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U.S. Steel’s 2016 EBITDA Guidance: How Realistic Is It This Time?

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U.S. Steel’s 2016 EBITDA guidance

U.S. Steel (X) posted a negative adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $13 million in 4Q15. During the 3Q15 earnings call, U.S. Steel gave fiscal 2015 adjusted EBITDA guidance of $225 million, which implies an EBITDA of $10 million in 4Q15. However, the company was not able to deliver even the modest EBITDA target in 4Q15 and instead returned a loss at the EBITDA level. In this part of the series, we’ll look at U.S. Steel’s 4Q15 EBITDA. We’ll also be looking at the company’s 2016 guidance.

Segment performance

  • U.S. Steel’s Flat-Rolled segment barely broke even at the EBITDA level in 4Q15. The segment had generated an EBITDA of $81 million in 3Q15. In fiscal 2015, the Flat-Rolled segment generated an adjusted EBITDA of $155 million.
  • The Tubular segment generated negative adjusted EBITDA of $48 million in 4Q15. The segment has generated negative EBITDA in the last three consecutive quarters. In fiscal 2015, the Tubular segment generated negative adjusted EBITDA of $115 million. Falling energy prices have negatively impacted steel companies supplying to the energy sector. Tenaris (TS) and Allegheny Technologies (ATI) are the leading steel suppliers to the energy sector. However, AK Steel (AKS) has minimal exposure to the energy sector.
  • In Europe, (VGK) U.S. Steel generated an adjusted EBITDA of $26 million in 4Q15 and $162 million in fiscal 2015.

2016 guidance

U.S. Steel expects to break even at the EBITDA level in 2016 assuming “current market conditions which include spot prices, import volumes and supply chain inventory levels.” U.S. Steel has assumed more realistic market conditions this year as compared to what it assumed while giving its fiscal 2015 guidance. However, even the much scaled down 2016 EBITDA guidance could prove an uphill task, which we’ll explore in the coming parts of the series. But, before that, let’s look at U.S. Steel’s 4Q15 cash flows.

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