United States Steel Corporation

I'll now hand the call over to Kevin Lewis, Vice President of Investor Relations and Corporate at P&A. Please go right ahead.

Thank you. Good morning, and thank you for joining our third quarter call. We are looking forward to discussing our record third quarter performance and the enhancements to our capital allocation priorities announced yesterday, as well as providing an update on our strategy execution. Joining me on today's call is U.S. Steel President and CEO Dave Burritt. Senior Vice President and CFO, Christy Brees, and Senior Vice President and Chief Strategy and Sustainability Officer, Rich Fruehauf. 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. Further 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 USCO President and CEO, Dave Burritt, who will begin on slide four.

Thank you, Kevin. Thank you everyone on the line for joining us this morning. As Kevin just mentioned, we delivered record performance in the third quarter, record net earnings, record EBITDA, record EBITDA margin, and record quality and reliability. Thank you to the US Steel team for this quarter's record setting performance and for your unwavering commitment to not only our customers, but of course, our steel principles, including our number one core value of safety. Our record-setting performance in the third quarter and throughout 2021 has truly transformed our business and demonstrates the progress we are making in pursuit of best. By year end, we will have transformed the balance sheet by repaying over $3 billion of debt, achieving our deleveraging target ahead of schedule. We expect to have total liquidity of approximately $5 billion, creating a foundation to confidently execute our strategy and invest in our competitive advantages. And we will have put the business in position to deliver another strong year in 2022. Our transformed balance sheet, the ability to pre-fund critical strategic investments, And continued optimism for our business gives us confidence to return capital to stockholders while executing the next phase of our best-for-all strategy. We believe the market is significantly undervaluing the progress we've made and the value our strategy is creating. And now is the time to be more balanced in our capital allocation priorities. Our strategy is truly best-for-all. of course, including our stockholders. Let's get into today's presentation on slide five. We're delivering strong performance year to date, continued bullish outlook for 2022 and beyond, and expectations for a super cycle continuing put us in a position to move faster on the next phase of our strategy execution while beginning to reward stockholders with direct returns. Our biggest challenges remain lowering our capital and carbon intensity. Investments in mini-mill steelmaking, like the construction of a second mini-mill, while investing in our competitive advantages, can deliver on these objectives and reposition the company for the future. The solution is to continue moving toward a more balanced capital allocation strategy by successfully executing our best-for-all strategy with mini mill number two and an electrical steel line and coating line at Big River Steel. We are moving quickly on our path forward by expanding our competitive advantages through strategic investments that help us achieve our strategic objectives aligned with long-term value creation, improved through-cycle earnings and cash flow, and reduced capital and carbon intensity. Whether you're looking only at next year or our ability to build long-term value, we believe that investors are undervaluing our progress and potential, but not our customers. They are noticing the transformations that's taking place at U.S. Steel and the importance of a regional supply chain Our industry-leading finishing line capabilities are increasing our value proposition, and customers are excited about the opportunities we are creating together. Whether it is advanced high-strength steels, differentiated electrical steels, or green and sustainable steels, discussions with customers continue to shift from transactional to strategic, and that's important. We continue to create longer-term value with customers by prioritizing innovation, differentiation, and strategic goals and look forward to building deeper relationships that unlock the value of U.S. Steel for our customers and provide them the certainty of a regional supply chain. Slide six further emphasizes our progress and performance. We are encouraged by our record-setting performance, performance that is outpacing even those records being achieved by direct competitors. But there is more we can do. As we said, our goal is to be the best steel competitor. And while there is certainly much more opportunity ahead, we've clearly come a long way quickly. As we always say at U.S. Steel, safety first. And I'm so pleased with the U.S. Steel team for continuing to prioritize safety and for embodying our steel principles each day. Moving to our margin performance, our enterprise EBITDA margin reflects the disciplined, value-focused approach we've taken to our footprint. With revenues of nearly $6 billion in the quarter, the quality of our earnings demonstrates a business model that is increasingly built upon capability and cost differentiation. From our iron ore advantage to our integrated assets and from the newest mini mill in the country to the most efficient mill in Eastern Europe, our diversified footprint is extracting significant value from today's stronger for longer market. While the competition isn't standing still, the actions we've taken over the past several years to invest in our assets, streamline our footprint, and add capabilities have created significant value, leading to outperformance versus peers this quarter. Our mini-mill performance also continues to be the industry leader, further widening its performance versus other mini-mill producers. Our position as a mini mill leader creates the perfect platform for high return investments in capabilities that expand our margins, reduces our carbon and capital intensity, and furthers our customer value proposition for sustainable green steel solutions. Those investments continue to be supported by strong liquidity and we are moving forward with investments that create enduring value while rewarding stockholders for the progress we've made so far. Slide seven expands on what makes U.S. Steel unique and why Best For All will continue to grow the