The economic data is becoming bad enough that very few businesses are able to make any great forecasts mow. What is visible is that the situation has become dire for many companies as the global economy has been grinding down. United States Steel Corp. (NYSE: X) was the latest of the large industrial companies to announce that the coronavirus pandemic is bringing serious pain to their businesses. The impact from COVID-19 was said to be sudden and with significant changes in global oil and gas markets.
In an effort to prioritize cash and liquidity, U.S. Steel wants to remain well prepared for when the global economy ultimately recovers. The plans include reducing capital spending in 2020 by $125 million to approximately $750 million, along with idling plants. It also drew down its revolving credit facility by $800 million in order to increase its cash position.
While none of the items are expected to materially change the first-quarter results, U.S. Steel expects a meaningful reduction in demand for the full fiscal year, and it cannot determine the forward guidance for 2020.
The company will idle the #4 blast furnace at Gary Works immediately to begin a planned outage, and while it was scheduled to be idled for 48 days, it is now idled until conditions improve. U.S. Steel also will temporarily idle blast furnace “A” at Granite City Works, and it still plans to complete the indefinite idling of its iron and steelmaking facilities at Great Lakes Works. It also will idle all or most of Lone Star Tubular Operations and Lorain Tubular Operations for an indefinite period. Other facility announcements were included in the release.
David B. Burritt, U.S. Steel’s president and chief executive, said:
In this unprecedented and rapidly changing situation, our first priority remains the safety and well-being of our employees. As an essential part of our critical infrastructure, our employees have embraced the special responsibility to continue making the steel society needs, including the packaging for our food supply during the COVID-19 pandemic response. To ensure a more secure future for all our stakeholders, the time has come for us to take aggressive actions to reposition the company. U. S. Steel has been a cornerstone of manufacturing for over a century and our products are vital to national and economic security. I am confident in the resilience of our employees, the strength of our customer relationships, and the reliability of our regional supply chain. The actions we are announcing today make us stronger and enable us to weather the current situation to emerge as a leader in sustainable steel solutions for generations to come.
U.S. Steel stock traded down 4.3% at $5.85 on Friday, in a 52-week range of $4.54 to $20.53.