The worldwide decline in the demand for steel sent U.S. Steel's (NYSE: X) fortunes tumbling in the first quarter of 2009. The company reported today a decline in net sales of $1.75 billion over the previous quarter and $2.4 billion over the same quarter in 2008. This resulted in a net loss of $439 million, or $3.78 per share.
The company blames weak demand for its flat-rolled steel, a drop in tube steel usage in the drilling industry as a result of declining oil prices, and "unfairly traded and subsidized tubular imports from China." The industry has benefited from trade protections in the past after claiming that foreign competitors were being subsidized.
U.S. Steel also announced a number of steps to gird itself for the downturn. The United Steelworkers Union has agreed to defer until 2012 the $95 million contribution the company was scheduled to pay into the trust fund for retirees' health care benefits. The company has shut down some factories temporarily and laid off workers.
It has restructured its outstanding $750 million credit facility and plans to offer 18 million shares of common stock and $300 million of Senior Convertible Stock in order to repay $655 million of three and five-year loans. The board also voted to lower the quarterly dividend from 30 cents to a nickel.
The sale of Elgin, Joliet and Eastern Railway Company, which netted U.S. Steel $97 million, was offset by the costs associated with the voluntary early retirement program, which 500 non-union employees accepted.
The company expects further losses in the second quarter, but less steep due to a drop in raw material costs and increased efficiencies.
CEO John P. Surma sidestepped the quagmire engulfing AIG executives by informing the board that he was declining to be considered this year for an annual incentive bonus, which brought him $6.4 million in 2008.
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