competitive advantages of U.S. Steel. We are investing to get better, not bigger, and expanding our three competitive advantages that differentiate us versus the competitors. First, low-cost iron ore. Second, lower greenhouse gas emission mini-mill steelmaking. And third, best-in-class finishing capabilities. Those competitive advantages are built on a foundation of research and innovation and deep customer relationships. Let's turn to slide eight. where I will first provide an update on how we are expanding our iron ore advantage. We're pleased to report the first step in our metallic strategy, which pivots our iron ore advantage in Minnesota towards our growing fleet of EAFs. We're finalizing an agreement with a strategic partner to produce up to 500,000 tons annually of pig iron at Gary Works. Under the contemplated deal, our potential partner would fund, install, and operate pig iron production assets, which we would supply with excess liquid iron production. This potential partnership would further enhance the cost structure of Big River Steel by insourcing high-value metallics while driving blast furnace efficiencies at Gary Works. The permitting process has begun, and we expect pig iron production at Geary to begin in early 2023. This is an efficient and quick way to expand our iron ore advantage to our mini mills, and we continue to evaluate other opportunities to extract additional value from iron ore. Slide 9 provides some additional context on our mini mill number two investment. Last month, we commenced the site selection process to build a new state-of-the-art mini mill. This new mini mill will provide differentiated steelmaking supported by a comprehensive suite of finishing assets, including advanced high-strength steel galvanizing, hot roll galvanizing, painting, and slitting. We are expanding our minimal steelmaking capability as we continue to transition towards sustainable, lower greenhouse gas emissions steelmaking. This investment is a platform to provide our customers with more of the green steel they expect from like-minded partners like U.S. Steel. We're in the process of filing permits in multiple states and are on track to begin construction as early as the first half of 2022. Mini Mill No. 2 will be built by the same experienced construction team who built Phase 2A of Big River Steel ahead of schedule, under budget, and fully ramped in record time. As we said in our press release last month and will reiterate now, We do not expect mini-mill number two to add to the overall production volumes of U.S. steel. We expect the value-added capabilities of mini-mill number two to drive an approximately $650 million of incremental EBITDA contribution from this investment once fully ramped. Also, yesterday we announced plans to build a new coating line at Big River Steel. Slide 10 has the details. This line will have 325,000 tons of annual capability and will sustainably produce both galvalume and galvanized product. We expect the investment to contribute another $60 million of annual run rate EBITDA to Big River's already industry-leading results. We expect the line to produce a mix of 75% galvalume and 25% hot dip galvanizing. Galvalume capabilities create opportunities to target the higher value construction market, including exposed building panels. Hot dip galvanizing capabilities create additional opportunities to serve the appliance, automotive, and construction markets. The investments we are making at Big River are natural extensions of the Big River campus and further utilize the state-of-the-art capabilities of the facility as we provide customers with sustainable steels to help meet their own decarbonization objectives. As we continue to demonstrate our industry-leading position at Big River, we're excited to expand the mini-mill footprint, invest in downstream capabilities, and further enhance the commercial mix of our business model. Let's turn to slide 11. The progress we have made in 2021 is undeniable. Over the past several quarters, we've transformed our balance sheet. When we closed on the Big River Steel acquisition at the start of the year, we carried $7 billion of debt and expect to end the year with $3.9 billion. We've extended the maturity profile and expect next year's run rate cash interest expense to be approximately $225 million. Our pension plan is overfunded, an enviable position that others in our industry are not close to achieving. We are in a clear position of strength. So while we'll continue to look at the ability to de-lever further as debt becomes callable, we are very confident that this level of debt puts us in a sustainable and manageable position to support investments in our business. Next, we continue to believe the highest source of long-term value creation is from investing in expanding competitive advantages that reshape our earnings profile and reduce our capital and carbon intensity. Our cash and liquidity position more than supports these high return projects and allows us to execute with confidence. And today, given the undeniable progress we've seen over the past several quarters, we are announcing enhancements to our capital allocation priorities that begin to directly reward stockholders with the improvements we've made to the business. We believe the market is not rewarding us for the strong performance we expect in 2022 and is not yet recognizing the long-term value creation potential of our best-for-all strategy. Our strong financial performance and the significant returns we believe we can generate by buying our own stock is the reason we're accelerating direct turns to stockholders. Reinstating a $0.05 per share quarterly dividend and moving quickly on a $300 million stock buyback demonstrates our commitment to ensuring our strategy is indeed best for all. Our goal is to ensure direct returns become an enduring part of our capital allocation strategy, and we believe there are catalysts that could drive additional buybacks in the future. Aside from additional free cash flow generation, we believe there are near-term opportunities to divest non-core assets, primarily real estate, which could further accelerate or increase further authorizations. In addition, the option for Stelco to acquire 25% of Mintac remains in place through January of 2027 and presents an opportunity to return up to $500 million of incremental capital to stockholders. Christy will now provide details into our quarterly performance before I provide some thoughts on 2022. Christy?