U.S. steelmakers reported better-than-expected third-quarter results on Tuesday but they restated their gloomy short-term views for the industry and the economy and their shares fell.
U.S. Steel Corp posted a narrower third-quarter loss than Wall Street expected and AK Steel reported a profit as both steelmakers saw a pickup in shipments that had slumped in the past year.
But U.S. Steel said it was still cautious about demand, especially for flat-rolled steel from U.S. automakers following the expiration of Detroit's Cash for Clunkers program and expects to report a fourth-quarter operating loss and idle two blast furnaces to lower production.
AK Steel said that while it expects to post an operating profit in the fourth quarter, it anticipates a decline in average selling prices.
Both companies' stock fell in early trading on the New York Stock Exchange. U.S. Steel was down 4.4 percent at $38.78 and AK Steel was down 5.5 percent at $17.76. The Dow Jones Steel Index .DJUSST fell 3.16 percent.
The results came a day before the world's biggest steelmaker, ArcelorMittal is expected to report its fourth quarterly loss in a row.
U.S. Steel did better than expected, especially in its shipments. That shows orders came back, not necessarily demand, said analyst Charles Bradford, of Affiliated Research Group.
Last week, Nucor Corp posted a third consecutive quarterly loss and gave a negative outlook for any short-term improvement and Steel Dynamics Inc said it expected a sequential drop in fourth-quarter production and shipments, saying weakness in the construction market and falling scrap prices may continue till the end of the year.
BY THE NUMBERS
U.S. Steel's third-quarter net loss was $303 million, or $2.11 per share, compared with a year-earlier profit of $919 million, or $7.79 per share. Revenue dropped 61 percent to $2.82 billion, but was 32 percent higher than in the second quarter, the Pittsburgh-based company said.
Excluding a one-time currency gain, the loss was $2.43 per share versus analysts' average forecast of a loss of $2.87 and revenue of $2.72 billion, said Thomson Reuters I/B/E/S.
We expect improvement in our overall fourth-quarter results mainly as a result of increased demand for flat-rolled products in North America, driven primarily by automotive markets, said Chairman and Chief Executive John Surma.
However, we expect to report an overall operating loss in the fourth quarter due primarily to continued low operating rates and idled facility carrying costs for our flat-rolled and tubular segments.
He said the company was cautious in outlook for end-user demand as customer order rates in flat-rolled and U.S. Steel Europe have decreased from the third quarter, partly due to seasonal slowdowns.
We will continue to adjust production to meet our customers' demand, said Surma, adding that U.S. Steel would idle its No. 14 blast furnace at its Gary, Indiana, mill for repairs, as well as one furnace at its Granite City Works.
AK Steel's third-quarter net earnings were $6.2 million, or 6 cents per share, compared with earnings of $188.3 million, or $1.67 per share, in the same quarter last year.
Revenue fell more than half to $1.04 billion, the West Chester, Ohio-based company reported. Analysts on average were expected a profit of 1 cent per share.
(Reporting by Steve James; editing by Patrick Fitzgibbons, Dave Zimmerman)