Sunil Shah

Earnings Surprises for U.S. Steel

Well spotted squire! Not a single professional "anal liced'' seemed to notice. But in P&L and cash terms its not relevant. Why? The 2bn additional booked liability refers to the hole they now have on their defined benefit pension obligations (employees are guaranteed x when they retire and current assets in pension fund replace, 0.7x say). So over the next few years, that hole has to be funded through the P&L and cash. This was reflected in an increase charge this year, and they have a number of years to fund the entire 2bn hole. In fact in a period equal to the maturing of pension obligations.

When (i say when not if) markets recover, this 2bn debit will erode away with the rising Net Asset Value of the assets in their pension fund.

Hope that helps!

Sunil