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Analyzing U.S. Steel Corporation’s Cash Flows

Mohit Oberoi, CFA - Author

Aug. 18 2020, Updated 6:15 a.m. ET

Cash flows

Previously in this series, we looked at steel companies’ 1Q17 revenue and profits. Along with these metrics, the market is also interested in cash flows and leverage position.

Some steel companies were saddled with huge debt last year and took measures to cut their debt levels. Generating negative free cash flow would negate some of the debt reductions that the companies completed in recent quarters.

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Comparative analysis

  • Nucor (NUE) generated free cash flows of $150 million in 1Q17. Steel Dynamics (STLD) also posted positive free cash flows of $198 million during the quarter.
  • AK Steel (AKS) was nearly breakeven on its free cash flows in 1Q17.
  • ArcelorMittal (MT) generated free cash flows of -$879 million in 1Q17. However, investors shouldn’t worry about the company’s negative free cash flows. It’s mainly the result of working capital buildup. ArcelorMittal’s working capital rose by $2.2 billion in 1Q17 compared to the previous quarter. Inventory buildup is typical for ArcelorMittal in its first quarter. A working capital release tends to be a source of cash for it in other quarters.
  • U.S. Steel Corporation (X) posted negative free cash flows of $182 million in 1Q17. The company attributed its negative cash flows to higher working capital. Having said that, U.S. Steel Corporation’s cash flows could be suppressed over the next few quarters due to higher maintenance costs. According to consensus estimates compiled by Thomson Reuters, analysts expect U.S. Steel Corporation to post free cash flows of $56 million in fiscal 2017. The company posted free cash flows of $421 million last year.

In the next part, we’ll do a comparative analysis of steel companies’ leverage ratios.


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