ArcelorMittal Posts 23% Jump in Profit, Sees Better 2014

Photographer: Martin Divisek/Bloomberg

A worker operates in the blast furnace at ArcelorMittal's steel plant in Ostrava, Czech Republic. Close

A worker operates in the blast furnace at ArcelorMittal's steel plant in Ostrava, Czech Republic.

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Photographer: Martin Divisek/Bloomberg

A worker operates in the blast furnace at ArcelorMittal's steel plant in Ostrava, Czech Republic.

ArcelorMittal (MT), the world’s biggest steelmaker, expects profit to climb 16 percent this year as demand for the metal rebounds in the U.S. and Europe.

“We have started the year in a stronger position then for several years and are cautiously optimistic about the prospects for 2014,” Chief Financial Officer Aditya Mittal said on a call. “We see a year of further growth in global apparent steel consumption with a greater bias towards our core markets.”

Earnings before interest, taxes, depreciation and amortization will rise to about $8 billion this year from $6.9 billion in 2013 as steel and iron-ore production increase, the Luxembourg-based company said in a statement today. It reported a 23 percent increase in fourth-quarter profit.

ArcelorMittal is seeking to emerge from an industry trough after dwindling demand and excess capacity eroded profit margins at steelmakers. The company said in November that the worst of the cycle had passed and it was optimistic about a global recovery. Asian peer Posco also said last month an economic revival this year will increase consumption and drive up sales.

ArcelorMittal rose 0.8 percent to 12.495 euros by the close in Amsterdam, paring an earlier advance of as much as 4.7 percent

The company said it expects global steel use to rise by 3.5 percent to 4 percent this year. Steel shipments, which totaled 84.3 million tons last year, will increase by 3 percent. Iron-ore production is set to climb by 15 percent.

Brazil, China

Steel demand in Europe is forecast to grow by as much as 2.5 percent after demand fell last year, while U.S. consumption is set to gain by as much as 4.5 percent. China is also projected to use 4.5 percent more steel, while growth in Brazil may be as much as 3 percent, the company said.

ArcelorMittal expects to see “moderate” steel margin gains in 2014 as lower raw material prices combine with higher steel volumes. Any decline in steel prices is likely to be more than offset by bigger drops in the price of steelmaking ingredients iron ore and coking coal, Aditya Mittal said.

Fourth-quarter Ebitda rose to $1.91 billion from $1.56 billion a year earlier. That beat the $1.81 billion average estimate of 17 analysts surveyed by Bloomberg. The company reported a net loss of $1.23 billion for the quarter.

The steelmaker has reduced costs and closed plants to weather the slump in demand. It has cut more than $5 billion of debt in the past two years and shut facilities at Liege in Belgium and Florange in France.

East Europe

East European plants that had been earmarked for possible closure, may be kept open because of improving demand.

“Assuming the demand levels continue to improve as we’re forecasting, then perhaps there will not be an asset optimization requirement in east Europe,” CFO Mittal said. “We need to be careful when looking at our asset base that we don’t cut capacity, then in a few years time we need that capacity.”

Net debt fell to $16.1 billion in the fourth quarter, according to the statement. ArcelorMittal is lowering borrowings after its credit rating was cut to below investment grade by Moody’s Investors Service, Standard & Poor’s Corp. and Fitch Ratings. The company maintained its medium-term debt target of $15 billion

Its South African unit today reported a full-year operating profit of 47 million rand ($4.3 million) compared with a 477 million rand loss a year earlier. The unit said it expects higher sales and prices in the the first quarter to lead to a “significant improvement” in earnings.

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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