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What Were the Key Drivers of U.S. Steel’s 4Q16 Profitability?

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U.S. Steel’s 4Q16 profitability

There are several metrics you can use to measure an enterprise’s profitability. Net profit is widely used to measure a company’s profitability. For companies in the commodities space (XLB) like ArcelorMittal (MT), Nucor (NUE), and AK Steel (AKS), EBITDA (earnings before interest, tax, depreciation, and amortization) is generally used.

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EBITDA

U.S. Steel (X) generated adjusted EBITDA of $211 million in 4Q16 and $510 million in fiscal 2016. Freeport’s adjusted EBITDA rose significantly as compared to the corresponding period last year. The company had generated an adjusted EBITDA of -$13 million in 4Q15 and $202 million in fiscal 2015. However, U.S. Steel’s 4Q16 EBITDA fell as compared to 3Q16 where the company managed to post adjusted EBITDA of $272 million. Notably, U.S. Steel’s 3Q16 EBITDA was the highest since 4Q14.

Key drivers

  • The Flat Rolled segment, which is U.S. Steel’s largest segment in terms of revenues, posted adjusted EBITDA of $147 million in 4Q16 as compared to $201 million in 3Q16 and -$97 million in 4Q16.
  • U.S. Steel’s Europe operations generated adjusted EBITDA of $83 million in 4Q16 as compared to $102 million in 3Q16 and $5 million in 4Q15.
  • U.S. Steel’s Tubular segment continues to reel under the impact of lower energy prices. The segment reported adjusted EBITDA of -$70 million in 4Q16 as compared to EBITDA of -$58 million in 3Q16 and -$47 million in 4Q15. Notably, U.S. Steel’s Tubular operations reported lower yearly performance in 4Q16 while the other two segments managed to post a yearly increase in EBITDA.

In the next article, we’ll look at the other key takeaways from U.S. Steel’s 4Q16 earnings call.

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