Greetings and thanks for participating in our results conference for the third quarter of 2023. Dave Burritt, President and CEO of U.S. Steel; Jessica Graziano, Senior Vice President and Chief Financial Officer; and Rich Fruehauf, Senior Vice President and Chief Strategy and Sustainability Officer, will be joining me on the conference today. Additionally, I would like to take this occasion to welcome Emily Chieng, our Investor Relations Officer, who recently joined U.S. Steel. Emily’s tenure as a sell-side analyst specialising in metals and mining has given her a wealth of expertise. We anticipate your further interaction with Emily and the Investor Relations team, as I know many of you have already had the opportunity to meet her in her new capacity. We uploaded the slides for today’s prepared comments this morning.
These are located in the overview part of the U.S. Steel Investor Relations website. Let me remind you before we get started that some of the information discussed during this call can contain forward-looking statements. These statements are based on certain assumptions and are subject to various risks and uncertainties, as detailed in our SEC filings. As a consequence, actual future results might differ significantly from what is projected. The news release we released yesterday and our remarks today contain forward-looking statements that are made as of today, and we disclaim any obligation to amend them as actual events transpire. I now like to hand the conference call over to Dave Burritt, President and CEO of U.S. Steel, who will start on Slide 4.
Good morning to those of you who are joining us, Kevin. We value your ongoing interest in U.S. Steel and are excited for our conversation this morning. However, we start with profound sadness over the incidents that have occurred recently in the Middle East, Ukraine, or earlier this week in Maine. We are praying and thinking about the people affected by these events. However, our focus this morning will be on three main points that will guide our comments. First, the strategic options evaluation process has revealed a strong amount of interest in U.S. Steel. Second, as Jess will go over in our third quarter results, the company’s ongoing excellent success.
We think you will hear our excitement for optimising investor value throughout the session. First, let’s address the strategic options review procedure. We declared in August that the U.S. Steel Board of Directors had started this process of reviewing strategic alternatives after receiving many unsolicited bids from respectable parties, ranging from the purchase of certain production facilities to the acquisition of U.S. Steel as a whole. The Board of Directors of the corporation is advancing a thorough, equitable, and exacting assessment process with the help of the management group and its advisers. Increasing investor value has been and will be the Board’s North Star [ph]. Since the process is still continuing, we must respect the Board’s work and our duties regarding confidentiality.
As we continue to assist the bidders in the process with their due diligence, steady progress is being made. To reiterate, our Board is totally dedicated to maximising value for stockholders. I can assure you that many very reputable bidders are very interested in the Board’s competitive process, even if I am unable to comment on the mechanics of the procedure. Following the process, the U.S. Steel Board will decide what is best for our investors, guided by our code of conduct known as our Steel Principles. We shall now stop responding to inquiries on the procedure or participants. The amount of interest in our firm has us gratified, but not shocked.
It won’t take long for these new, top-notch assets to start generating robust free cash flow; we’ve been climbing a mountain of strategic CAPEX, and now that we’re at the bottom, we’re not shocked. Actually, as we keep delivering on our Best for All strategy—the second source of investor excitement—we are adding value now. In light of this, we are happy to report that we successfully completed a solid third quarter, marking our 12th consecutive quarter of profitability. Despite increased capital expenditures, we also produced a positive free cash flow quarter. It’s become our middle name to remain consistent. Our findings demonstrate a strong operational performance.
Our ability to adapt and be resilient in the face of changing business circumstances while maintaining a laser-like focus on safety. We’re really headed for yet another record-breaking year of safety performance. I mention “another” because our outstanding safety record comes after record-breaking safety results in 2020, 2021, and 2022. Our star operations include our stellar safety record as standard practise. Our culture is one of compassion, and one of our guiding principles has always been and always will be safety. In our opinion, you aren’t working effectively if you aren’t operating safely. We were able to provide solid financials for the third quarter thanks to our safety performance, which was made possible by the greatest workers in the steel business. Our “Best for All” approach is working.
