U.S. Steel Corp. (X) announced that it will be raising the spot market prices for its flat rolled products by $60 per ton.
The company is taking this measure to combat increasing raw material costs. As per U.S. Steel, the costs are high and inventories are low and thus it is increasing prices to raise margins.
Recently, the company released its financial results for the second quarter of 2011. The company reported second-quarter 2011 net operating profit of $1.33 per share versus a net operating loss of 17 cents in the year-ago quarter. Results also exceeded the Zacks Consensus Estimate of $1.26 per share.
Net income was $222 million in the quarter versus net loss of $25 million in the second quarter of 2010.
Revenue in the quarter improved 9.4% year over year to $5.1 billion from $4.7 billion. Results were driven primarily by higher average realized prices and stable raw materials costs in Flat-rolled segment. However, results were below the Zacks Consensus Estimate of $5.5 billion.
Shipments totaled 5.5 million tons, down 6.5% year over year, primarily due to weaker demand in Europe that caused a 21% drop in shipments.
U.S. Steel expects Flat-rolled to decline sequentially in the third quarter of 2011, reflecting lower average realized prices on monthly index-based contracts and spot market business as increasing capacity and imports have exerted pressure on current transaction prices.
Raw materials costs are expected to remain relatively stable, reflecting iron ore, coke and coal positions. Shipments and raw steel utilization are expected to be in line with the second quarter.
U.S. Steel expects European segment in the third quarter to be in line with the second quarter of 2011. Overall average realized prices are expected to decline, while seasonal effects are anticipated to result in increased demand late in the quarter. Raw materials costs are expected to be in line with the second quarter.
Tubular third-quarter results for 2011 are expected to improve significantly sequentially, driven by both increased shipments and improved average realized prices. Demand for energy-related tubular products is projected to increase during the third quarter, primarily due to the continued strength of horizontal and oil-directed drilling. In addition, substrate costs, in the form of hot-rolled bands supplied by Flat-rolled segment, are expected to be lower throughout the quarter.
U.S. Steel is an integrated steel producer of flat-rolled and tubular products with major production taking place in North America and Europe. It is currently the tenth largest steel producer in the world with an annual raw steel production capability of 31.7 million tons. It competes with international steel giants like ArcelorMittal (MT), BaoSteel, Posco (PKX), Nippon Steel and ThyssenKrupp.
We maintain our Neutral recommendation on United States Steel with its quantitative Zacks # 4 Rank (short-term ‘Sell’ rating).
ARCELOR MITTAL (MT): Free Stock Analysis Report
POSCO-ADR (PKX): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment