U.S. Steel’s Q2 2016 Earnings Review: Cost Reduction Initiatives Boost Results Amid Weakness In Steel Prices

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United States Steel

U.S. Steel reported much improved Q2 2016 results with its adjusted net loss narrowing considerably year-over-year. The improved results are largely due to the company’s ongoing initiative (‘The Carnegie Way’) to rationalize costs and boost the efficiency of its operations. Projects under ‘The Carnegie Way’ initiative are expected to translate into margin improvement to the tune of $645 million in 2016. Though U.S. Steel’s realized steel prices for its U.S. Flat-rolled operations have improved considerably sequentially, partly as a result of regulatory intervention in the form of the imposition of antidumping duties on imported steels, prices are still lower on a year-over-year basis. Moreover, weak demand conditions in Europe still weigh on the realized prices of the U.S. Steel Europe division. Furthermore, a decline in oil and gas drilling activity (as a result of a decline in crude oil prices) has dampened the demand for tubular steels and the U.S. Tubular division’s business prospects.

U.S. Steel's Q2 2016 Earnings Review 1

U.S. Steel's Q2 2016 Earnings Review 2

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for U.S. Steel

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