United States Steel Corporation · NYSE:X
United States Steel — Q1 2018 Earnings Presentation
46 slides from United States Steel's earnings presentation, Apr 26, 2018
Slide 1: First Quarter 2018 Earnings Presentation & Remarks
United States Steel Corporation United States Steel Corporation First Quarter 2018 Earnings Presentation & Remarks April 26, 2018
Slide 2: Slide 2
Slide 3: Forward-looking Statements
United States Steel Corporation 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 first quarter of 2018. They should be read in conjunction
Slide 4: Explanation of Use of Non-GAAP Measures
United States Steel Corporation 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
Slide 5: First Quarter 2018 Financial Highlights
United States Steel Corporation First Quarter 2018 Financial Highlights First quarter net earnings of $18 million EBITDA increased for all three reportable segments in 1Q 2018 as compared with 1Q 2017 Net debt of $1.5 billion Adjusted first quarter EBITDA of $255 million Note: For reconcilia
Slide 6: Remarks: positive momentum continued into 2018
The positive momentum we built in the last three quarters of 2017 continued into 2018 as our first quarter results for all three of our segments were in line with our expectations and represent significant improvements compared to the first quarter of 2017. In the first quarter, we continued executi
Slide 7: First Quarter Segment Results
United States Steel Corporation First Quarter Segment Results Adjusted EBITDA $ Millions $11 +1,018% 1Q 2018 $123 1Q 2017 Flat-rolled Adjusted EBITDA Bridge 1Q 2017 vs. 1Q 2018 ($ Millions) $32 $123 $11 ($52) $6 Other Maintenance & Outage Raw Materials Commercial 1Q 2017 $126 1Q 2018 Earnings (Loss)
Slide 8: Segment Adjusted EBITDA Bridge Commentary
Flat-Rolled 1Q 2017 vs. 1Q 2018 Adjusted EBITDA Bridge: Commercial – The favorable impact is primarily the result of higher average realized prices and increased shipments of substrate to our Tubular segment. Raw Materials – The unfavorable impact is primarily the result of higher raw material costs
Slide 9: 2018 2Q and Full Year Guidance
United States Steel Corporation 2018 2Q and Full Year Guidance Guidance: • 2Q 2018 Adjusted EBITDA of approximately $400 million • Full Year 2018 Adjusted EBITDA of approximately $1.7 - $1.8 billion Note: For reconciliation of non-GAAP amounts see Appendix
Slide 10: Remarks: second year of asset revitalization program
We are beginning the second year of our asset revitalization program and we are already seeing benefits from the investments in our assets. It is prudent for us to anticipate the possibility of continued operational volatility for those assets yet to be revitalized. We remain focused on managing ope
Slide 11: Financial Flexibility
United States Steel Corporation Financial Flexibility Strong cash and liquidity positions Cash from Operations1 $ Millions Total Estimated Liquidity $ Millions Cash and Cash Equivalents $ Millions ($99) $825 $754 $360 ($135) 1Q 2017 +$465 1Q 2018 YE 2017 YE 2016 YE 2015 +$36 Net Debt $ Millions $1,3
Slide 12: Remarks: cash flow, liquidity and net debt
Net cash used by operating activities was $99 million in the first quarter, primarily due to increased investment in working capital. Cash flow from operations in 1Q 2018 was $36 million better than 1Q 2017. Total liquidity, while slightly below the very strong year end 2017 level, primarily due to
Slide 13: Reducing Risk
United States Steel Corporation Reducing Risk 1Pro forma to reflect April 12, 2018 repayment of remaining balance of Secured Notes due 2021 Improving our debt maturity profile to support execution of our strategy Liquidity and Debt Maturity Profile Cash and Liquidity $2,873M1 $1,807 $1,066 2027+ $52
Slide 14: Remarks: liquidity and debt maturity profile
Financial Flexibility This chart shows how our liquidity position and debt maturity profile have improved since mid-year 2016. We accessed the debt and equity capital markets four times since May of 2016 to enhance liquidity and address near-term financing risks. In May 2016, we issued $980 million
Slide 15: 2018 Strategy Execution Progress
United States Steel Corporation 2018 Strategy Execution Progress Strong emphasis on our thirteen most critical assets Operational and commercial benefits by 2020 - Increase raw steel production capability by approximately 1 million tons - $275 - $325 million annual EBITDA improvement expected by
Slide 16: Remarks: asset revitalization progress and portfolio optimization
We continue to make good progress on our asset revitalization program and remain focused on achieving the quality and reliability improvements we committed to for 2018. Our goal is to deliver consistent, reliable earnings longer term with our focus on delivering sustainable operational improvements
