United States Steel Corp. said its flat-rolled business could decline in the second quarter due to planned furnace maintenance, while the European economy presented a challenge.
The negative outlook sent its stock down 1.2 per cent to $27.87 per share in morning trading on the New York Stock Exchange.
“The stock is down on a more muted second-quarter outlook. They are guiding to a flat quarter,” said analyst Kuni Chen of CRT Capital Group.
He pointed out that steel prices, which rose earlier this year, have since stalled in recent weeks.
“It’s a bit of a disappointment as people were expecting positive pricing and momentum to follow into the second quarter,” said Mr. Chen.
“Their outlook is not favourable and steel pricing is lower recently,” said analyst Charles Bradford of Bradford Research in New York.
Michelle Applebaum of Steel Market Intelligence in Chicago said steel prices had fallen back as a result of Chinese steel production and export increases in March. “When China produces more steel, the world has too much,” she said.
Earlier, U.S. Steel posted better-than-expected first-quarter results, saying it shipped more steel in the January-March period than in any quarter in more than three years.
Also on Tuesday, a competitor, AK Steel Holding Corp. , reported a first-quarter loss as a drop in shipment volumes offset higher steel prices in the quarter.
U.S. Steel chairman and chief executive officer John Surma said for the second quarter, he expected all three operating segments to reflect positive results from operations with total segment results consistent with the first quarter.
“While the economic conditions in Europe remain challenging,” he said, as second-quarter results from the European business segment are expected to return a positive income from operations. The tubular segment, which makes steel for gas and oil pipes, is expected to have similar results to the first quarter, he said.
But Mr. Surma said the flat-rolled segment results are expected to decrease due primarily to higher maintenance costs. Although end user demand remains stable, he said costs were expected to increase by about $50-million from the first quarter, for scheduled blast furnace and other maintenance projects. That will reduce the amount of steel the company produces.
U.S. Steel posted a net loss of $219-million, or $1.52 per share, compared with a net loss of $86-million, or 60 cents a share, in the same quarter of 2011.
But adjusted for items, including a $399-million loss on the sale of its Serbian operations, it showed a profit of 67 cents per share, which beat analyst expectations.
Sales rose to $5.2-billion from $4.8-billion in the 2011 quarter on higher prices and shipments, the Pittsburgh-based company said.
Analysts on average had expected adjusted earnings of 45 cents a share and revenue of $4.95-billion, according to Thomson Reuters I/B/E/S.
U.S. Steel said first-quarter prices increased by $23 per ton to $764 per ton due to higher average realized prices on both spot and contract business. Shipments increased by 8 per cent to 4.1 million net tons, the highest shipping level since the third quarter of 2008.
Competitor AK Steel’s net loss was $11.8-million, or 11 cents per share, against a profit of $8.7-million, or 8 cents a share, in the year-ago quarter.