We are prepared to use our competitive advantages to harness these megatrends. We are positive on American steel because, when you take into account the industrial dynamics in China and Europe, a large portion of the global steel market remains, at best, stagnant. How come? During our previous conference call, I discussed the three worldwide megatrends that would offer advantages to American Steel and our enterprise in the upcoming months and years. One is the acceleration of de-globalization in a world shaken by pandemics that have strained supply lines to breaking point and by wars such as those in the Middle East and Ukraine. A dramatic turnaround is taking place as a result of decades of globalisation.
The result, which we like to refer to as the Manufacturing Renaissance Act, was made possible by laws such as the Bipartisan Infrastructure Law, the CHIPS Act, and the Inflation Reduction Act.
The shoring boom that the US is currently experiencing a once in a generational event. With more to come and plenty of space for further expansion in North American steel demand, U.S. Steel’s almost 123-year legacy of manufacturing steel that is mined, melted, and manufactured in the USA is paying off thanks to the de-globalization boom. The United States’ attainment of energy independence is a key component of the globalisation trend.
We are experiencing and will continue to see a solid order book supporting America’s energy sectors thanks to our strong tubular steel segment, our line pipe goods coming out of North America, and the flat rolled steel. De-carbonization is another megatrend. Global commitment to cutting greenhouse gas emissions is high. U.S. Steel is in a good position to take advantage of the de-carbonization trend because to our electrical steels, which are facilitating the switch to electric vehicles, and our exposure to sustainable steelmaking at major River.
Finally, there is digitalization. We can increase efficiency and safety and capture revenue in ways that have never been possible before thanks to tools like generative AI. For example, we are utilising AI at our mining operations in Minnesota to enhance the upkeep of our fleet of trucks. AI tools are helping technicians fix trucks, get parts, and simplify complicated data. These megatrends, in our opinion, will give the domestic steel sector—particularly U.S. Steel—strong tailwinds. Lastly, we’re looking forward to the next 12 months as our Best for All approach unleashes a great deal of value. This is a thrilling moment.
We are at the centre of the United States of America, if not the greatest and brightest steel industry in the world. Naturally, it is our responsibility to take advantage of these megatrends in order to grow our company and catch the wind; this is precisely what we are doing with our strategic investments.
This brings us to the call’s third main point, which bridges until 2024. As we indicated at the beginning of the conference, our Best for All approach generates substantial benefits. Value, we don’t think the Street has completely projected what they want to achieve in the upcoming year. Think about our recently completed non-grain oriented (NGO) Electrical Steel Line, which Big River Steel celebrated with a ribbon cutting this month.
With the formal launch of our new index-branded electrical steel, we can now take advantage of the de-globalization and de-carbonization tendencies. By the way, we completed NGO on schedule and within budget. Next, Big River’s twin galvanised GALVALUME coating line, or CGL2, is getting closer to its projected 2024 commencement. This line will provide value-added construction and appliance steels by utilising the Big River Complex’s sustainable steelmaking process.
And then there’s Big River 2, our cutting edge micro mill that is still scheduled to begin operations in the second part of 2024. As previously discussed, Big River 2 and the current Big River Steel will combine to form a state-of-the-art 6 million tonne mega mill. This mill will supply North America’s most advanced and sustainable steels, emitting up to 70% to 80% fewer greenhouse gases than the conventional integrated steel making route. We can clearly see our progress at Big River 2. We only had a fraction of the equipment on site when we last spoke in July. Nearly two thirds of the way through, our skilled construction crew is getting closer to the first coil in the second half of 2024. Now,
Considering how our company model has changed and the advantages we anticipate obtaining in the upcoming year, this time was wisely spent. To put it plainly, we think the market has not completely recognised the direction of our success, both today and in the future. Big River 2 is expected to debut in 12 months, which indicates that incremental strategic EBITDA creation and a $1 billion decrease in CAPEX in 2024 compared to 2023 will occur. We are now cresting the peak of CAPEX after years of significant investment, and we are prepared to take advantage of the free cash flow and unleash investor value. While we make strategic investments to transform our presence and advance our Best for All objective by 2024,
In order to save fixed costs, we recently had to make some painful decisions. In September, for example, we had to decide whether to temporarily shut down Granite City Works’ final blast furnace. I say that this was a tough choice, and it really was, but it was one that had to be made. We took action to make sure that our melt capacity is in line with demand because the auto worker strike had an impact on the order book in the fourth quarter. We continue to be adaptable, which helps us to be profitable even under unpredictable market situations. Let’s pass the reins to Jess, who will review the finances and expectations for 2024. Iss?