Slide 17: Flat-Rolled Segment Asset Revitalization Program
United States Steel Corporation Focusing on operations 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 projec
Slide 18: Remarks: Flat-Rolled asset revitalization program
Our Flat-Rolled segment asset revitalization program is a comprehensive investment plan with a 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 program is desig
Slide 19: Projected Capital Spending by Production Process
United States Steel Corporation Flat-Rolled Segment asset revitalization program 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 ▪
Slide 20: Remarks: program size and critical assets
The total size of the program is $2 billion, with the projected split between capital and expense being $1.5 billion capital and $500 million expense. We currently expect 2018 total Flat-Rolled segment maintenance and outage expense, which include expenses related to the asset revitalization program
Slide 21: Asset Revitalization Performance Scorecard
United States Steel Corporation Flat-Rolled Segment asset revitalization program Performance Scorecard: All 2017 Targets Achieved Quality % Improvement vs. 2016 Base Reliability (including Unplanned Maintenance Downtime) % Improvement vs. 2016 Base Capital Spending $ Millions EBITDA improvement $ Mi
Slide 22: Remarks: performance scorecard and 2020 benefits
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 measure the success of the program. We made good progress in 2
Slide 23: Business Update: Operating updates
United States Steel Corporation Business Update Operating updates Iron ore mining facilities Flat-Rolled steel making facilities Flat-Rolled finishing facilities U. S. Steel Europe Tubular facilities
Slide 24: Remarks: Flat-Rolled operating update
Flat-rolled At our 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 sales, whil
Slide 25: A Principled Company Committed to Our Core Beliefs
United States Steel Corporation A Principled Company Committed to Our Core Beliefs Benchmarking critical safety activities Development of enhanced Safety Management System Initiation of new safety communication methods Enhanced contractor safety processes Committed to effective environment
Slide 26: Safety and Environmental Stewardship
Safety 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 • 2018 Recordable
Slide 27: Trade Update
United States Steel Corporation Trade Update Seeking a level playing field • Current Administration focused on fair trade. • Strongly support the President’s Section 232 action to defend our national security by ensuring the long-term viability of the domestic steel industry. A reduction in imports,
Slide 28: Remarks: Section 232 and trade enforcement
We are encouraged by the Trump Administration’s actions to address the threat to the U.S. manufacturing base, our economic competitiveness and our national security from unfairly traded steel imports and global excess capacity. We strongly support the Section 232 action. A reduction in steel imports
Slide 29: Appendix
United States Steel Corporation © 2011 United States Steel Corporation Appendix
Slide 30: Other Items: Capital Spending, DD&A, Pension Costs
United States Steel Corporation Capital Spending 2017 actual: $505 million 2018 estimate: $900 million Depreciation, Depletion and Amortization 2017 actual: $501 million 2018 estimate: $495 million Pension and Other Benefits Costs 2017 actual: $187 million 2018 estimate: $195 million Pension and Oth
Slide 31: Flat-Rolled Segment Major End Markets Summary
United States Steel Corporation Flat-Rolled Segment Major end markets summary Sources: Wards / AHAM / Customer Reports / AISI / US Census Bureau / Platts-FWDodge / Dept of Commerce / AIA / MSCI Automotive March vehicle sales surprise to the upside with a 17.4 million sales SAAR; trucks continue to o
Slide 32: U. S. Steel Europe Segment Major End Markets Summary
United States Steel Corporation U. S. Steel Europe Segment Major end markets summary Sources: Eurofer, USSK Marketing, IHS, Eurometal, Euroconstruct Automotive EU Light Vehicle Car (car) production reached 5.1 million units in 1Q 2018, an increase of 0.3% y-o-y. EU car production is projected to gro
Slide 33: Tubular Segment Market Industry Summary
United States Steel Corporation Tubular Segment Market industry summary Sources: Baker Hughes, US Energy Information Administration, Preston Publishing, Internal Oil Rig Count The oil rig count averaged 780 during 1Q, an increase of 5% quarter over quarter (q-o-q). As of April 13, 2018, there were 8
