U.S. Steel’s Gary Works steel mill is pictured above. U.S. Steel Chief Executive Officer David Burritt said the company is undergoing revitalization.
After tripling its first-quarter profit year-over-year to $54 million and announcing a $1 billion revitalization project, U.S. Steel is building momentum after emerging from a rough patch, CEO David Burritt said.
“We are now pivoting from playing defense to offense,” Burritt said in a conference call to investors.
The company is making a big investment in new technology at Mon Valley that’s expected to reduce operating costs at the Pennsylvania plant by $35 per ton. U.S. Steel also is building an electric arc furnace in Alabama and recently completed nine large infrastructure projects, including galvanizing line upgrades at the Midwest Plant in Portage.
“From asset revitalization to endless casting and rolling, our investment strategy expands our capability and cost profile to win share. We are revitalizing and now we’re revolutionizing,” Burritt said.
“From wide to narrow and from light gauge to heavy gauge, our footprint will be well positioned to win in the U.S. market and will help shape the future markets we will create with our customers. To be clear, we are not adding steelmaking capacity, instead we are transforming our footprint to capture market share. I’ve never been more confident in our future than I am right now.”
After being battered during the import crisis and turning an annual profit only three times in the last eight years, U.S. Steel has been undergoing a rebound under the tariffs of 25% and improved market conditions, Burritt said.
“U.S Steel is special and you know this,” Burritt said during the conference call. “U.S. Steel is the most recognizable steel brand in the U.S and the only U.S.-headquartered steel company that can mine, melt and make steel in USA. That’s the fact.
We have world-class safety performance, you all know that. That’s the fact. And here’s what’s been changing. Our last few years have allowed us to build the balance sheet with no major debt payments until 2025, a nice runway to keep us nimble. We also have the best cash conversion cycle time in the industry. We understand cash is king. That’s the fact.”
The company has spent $800 million in North America on capital projects that have had an internal rate of return of more than 22%. They have included blast furnace stove rebuilds, finishing line upgrades and steel shop environmental projects. It’s helped make the Pittsburgh-based steelmaker’s operations more efficient.
“We’ve been making significant improvements to our business over the past few years and have seen our operational excellence, creating operating leverage through improved performance and investing in technology to improve our cost structure and expand our capabilities,” Burritt said. “Our strategy is straightforward and we continue to be guided by our critical success factors. We will move down the cost curve. We will win in attractive markets.”
U.S. Steel Chief Financial Officer Kevin Bradley said the company has paid off or refinanced $1.8 billion in debt over the last two years. The company now has $2.5 billion in liquidity, including $676 million in cash, a position he described as “strong.”
Burritt said the company, one of the Region’s largest employers, was off to a strong start in 2019, despite the winter being a slower time for the steel business.
“Typically, first quarter is always a lighter quarter for our financial results,” he said. “You now know these first quarter issues well, whether or like the polar vortex this year, and of course we can’t ship pellets from Minnesota mines because the Soo Locks are closed.
By now everyone should know how difficult the first quarter is, but we beat even our own expectations in the first quarter, because we are performing better. Asset revitalization is working. Our performance and productivity capability are better. That’s the fact.”