U.S. Steel: Q1 Earnings, Layoffs, and Minntac Stake Sale

  • U.S. Steel Corporation (NYSE:X) released its first-quarter earnings on Thursday after the markets closed. The earnings were better than expected.
  • The company also announced layoffs and a stake sale in its Minntac mine to Stelco. U.S. Steel also announced a dividend of $0.01 per share.

U.S. Steel’s Q1 earnings

U.S. Steel released its first-quarter earnings on Thursday. The company will hold its earnings call today before the markets open. U.S. Steel reported revenues of $2.75 billion in the quarter compared to $3.50 billion in the first quarter of 2019. The company’s adjusted EBITDA fell from $285 million to $64 million during this period. That said, the first-quarter earnings were better than analysts’ estimates and its guidance. The company also announced a $0.01 dividend per share.

Announced layoffs, WARN notices issued

U.S. Steel has issued WARN (worker adjustment and retraining notification) notices to 6,500 workers, which is more than a third of its employees in North America. However, the company expects that the actual layoffs will be around 2,700. Notably, over the last year, the company has idled several facilities, which led to layoffs. Ironically, the company announced the curtailment of two US blast furnaces in June 2019 on the same day that President Trump started his 2020 reelection campaign.

So far, falling energy prices and COVID-19 have taken a toll on U.S. Steel in 2020. The stock is underperforming its peers. U.S. Steel was the worst-performing steel stock last year as well among the top five US steel producers.

U.S. Steel announced Minntac stake sale

In the first-quarter earnings release, U.S. Steel also announced a stake sale in its Minntac iron ore mine. The company announced that Stelco will purchase a 25% stake in its Minntac mine for a consideration of $600 million, which gives the mine an enterprise value of $2.4 billion. Under the terms, Stelco has paid the company $20 million. Stelco will pay $80 million over the course of 2020. Also, Stelco will receive an option to acquire a 25% stake in the Minntac mine by paying an additional $500 million before January 31, 2027.

U.S. Steel stock closed down 4.0% on Thursday and was trading down in after-market trading. The asset sale news doesn’t seem to have cut ice with markets despite its reasonably good valuation. The company has lost over 32% year-to-date. We’ll get more updates on the earnings and the Minntac divestment during the first-quarter earnings call.