U.S. Steel told analysts Wednesday that $575 million in savings from its Carnegie Way effort resulted in its first profitable year since 2008 and that the ongoing efficiency effort will help offset significant market headwinds in 2015.
Challenges this year include falling oil and steel prices, the strong U.S. dollar, global steelmaking overcapacity and high levels of cheap steel imports, president and CEO Mario Longhi told analysts during a conference call.
The Pittsburgh steel producer late Tuesday reported a fourth-quarter profit of $275 million, or $1.83 per share, on revenue of $4.07 billion.
The top and bottom line numbers topped analysts’ estimates, sending U.S. Steel shares higher in trading Wednesday. The shares rose 10.9 percent to $23.58.
For all of 2014, the steel producer earned $102 million, or 69 cents per share, compared with a 2013 loss of $1.65 billion, or $11.37 per share.
The company said it expects to generate an additional $150 million in savings this year from Carnegie Way projects that were implemented last year. In addition, “thousands” of other efficiency projects are currently being implemented and “thousands” more are in the pipeline, Dan Lesnak, investor relations general manager, told analysts.
Longhi said decisions to curb production at some of the company’s tubular mills were based on declining orders caused by lower oil prices, which have fallen about 50 percent. Those operations will be restarted when market conditions warrant, he said.
The stronger U.S. dollar makes it unlikely that the crush of imports will let up, Longhi said. Imports jumped 38 percent last year, the American Iron and Steel Institute reported this week. The industry group estimated imports of finished steel products captured about 30 percent of the domestic market in December and about 28 percent for all of 2014, a record.
Longhi cited imports of tubular steel from South Korea, a country that does not have an oil and gas industry.
“They have designed their business to come and attack our markets,” he said.