Good morning, Dave, and to everyone else on the line. I’ll go back to Slide 5 and begin by taking a closer look at the third quarter. The third quarter’s results, which included net earnings of $299 million, or $1.20 per diluted share, pleased us much. Once certain one-time events were taken into account, adjusted net earnings came to $350 million, or $1.40 per share. Higher-than-expected adjusted EBITDA of $578 million and adjusted EPS of $1.40 were largely attributable to improved performance throughout our NAFR division. There was $232 million in positive free cash flow for the quarter. Taking into account that we invested $423 million in strategic capital expenditures for our in-flight initiatives,
The balance sheet is still in very good condition. With $3.2 billion in cash on hand at the conclusion of the quarter, our overall liquidity was $5.5 billion. As of September 30th, our leverage ratio—two times adjusted debt to EBITDA—remains extremely low. Due to the Strategic Alternatives Review, buybacks are now on hold. Of our approved $500 million programme, we still have $125 million available for purchases. Let’s now focus for a little while on Q3 within the Slide 6 portions. With EBITDA of $378 million, our flat rolled division had a sequentially good third quarter that was consistent with Q2 results.
We had higher average selling prices than anticipated in Q3, despite a progressively weaker HRC environment. This was due to a combination of factors, including a larger percentage of higher value items sold throughout the quarter.
Tailwinds related to raw materials, such as decreased costs for alloy and outside bought scrap, also aided the third quarter. Throughout the quarter, we also profited from decreased mining-related expenses and fixed cost reductions. EBITDA for the Mini Mill division fell to 84 million as a result of lower spot transaction prices and somewhat fewer shipments. Because of decreased scrap and the advantage of having our Gary Pig machine ramped to full run rate production throughout the quarter, lower metallic costs helped to somewhat offset the price challenges we saw in Q3.
We anticipate that lower steel prices and a scheduled maintenance outage will have an effect on the Mini Mill segment’s fourth-quarter performance, resulting in lower sequential EBITDA. Reduced prices for metallics are anticipated to somewhat offset these goods. We anticipate that decreased raw material prices and the lack of scheduled outage spending will mostly balance pricing challenges throughout the quarter, resulting in Q4 EBITDA in Europe being comparable with Q3 performance. Finally, we anticipate our Tubular operations’ EBITDA to decline sequentially.
This is due to lower average selling prices, which are somewhat compensated by shipments that are now back to more typical levels. When combined, we project adjusted EBITDA for the fourth quarter to be in the range of $200 million to $250 million. Before I hand the presentation back to Dave, I would like to encourage you to review the updated slides that are available online as an appendix to this presentation.
In-depth price and product mix assumptions are included in the research, along with a bottom-up cost breakdown for our integrated sectors and the Mini Mill company. Of course, you may always ask any queries you may have of the Investor Relations staff.
The strong interest in U.S. Steel has us delighted and thrilled, especially for our investors. However, all of the information we will supply has already been disclosed. Please limit your inquiries to our operational and financial results, which we would be pleased to talk about. Let’s start the Q&A queue, Kevin.
Naturally, as many of you are aware, we usually start our calls with a question from our institutional and retail investor platform, let’s say technology. But we think we covered this enough in our prepared statements today. I’ll now ask the operator to let people ask inquiries on the line.