October 27, 2009 / 3:09 PM / in 9 years

WRAPUP 3-U.S. steelmakers beat estimates but outlook gloomy

* U.S. Steel loss narrower, but sees Q4 operating loss

* AK Steel posts Q3 profit, beats estimates

* Steelmakers’ shares down (Adds U.S. Steel CEO comments, closing stock prices)

By Steve James

NEW YORK, Oct 27 (Reuters) - U.S. steelmakers reported stronger-than-expected third-quarter results on Tuesday but their shares fell as they reiterated their gloomy short-term views for the industry and the economy.

U.S. Steel Corp (X.N) posted a smaller third-quarter loss than Wall Street had expected and AK Steel (AKS.N) reported a profit after consecutive losses as both steelmakers saw a pickup in shipments, which had slumped in the past year.

U.S. Steel said it was still cautious about demand, especially for flat-rolled steel from U.S. automakers following the expiration of the “Cash for Clunkers” program and expects to report a fourth-quarter operating loss and idle two blast furnaces to lower production.

AK Steel said that while it expects to post an operating profit in the fourth quarter, it anticipates a decline in average selling prices.

Shares of both companies fell, with U.S. Steel closing down 7.8 percent at $37.41 on the New York Stock Exchange and AK Steel ending the day 8.57 percent lower at $17.18. The Dow Jones Steel Index .DJUSST dropped 4.64 percent.

“Recently, order rates in our flat-rolled and European segments have decreased,” U.S. Steel Chairman and Chief Executive John Surma told Wall Street analysts. “Demand trends remained uncertain as both the U.S. and global economies struggle to recover.”

He said he expected improvement in the fourth quarter as a result of increased demand for flat-rolled products in North America, driven primarily by automotive markets.

However, U.S. Steel expects to report an overall operating loss in the fourth quarter due primarily to low operating rates, which are just over 50 percent.

“We will continue to adjust production to meet our customers’ demand,” said Surma, adding that U.S. Steel would idle its No. 14 blast furnace at its Gary, Indiana, mill for repairs, as well as one furnace at its Granite City Works.

“Technically speaking, we may be out of the recession, but it certainly doesn’t feel that way,” James Wainscott, AK Steel’s chairman, president and chief executive, told analysts.

“Suffice to say we’ve bounced off the bottom, but we’ve got a long way to go from here.”

He said AK Steel expects to ship more steel in the fourth quarter as it increases its capacity rate to around 65 percent from 55 percent to 60 percent in the third quarter.

Wainscott said he was optimistic that auto build rates would increase since carmakers currently had low inventories, due to the business generated by the clunker program.

The results came a day before the world’s biggest steelmaker, ArcelorMittal ISPA.AS (MT.N), is expected to report its fourth quarterly loss in a row.

“U.S. Steel did better than expected, especially in its shipments. That shows orders came back, not necessarily demand,” said analyst Charles Bradford, of Affiliated Research Group.

U.S. Steel’s third-quarter net loss was $303 million, or $2.11 per share, compared with a year-earlier profit of $919 million, or $7.79 per share. Revenue dropped 61 percent to $2.82 billion, but was 32 percent higher than in the second quarter, the Pittsburgh-based company said.

Excluding a one-time currency gain, the loss was $2.43 per share versus analysts’ average forecast of a loss of $2.87 and revenue of $2.72 billion, said Thomson Reuters I/B/E/S.

AK Steel’s third-quarter net earnings were $6.2 million, or 6 cents per share, compared with earnings of $188.3 million, or $1.67 per share, in the same quarter last year.

Revenue fell more than half to $1.04 billion, the West Chester, Ohio-based company reported. Analysts on average were expected a profit of 1 cent per share. (Reporting by Steve James; editing by Patrick Fitzgibbons, Dave Zimmerman, Tim Dobbyn and Steve Orlofsky)

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