 $1,515 $755 $1,354 YE 2015 YE 2016 3Q 2017 YE 2014 Strong c
Slide 22: Cash from operations and liquidity
Net cash provided by operating activities was $299 million in the third quarter compared to net cash provided by operating activities of $267 million in the same period last year. The change is primarily due to improved financial results. The quarter end cash balance was approximately $1.7 billion,
Slide 23: Third Quarter 2017 Results
Segment Earnings (Loss) Before Interest and Income Taxes $ Millions Adjusted EBITDA $ Millions Note: For reconciliation of non-GAAP amounts see Appendix Third Quarter 2017 Results United States Steel Corporation Adjusted Net Earnings (Loss) $ Millions Results continue to reflect higher selling price
Slide 24: Nine month 2017 results improved over 2016
24 Our results for the first nine months of 2017 improved over the first nine months of 2016. All three of our segments improved compared to the first nine months of 2016. Third quarter and nine month 2017 results include favorable impacts of $95 million and $205 million, respectively, related to ou
Slide 25: Flat-Rolled EBITDA Bridge
Earnings (Loss) Before Interest and Income Taxes $ Millions Flat-Rolled EBITDA Bridge 3Q 2016 vs. 3Q 2017 ($ Millions) Third Quarter 2017 Flat-Rolled Segment United States Steel Corporation EBITDA $ Millions Note: For reconciliation of non-GAAP amounts see Appendix $288 ($68) $160 $114 YTD 2017 YTD
Slide 26: Flat-Rolled segment results commentary
26 Results for our Flat-Rolled segment improved for the three and nine months ended September 30, 2017 compared with the same periods in 2016 primarily due to higher average realized selling prices and increased third party pellet sales, partially offset by higher raw material costs and increased ma
Slide 27: U. S. Steel Europe EBITDA Bridge
Earnings (Loss) Before Interest and Income Taxes $ Millions U. S. Steel Europe EBITDA Bridge 3Q 2016 vs. 3Q 2017 ($ Millions) Third Quarter 2017 U. S. Steel Europe Segment United States Steel Corporation EBITDA $ Millions Note: For reconciliation of non-GAAP amounts see Appendix $215 $122 $73 $81 YT
Slide 28: U. S. Steel Europe results commentary
28 Third quarter results for our European segment declined compared with the third quarter of 2016 primarily due to higher raw material costs, particularly for coal and iron ore, partially offset by higher average realized euro-based prices. For the nine months ended September 30, 2017, our European
Slide 29: Tubular EBITDA Bridge
Earnings (Loss) Before Interest and Income Taxes $ Millions Tubular EBITDA Bridge 3Q 2016 vs. 3Q 2017 ($ Millions) Third Quarter 2017 Tubular Segment United States Steel Corporation EBITDA $ Millions Note: For reconciliation of non-GAAP amounts see Appendix ($93) ($217) ($7) ($75) YTD 2017 YTD 2016
Slide 30: Tubular results commentary
30 Third quarter results for our Tubular segment improved compared with the third quarter of 2016 due to higher shipment volumes and average realized selling prices, partially offset by increased substrate costs. For the nine months ended September 30, 2017, our Tubular segment improved compared wit
Slide 31: Appendix
© 2011 United States Steel Corporation Appendix United States Steel Corporation
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Slide 33: Carnegie Way Benefits
Carnegie Way 12% 55% United States Steel Corporation Carnegie Way Benefits1 – Full Year 2017 Impact $ Millions 1 Carnegie Way benefits are based on the incremental impact in 2017 as compared to 2016 as the base year. $440 $390 $50 Total 2017 benefits announced to date Additional announced today Prev
Slide 34: EBITDA per ton and average realized price by segment
Flat-Rolled Segment $ / short ton Source: Company Filings Improving Profitability EBITDA / Ton improvements greater than changes in average realized prices when compared to the quarterly average from 1Q 2009 through 3Q 2017 ($200) ($150) ($100) ($50) $0 $50 $100 $150 $400 $500 $600 $700 $800 $900 $1
Slide 35: Segment EBITDA Bridges 2Q 2017 vs. 3Q 2017
Flat-Rolled segment EBITDA Bridge 2Q 2017 vs. 3Q 2017 ($ Millions) Third Quarter 2017 United States Steel Corporation Note: For reconciliation of non-GAAP amounts see Appendix $243 $21 $299 3Q 2017 Other ($42) Maintenance & Outage ($21) Raw Materials ($14) Commercial 2Q 2017 Commercial change primar
