So far in this series, we’ve looked at steel companies’ 4Q16 earnings. But given the current situation, the market is also interested in cash flows.
Generating negative free cash flow could lead to cash burn. As a result, companies might have to borrow to fund their deficits. Negative free cash flow would only make things worse in the current market scenario.
U.S. Steel Corporation (X) posted free cash flows of $112 million in 4Q16. In contrast, the company posted free cash flows of $213 million in 3Q16. For U.S. Steel, it was the third consecutive quarter of positive free cash flows. Before 4Q16, it had a cash burn in every quarter since 4Q14.
Nucor (NUE) posted free cash flows of $288 million in 4Q16. To put this in context, the company posted free cash flows of $215 million in 3Q16 and $388 million in 4Q15. Steel Dynamics (STLD) reported free cash flows of $132 million in 4Q16 versus $137 million in the sequential quarter.
AK Steel (AKS) was the only steel company (XLB) in our coverage of steel stocks that generated negative free cash flows in 4Q16. It had a cash burn of $29 million in 4Q16. This is the second consecutive quarter when AK Steel has generated negative free cash flows. However, thanks to the positive free cash flows in 1H16, the company managed to be free cash flow positive in fiscal 2016.
Meanwhile, most steel companies have managed to bring their debt levels down in the last year. In the next article, we’ll look at different steel companies’ leverage metrics.