Slide 34: U. S. Steel Commercial: Contract vs. Spot
United States Steel Corporation U. S. Steel Commercial – Contract vs. Spot Contract vs. spot mix – twelve months ended March 31, 2018 Flat-Rolled Contract: 78% Spot: 22% 9% 22% 30% 1% 22% 16% Market Based Semi Annual* Market Based Monthly* Market Based Quarterly* Spot Cost Based Firm Tubular Program
Slide 35: Fourth Quarter 2017 vs. First Quarter 2018 EBITDA Bridges
United States Steel Corporation Fourth Quarter 2017 vs. First Quarter 2018 Flat-Rolled segment EBITDA Bridge 4Q 2017 vs. 1Q 2018 ($ Millions) $63 $123 $182 Commercial 4Q 2017 ($99) Other 1Q 2018 Maintenance & Outage Raw Materials ($7) ($16) Commercial change primarily due to higher average realized
Slide 36: Total Corporation Adjusted EBITDA Bridge 1Q 2017 vs. 1Q 2018
United States Steel Corporation $204 $255 $48 $17 $92 Commercial ($106) Other 1Q 2018 Raw Materials 1Q 2017 Maintenance & Outage $112 $255 $28 $24 $92 ($1) Flat-Rolled Other Businesses 1Q 2017 U. S. Steel Europe Tubular 1Q 2018 Total Corporation Adjusted EBITDA Bridge 1Q 2017 vs. 1Q 2018 ($ Millions
Slide 37: Asset Revitalization Program Project Update
United States Steel Corporation Flat-Rolled Segment asset revitalization program Project update HSM = Hot Strip Mill BOP = Basic Oxygen Process BF = Blast Furnace Production Process Completed Project Future Project Iron Making • Gary Works BF Recycle Cooling Tower Replacement • $9 million investment
Slide 38: Pension Expense and Funded Status
United States Steel Corporation Expense and funded status Participants by Type of Plan Type of Plan 12/31/2003 12/31/2016 12/31/2017 Defined Benefit 15,574 4,710 4,220 Multiemployer 6,043 9,730 9,306 Defined Contribution 1,627 3,535 3,651 Total 23,244 17,975 17,177 Pension – Benefit Obligations $ Bi
Slide 39: OPEB Expense and Funded Status
United States Steel Corporation OPEB Expense and funded status OPEB – Expense $ Millions OPEB – Benefit Obligations $ Billions OPEB – Service Cost $ Millions OPEB – Underfunded Status $ Billions $17 $20$21 $22 $27$28 2017 2016 2015 2014 2013 2012 $78 -$4 -$40 -$25 $55 $100 $60 2018E 2017 2016 2015 2
Slide 40: Reconciliation of Segment EBITDA
United States Steel Corporation Reconciliation of segment EBITDA Segment EBITDA – Flat-Rolled ($ millions) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Segment earnings (loss) before interest and income taxes ($88) $220 $161 $93 $33 Depreciation 99 81 83 89 90 Segment EBITDA $11 $301 $244 $182 $123 Segme
Slide 41: Reconciliation to Consolidated 2Q and Full Year EBITDA in Guidance
United States Steel Corporation Reconciliation to Consolidated 2Q and Full Year EBITDA Included in Guidance ($ millions) 2Q 2018 FY 2018 Projected net earnings attributable to United States Steel Corporation included in Guidance $190 $855 $955 Estimated income tax expense 20 40 40 Estimated net inte
Slide 42: Reconciliation of Net Debt
United States Steel Corporation Reconciliation of net debt Net Debt ($ millions) YE 2015 YE 2016 YE 2017 1Q 2017 1Q 2018 Short-term debt and current maturities of long- term debt $45 $50 $3 $281 $281 Long-term debt, less unamortized discount and debt issuance costs 3,093 2,981 2,700 2,752 2,571 Tota
Slide 43: Reconciliation of Cash Conversion Cycle
United States Steel Corporation Reconciliation of cash conversion cycle Cash Conversion Cycle 4Q 2017 1Q 2018 $ millions Days $ millions Days Accounts Receivable, net $1,379 43 $1,566 42 + Inventories $1,738 58 $1,824 57 − Accounts Payable and Other Accrued Liabilities $2,163 71 $2,164 69 = Cash Con
Slide 44: Reconciliation of Reported and Adjusted Net Earnings (Loss)
United States Steel Corporation Reconciliation of reported and adjusted net earnings (loss) ($ millions) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Reported net (loss) earnings attributable to U. S. Steel ($180) $261 $147 $159 $18 Gain associated with retained interest in U. S. Steel Canada Inc. ─ (72)
Slide 45: Reconciliation of Reported and Adjusted Diluted EPS (LPS)
United States Steel Corporation Reconciliation of reported and adjusted diluted EPS (LPS) ($ per share) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Reported diluted EPS (LPS) ($1.03) $1.48 $0.83 $0.90 $0.10 Gain associated with retained interest in U. S. Steel Canada Inc. ─ (0.41) ─ ─ ─ Loss (gain) on e
Slide 46: Reconciliation of Adjusted EBITDA
United States Steel Corporation Reconciliation of adjusted EBITDA ($ millions) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Reported net earnings (loss) attributable to U. S. Steel ($180) $261 $147 $159 $18 Income tax provision (benefit) 19 (16) ─ (89) 1 Net interest and other financial costs1 81 82 113