ArcelorMittal Beats Estimates, Sees Second Better Quarter

ArcelorMittal (MT), the world’s biggest steelmaker, posted first-quarter earnings that beat analyst estimates and forecast higher profit in the second three months of the year.

Earnings before interest, taxes, depreciation and amortization fell to $1.57 billion in the first three months of the year from $2.12 billion a year earlier, ArcelorMittal said today in a statement. That beat the $1.32 billion median estimate of 12 analysts surveyed by Bloomberg.

“Economic conditions remain challenging, but our performance in the quarter reflects the results of the management action we have taken to confront the effects of the financial crisis,” Lakshmi Mittal, chief executive officer of the Luxembourg-based company, said in the statement.

Steel-industry earnings have slumped as Europe’s economic crisis saps demand and slower Chinese growth weighs on commodity prices. European steelmakers are grappling with excess capacity that’s pushed down prices as operating costs climb. The region has capacity to make about 210 million metric tons of steel a year, while demand in a “normal market” is 150 million to 160 million tons, according to industry lobby group Eurofer.

ArcelorMittal said second-quarter Ebitda will exceed the first-quarter result. The company maintained its full-year guidance that Ebitda will exceed $7.1 billion. In February, it said earnings will recover in 2013 after the company posted the lowest full-year profit since 2009.

Demand Outlook

The steelmaker said in March it expects global steel consumption to rise 3 percent to 3.5 percent this year, while European demand will slide to a low before rebounding next year.

Full-year profitability will be boosted by a 2 percent rise in steel shipments, a 20 percent gain in the volume of iron-ore sold and as the company sees benefits from cost-cutting efforts, the steelmaker said.

ArcelorMittal said in March that it plans to cut costs by $3 billion by the end of 2015.

First-quarter sales slipped 13 percent to $19.75 billion, it said. The $1.6 billion Ebitda figure included $500 million of gains from asset disposals and carbon-credit sales.

ArcelorMittal’s net debt fell by $3.8 billion during the first quarter to $18 billion. The company is seeking to reduce borrowings after its credit rating was cut to below investment grade by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.

Dividend Cut

The steelmaker has scaled back its dividend and sold assets, including a $1.1 billion stake in its Canadian mining business. It raised about $4 billion in a sale of shares and bonds in a bid to pare debt to $17 billion by the end of June.

ArcelorMittal shipped 20.9 million tons of steel in the the quarter, a 4.7 percent increase from the prior three months. Iron ore production was 13.1 million tons.

The steelmaker’s South African unit today reported a loss of 270 million rand ($30 million) for the first quarter, after a fire that halted the continent’s biggest steel plant. ArcelorMittal South Africa Ltd. (ACL) said it expects to return to profit in the second quarter.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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