WASHINGTON (dpa-AFX) - Shares of U.S. Steel Corp. (X) surged nearly seven percent in extended trading on Tuesday after the steel producer announced strategic actions to strengthen the company, and said it continues to expect third quarter adjusted results to be significantly higher than the current consensus estimates.
U.S. Steel announced that it will not proceed with an expansion at its Keewatin, Minnesota-based iron ore pellet operations, as well as shelve expansion of the Gary, Indiana-based carbon alloy facilities at Gary Works. The company's board also decided unanimously to file for creditor protection at its Canadian subsidiary, U. S. Steel Canada Inc.
'The decisions to stop further efforts relative to these investments represent another step in our transformation to earn the right to grow. These strategic decisions allow us to redirect funding to projects to further develop Advanced High Strength Steels for our automotive customers, premium connections for our energy market customers, and capital expenditures to update and modernize our operations,' President and CEO Mario Longhi said in a statement.
The company estimated capital investment in excess of $800 million to complete the two projects. It estimates that these two strategic actions will result in a non-cash, pre-tax charge of about $250 million in the third quarter.
The company noted that the amount saved through these actions will be redirected to other projects such as developing advanced high strength steel for the automotive and energy industries as well as to update and modernize its operations.
The company also decided to drop from financial statements the Canadian operations, which have lost about $2.4 billion or $16.00 per share over the past five years since 2009. U. S. Steel Canada will then file for creditor protection under Canada's Companies' Creditors Arrangement Act. U.S. Steel Canada accounts for about $1 billion in employee benefits liability.
As a result of these three strategic actions, the company estimates a total non-cash, pretax charge of between $550 million and $600 million.
Following the strategic actions, U.S. Steel said it expects third-quarter adjusted results, excluding items, to be significantly higher than the current consensus earnings per share estimates, citing the stable steel market conditions in the U.S. and improved operational performance.
On average, 17 analysts polled by Thomson Reuters expect the company to report earnings of $0.89 per share for the third quarter. Analysts' estimates typically exclude special items. This is compared to an adjusted loss of $0.14 per share reported in the year-ago quarter.
Twelve Wall Street analysts also have a consensus revenue estimate of $4.59 billion for the quarter.
X closed Tuesday's regular trading session at $41.41, up $1.75 or 4.41% on a volume of 9.21 million shares. The stock surged a further $2.78 or 6.71% in after-hours trading.
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