Slide 36: Total Corporation Adjusted EBITDA Bridges
Total Corporation Adjusted EBITDA Bridge YTD 2016 vs. YTD 2017 ($ Millions) Total Corporation United States Steel Corporation Note: For reconciliation of non-GAAP amounts see Appendix $143 $778 $299 YTD 2017 Other Maintenance & Outage ($350) Raw Materials ($581) Commercial $1,267 YTD 2016 Total Corp
Slide 37: Iron Making key projects
Future Projects1 Completed Projects1 Iron Making United States Steel Corporation Key projects 1 Projects listed are examples and are not inclusive of all iron making asset revitalization investments ▪ Gary Works #6 BF Outage – $26 million / To be completed in 4Q 2017 / Improve reliability ▪ Mon Vall
Slide 38: Steel Making key projects
Steel Making United States Steel Corporation Key projects 1 Projects listed are examples and are not inclusive of all steel making asset revitalization investments Future Projects1 ▪ Mon Valley Steelmaking R Vessel Hood Replacement – $11 million / To be completed in 4Q / Increase reliability ▪ Gary
Slide 39: Hot Rolling key projects
Hot Rolling United States Steel Corporation Key projects Future Projects1 ▪ Gary Works HSM Furnace Burners – $2 million / To be completed 4Q / Improve efficiency and reduces natural gas usage ▪ Great Lakes HSM Run Table 8” Roll Cool Water Supply Replacement – <$1 million / To be completed in 4Q / Im
Slide 40: Finishing key projects
Future Projects1 Completed Projects1 Finishing United States Steel Corporation Key projects ▪ Great Lakes #1 CGL W-Tube Replacements – – $1 million / Improves throughput and quality ▪ Great Lakes CGL 1 Pass Line Shear Rebuild – <$1 million / Improves quality and reliability ▪ Gary Tin Continuous Ann
Slide 41: Major end markets summary: Flat-Rolled Segment
Major end markets summary Flat-Rolled Segment United States Steel Corporation Automotive September vehicle sales the best of 2017, with a SAAR exceeding 18.5 million. Only second time since Great Recession that sales SAAR exceeded 18 million. Year to date sales of trucks accounting for over 61% shar
Slide 42: Major end markets summary: U. S. Steel Europe Segment
Major end markets summary United States Steel Corporation U. S. Steel Europe Segment Sources: Eurofer, USSK Marketing, IHS, Eurometal, Euroconstruct Automotive EU car production reached 4.3 million units in 3Q, an increase of 3.6% y-o-y. In 4Q, EU car production is projected to grow by 6.8% y-o-y to
Slide 43: Market industry summary: Tubular Segment
Market industry summary Tubular Segment United States Steel Corporation Sources: Baker Hughes, US Energy Information Administration, Preston Publishing, Internal Oil Rig Count U.S. energy companies continued to increase drilling rates during 3Q. The oil rig count averaged 759 during 3Q, an increase
Slide 44: Other Items
United States Steel Corporation Other Items Capital Spending* 2016 actual $306 million 2017 estimate $575 million Flat-Rolled: $440 million, USSE: $85 million, Tubular: $40 million, Other: $10 million Depreciation, Depletion and Amortization* 2016 actual $507 million 2017 estimate $515 million Flat-
Slide 45: U. S. Steel Commercial: Contract vs. Spot
U. S. Steel Commercial – Contract vs. Spot Contract vs. spot mix – twelve months ended September 30, 2017 Flat-Rolled Tubular U. S. Steel Europe Contract: 81% Spot: 19% Contract: 64% Spot: 36% Program: 57% Spot: 43% United States Steel Corporation *Annual contract volume commitments with price adjus
Slide 46: Shipments by Product & Market
United States Steel Corporation Shipments by Product & Market Flat-Rolled Tubular U. S. Steel Europe 11% 9% 22% 27% 31% All Other Tin Mill Coated Cold-rolled Hot-rolled Prod u c t Ma rk e t 19% 36% 5% 4% 8% 9% 19% Transportation Steel Service Centers Further Conversion All Other Appliances & Electri
Slide 47: Pension expense and funded status
Pension Expense and funded status Participants by Type of Plan Type of Plan 12/31/2003 12/31/2016 Increase/ (Decrease) Defined Benefit 15,574 4,710 (10,864) Multiemployer 6,043 9,730 3,687 Defined Contribution 1,627 3,535 1,908 Total 23,244 17,975 (5,269) Major Assumptions: Discount rate expense: 4.
