United States Steel Corp. (X) - Get Report will idle plants, reduce its spending plans and tap lenders for $800 million in near-term liquidity support amid a sharp downturn in demand and "unprecedented" challenges from the global coronavirus pandemic.
U.S. Steel said prioritizing cash and liquidity will give it the flexibility it needs to compete when the global economy recovers from the current outbreak, which is expected to trigger a deep U.S. recession and similar contractions in major economies around the world. construction of a planned facility in West Mifflin, Pennsylvania will also be delayed.
The company will idle blast furnace planst in Gary, Indiana and Granite City, Illinois, as well as tublar operations in Ohio and Texas, thanks in part to "continued high levels of imports and decreased demand driven by a sudden, significant drop in oil prices." US Steel also said it would reduce 2020 spending by around $125 million, and increase borrowing from its standby credit facility by around $800 million.
“U.S. Steel has been a cornerstone of manufacturing for over a century and our products are vital to national and economic security,." said CEO David Burritt. "I am confident in the resilience of our employees, the strength of our customer relationships, and the reliability of our regional supply chain."
"The short-term actions announced today are difficult but necessary. Our focus on cash and liquidity will ultimately position us to achieve our longer-term goals as a stronger organization,” he added.
U.S. Steel shares were marked 8.14% lower in early trading Friday immediately following the investor update to change hands at $5.64 each, a move that would extend the stock's year-to-date decline to around 50.5%.
The company said the actions wouldn't have a "meaningful impact" on its first quarter earnings, which are expected to be released on May 7, but warned that it expects "a meaningful reduction in demand for the full fiscal year, though an updated full-year estimate of third-party shipments for each of its operating segments cannot be determined at this time."