United States Steel Corporation

Good morning, everyone, and welcome to United States Steel Corporation's second quarter 2021 earnings conference call and webcast. As a reminder, today's call is being recorded. I'll now hand the call over to Kevin Lewis, Vice President of Investor Relations and Corporate at TNA. Please go right ahead.

Okay, thank you, Tommy. Good morning, and thank you for joining our second quarter call. As you read in our press release and saw in our supplemental materials yesterday, we had a very strong quarter. We look forward to discussing our results, the continued execution of our strategy, and our bullish outlook with you this morning. Joining me on today's call is USDL President and CEO Dave Burritt, Senior Vice President and CFO Christy Brees, and Senior Vice President and Chief Strategy and Sustainability Officer Rich Ruhoff. This morning we posted slides to accompany today's prepared remarks. The link and slides for today's call can be found on the U.S. Steel investor page under the events and presentations section. Before we start, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties as described in our SEC filings. And actual future results may vary materially. Forward-looking statements in the press release that we issued yesterday along with our remarks today, are made as of today, and we undertake no duty to update them as actual events unfold. I would now like to turn the conference call over to U.S. Steel President and CEO Dave Burritt, who will get us started on slide four.

Thank you, Kevin. Good morning, everyone, and thank you for being with us today and for your interest in U.S. Steel. Our second quarter performance was exceptional and is demonstrating the power of our strategy. Our footprint is positioned better than ever with the optionality to benefit from today's continued robust demand and strong operating performance. We remain optimistic about our future and have so many opportunities ahead. We are delivering best in nearly every aspect of our business. We are delivering our best financial performance in 2021. We are delivering our best quality performance in 2021. And our employees are delivering their best and maintaining U.S. Steel's industry-leading safety performance. There are no joys and profits unless we keep our employees and our environment safe. So thank you to our employees for embodying our steel principles and for your continued focus on our number one core value, safety. Safety is first at U.S. Steel. Our record-setting performance so far this year demonstrates the power of our best-of-both strategy, a strategy that is rooted in product and process innovation so that we can continue to amaze and delight our customers. We can now truly say U.S. Steel, the original iconic corporation, has its best days ahead. We can't get to the future fast enough. We are executing from a position of great strength, a foundation from which to continue to build and to transition to best for all. We've made great progress, and I am pleased to provide another update this quarter on our steps forward. Let's dig into the highlights on slide five. Our business is firing on all cylinders, and the hard work we put into our business is producing exceptional results. We are safely delivering our best quality and best reliability for customers. Quality for North American flat-rolled segment is at record levels. Quality performance for U.S. Steel Europe is at record levels, and quality performance for Big River Steel is at record levels. We've also set new records on reliability and productivity at numerous assets in our portfolio, a portfolio that generated strong earnings, including best margin performance for the enterprise in the second quarter. Our second quarter EBITDA margin was 26%, the best EBITDA margin in our company's history and getting better. Our mini mill segments, 36% EBITDA margin was the best mini mill performance in the industry by far. The bold step we took to acquire Big River Steel faster is generating significant value today. The value of that bold action is further detailed on slide six. When we purchased the remaining stake in Big River Steel, we knew we were buying the best mini mill in the country. But the performance of our Big River team has exceeded even our lofty expectations. Yet again, Big River is outperforming the competition. Its 36% second quarter EBITDA margin far exceeds other domestic mini-mills with further through-cycle upside potential from our planned non-grain-oriented electrical steel line investment, which is expected to grow margins even more upon completion in 2023. Big River is not only the clear financial leader, but it is the example of what best looks like when it comes to profitable steel solutions for people and planet. Big River is a leader in sustainability, a position that was recently validated by Daimler, who awarded Big River with their Global Sustainability Recognition Award earlier this month. It is clear that best of both is best for all. Moving to slide seven. We've made a lot of improvements to our business with a high sense of urgency. Our goal has never been to be bigger. It's always been to get better and never satisfied until best. That high sense of urgency to get better has positioned us extremely well to extract value from today's strong market. You've heard me say we've been bullish for a long time about the potential of this market, and my optimism for the future only continues to increase. Expectations for global growth continue to rise. Ample fiscal stimulus, a recovering labor market, significant pent-up demand, and a continued shift to domestic supply chain resiliency provide tailwinds for the market, along with an infrastructure bill that seems inevitable. Steel fundamentals are booming, and we firmly believe our business will be stronger for longer. Demand from our customers continues and lead times remain extended. The industry, including here at U.S. Steel, has several planned outages in the second half of 2021. And low steel industry inventory levels suggest an extended restocking period still needs to take place, supporting steel consumption into the future. The pace of change at U.S. Steel has allowed us to benefit from the sustained market strength we've seen over the past several quarters. While some competitive mini mills are adding capacity, we are building to better, not bigger, and believe our unique competitive advantages provide opportunities to expand where the market is headed. In under a year, we've gone from zero EAFs in our footprint to now three of the newest and most capable EAFs in the country. And in under a year, we've announced industry-leading goals that support a more sustainable future for all our stakeholders. Those goals continue to guide our future, a future that we can confidently say will be the best for all. Let's turn to slide eight. So what is best for all? Best for all is about the customer. Best for all is about the people who work in our facilities, live in our communities, benefit daily from the steels we produce and invest in our future. And best for all is about our most important customer, the planet. Simply said, best for all is how U.S. Steel will provide customers with profitable steel solutions for people and planet. Together with our customers, employees, and partners, we can contribute to a more sustainable future for all our stakeholders, and we're already making great progress. Before I turn it to Christy to discuss our second quarter performance and outlook, let me highlight the progress we've made since our last earnings call on slide nine. We are investing to be a leader in non-grant-oriented NGO projects. In June, we announced a planned expansion of Big River Steel to include NGO Electrical Steels, an investment funded by the substantial free cash flow Big River Steel is generating. This investment is the very definition of best for all. For our customers, we are meeting you where you are headed, with the next most innovative and technologically advanced generation of NGO electrical steel. Our customers deserve a like-minded partner to support their growing fleet of electric vehicles. For our people, we are investing only after a few short months of full ownership of Big River into an asset that is highly differentiated and has strong strategic fit. For our planet, we plan to pursue additional LEED certification for our new NGO line, which will further expand our sustainable Vertex steel brand. And we will do it profitably, delivering industry-leading technology that we expect to generate approximately $140 million of incremental run rate EBITDA by 2026. Permits are in place and we are moving forward quickly to get to our future faster. We've been able to pull approximately 35 million of CapEx from the project into 2021 and now expect to spend approximately 85 million this year on the NGO line. Our expected total 2021 CapEx budget is now approximately $800 million. Earlier this week, we closed on the sale of our Transtar short-line rail assets. The sale of Transtar delivers gross proceeds of approximately $640 million and generates immediate incremental value for stockholders. Lastly, we also recently furthered our commitment to sustainability by adding performance targets to our U.S. steel and Big River steel revolvers. This action reinforces our commitment to maintain our industry-leading safety performance, lower our GHG emissions, and differentiate our operating footprint through responsible steel site certification. We know where we're headed. And with today's market conditions as a tailwind, we're getting to the future faster. Let me hand it over to Christy now to highlight our financial performance. Christy?