In separate announcements Thursday after markets had closed, United States Steel Corp. (NYSE: X) announced that it plans to shut down a “significant portion” of its Great Lakes Works and slice its dividend by 80% while terminating its share buyback program.
The closure of the Great Lakes Works, located in Ecorse and River Rouge, Michigan, will begin around April 1, 2020, with the iron and steelmaking facilities. By the end of 2020, the company will begin shutting down the hot strip mill rolling plant. According to the announcement, the company has notified 1,545 plant employees of the plans. Both union and non-union workers received notifications.
U.S. Steel also announced that its quarterly dividends for 2020 would be reduced from $0.05 per share to $0.01. The company already has stopped repurchasing stock, but Thursday’s announcement said the repurchase program has been formally terminated.
The company said it plans to focus its attention on three U.S. plants in Gary, Indiana, Mon Valley Works in Pennsylvania, and Big River Steel, a joint-venture located in Arkansas. U.S. Steel paid $700 million in October to form the joint venture with Big River as a minority partner and has a four-year option to acquire the rest of the company.
In a comment, U.S. Steel CEO David Burritt said, “Acquiring the remaining stake in Big River Steel continues to be our top strategic priority.” The Arkansas plant is the only LEED-certified flat-rolled steel mill in North America.
The company also revised fiscal 2019 guidance. It now expects full-year 2019 adjusted EBITDA to be approximately $682 million, excluding about $285 million of estimated restructuring and other charges and approximately $47 million related to a fire at a coke-making plant in December 2018. U.S. Steel now expects a fiscal 2019 adjusted diluted loss per share to be approximately $0.42.
Analysts had forecast full-year earnings per share of $0.06 and revenues of $12.94 billion.
In a comment about the shutdown at Great Lakes Works, Burritt said:
[C]urrent market conditions and the long-term outlook for Great Lakes Works made it imperative that we act now, allowing us to better align our resources to deliver cost or capability differentiation across our footprint. Transitioning production currently at Great Lakes Works to Gary Works will enable increased efficiency in the use of our assets, improve our ability to meet our customers’ needs for sustainable steel solutions and will help our company get to our future state faster.
U.S. Steel stock has dropped 49% from its 52-week high of $24.74 to trade at around $12.60 in Friday’s premarket session. Shares traded down about 5.7% from Thursday’s close. The 52-week low is $9.93 and the 12-month price target on the stock is $10.13.
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