Steel Mills

U.S. Steel’s $1.8 Billion “Goodwill Impairment” Charge
Written by John Packard
October 27, 2013
U.S. Steel will report their 3rd Quarter earnings this week. Prior to the announcement the company and its new CEO, Mario Longhi announced what many in the industry already knew – two asset purchases made in 2007 are not worth what the company paid for them. The result is USS is taking a non-cash goodwill impairment charge.
I asked one of the metals and mining analysts to explain to Steel Market Update what is meant by a “non-cash goodwill impairment charge.”
“…short version is that companies record goodwill when they make acquisitions, generally to reflect value above the underlying worth of the assets – i.e. brands, or special customer relationships. They have to conduct impairment tests to determine if the value on their books is still valid. Anyway, this is ultimately a concession by X that they no longer can justify a view that the value of the asset on the books will be realized in the future. So they write down their asset value but it doesn’t change their earnings.”
The assets they are writing down are the acquisitions of the former Stelco mills in Canada (now USS Hamilton and USS Lake Erie) as well as Lone Star Technologies (manufacturer of tubular products used in the energy industry).
The flat rolled section of U.S. Steel took a $1 billion goodwill impairment charge while their Texas Operations took a $.8 billion charge for a combined total of $1.8 billion.
The goodwill impairment charges are only to recognize the loss of value in the U.S. Steel Canada plants and Lone Star Technologies. The charges will not affect the company’s 3rd Quarter earnings which will be reported on Tuesday, October 29th. What it does do for investors is take the “book value” of the company from approximately $24 per share to approximately $11 per share.

John Packard
Read more from John PackardLatest in Steel Mills

U.S. Steel sues Algoma over iron pellet shipments
U.S. Steel is suing Algoma over the Canadian flat-rolled producer's rejection of iron pellet shipments, arguing it has breached its contract.

August US mill shipments slip but still higher than last year
The American Iron and Steel Institute reported a decline in the monthly shipments of US mills from July to August.

TransPod, Algoma, Supreme Steel linkup anchors Canadian steel in high-speed transit build
The three Canadian companies have announced a strategic partnership to support the development of an ultra-high-speed transit line from Edmonton to Calgary.

Metallus, USW agree to tentative four-year labor deal
Metallus and the United Steelworkers (USW) have agreed to a tentative four-year labor contract.

ArcelorMittal Dofasco resumes cokemaking after emergency maintenance
The Canadian steelmaker reported on Sept. 30 that “urgent maintenance” was needed in its coke plant off-gas systems. The work required coke oven gas from the No. 2 coke plant to be flared for most of that week.