Slide 48: OPEB expense and funded status
OPEB Expense and funded status Major Assumptions: Discount rate expense: 4.50% for 2012, 3.75% for 2013, 4.50% for 2014, 3.75% for 2015, 4.25% for 2016, and 4.00% for 2017E Expected rate of return on assets: 7.75% in U.S. & 7.25% in Canada for 2012 through 2014, 7.50% in U.S. for 2015 and 2016, for
Slide 49: Reconciliation of segment EBITDA
United States Steel Corporation Reconciliation of segment EBITDA Segment EBITDA – Flat-Rolled ($ millions) 3Q 2016 2Q 2017 3Q 2017 YTD 2016 YTD 2017 Segment earnings (loss) before interest and income taxes $114 $218 $160 ($68) $288 Depreciation 87 81 83 267 263 Segment EBITDA $201 $299 $243 $199 $55
Slide 50: Reconciliation to Segment EBITDA and Consolidated Adjusted EBITDA in Outlook
United States Steel Corporation Reconciliation to Segment EBITDA and Consolidated Adjusted EBITDA Included in Outlook ($ millions) FY 2017 Projected net earnings attributable to United States Steel Corporation included in Outlook $323 Gain associated with retained interest in U. S. Steel Canada Inc.
Slide 51: Reconciliation of net debt
United States Steel Corporation Reconciliation of net debt Net Debt ($ millions) YE 2014 YE 2015 YE 2016 3Q 2017 Short-term debt and current maturities of long-term debt $378 $45 $50 $3 Long-term debt, less unamortized discount and debt issuance costs 3,086 3,093 2,981 2,896 Total Debt $3,464 $3,138
Slide 52: Reconciliation of cash conversion cycle
United States Steel Corporation Reconciliation of cash conversion cycle Cash Conversion Cycle 3Q 2017 4Q 2016 $ millions Days $ millions Days Accounts Receivable, net $1,527 42 $1,248 42 + Inventories $1,737 56 $1,573 63 − Accounts Payable and Other Accrued Liabilities $2,080 66 $1,665 62 = Cash Con
Slide 53: Reconciliation of reported and adjusted net earnings (loss)
United States Steel Corporation Reconciliation of reported and adjusted net earnings (loss) ($ millions) 3Q 2016 2Q 2017 3Q 2017 YTD 2016 YTD 2017 Reported net earnings (loss) $51 $261 $147 ($335) $228 Gain associated with retained interest in U. S. Steel Canada Inc. ─ (72) ─ ─ (72) Gain on equity i
Slide 54: Reconciliation of reported and adjusted diluted EPS (LPS)
United States Steel Corporation Reconciliation of reported and adjusted diluted EPS (LPS) ($ per share) 3Q 2016 2Q 2017 3Q 2017 YTD 2016 YTD 2017 Reported diluted EPS (LPS) $0.32 $1.48 $0.83 ($2.22) $1.29 Gain associated with retained interest in U. S. Steel Canada Inc. ─ (0.41) ─ ─ (0.41) Gain on e
Slide 55: Reconciliation of adjusted EBITDA
United States Steel Corporation Reconciliation of adjusted EBITDA ($ millions) 3Q 2016 2Q 2017 3Q 2017 YTD 2016 YTD 2017 Reported net earnings (loss) $51 $261 $147 ($335) $228 Income tax provision (benefit) 19 (16) 0 26 3 Net interest and other financial costs 62 68 98 208 229 Reported earnings (los