ArcelorMittal Profit Falls 24%, Exceeds Estimates

ArcelorMittal First-Quarter Profit Falls 24%, Exceeds Estimates
An employee walks past rolls of steel at the ArcelorMittal Ostrava steel plant in Ostrava, Czech Republic. Photographer: Vladimir Weiss/Bloomberg

ArcelorMittal, the world’s biggest steelmaker, posted first-quarter profit that beat estimates after a recovery in North America countered declining revenue from mining and weaker European demand.

Earnings before interest, tax, depreciation and amortization were $1.97 billion, ArcelorMittal said today in a statement, exceeding the $1.67 billion median estimate of 13 analysts surveyed by Bloomberg. The company maintained guidance that first-half Ebitda will be higher than the prior six months.

“North America was a lot stronger than I would have thought, up very strongly sequentially driven by both volumes and prices,” Tim Cahill, a Dublin-based analyst at J&E Davy Holdings Ltd., said by phone. “That was definitely a surprise.”

Profit at ArcelorMittal’s Americas flat-steel business more than doubled from the prior three months as production rose by 4 percent to meet demand for use in cars, appliances and farming equipment -- so-called yellow goods. U.S. consumption of the metal is forecast by the World Steel Association to rise 5.7 percent this year, contrasting with slumping European demand.

ArcelorMittal saw “improved sentiment in a number of key markets, in particular North America where the automotive and white and yellow goods sectors continue to show strong demand,” Aditya Mittal, chief financial officer, said on a call.

Shares Advance

The company rose 2.4 percent to 12.70 euros by the close of Amsterdam trading, paring its loss this year to 14 percent.

European demand is set to drop 1 percent to 2 percent this year, Mittal said. “Europe clearly remains a live concern but we’re not seeing a crisis-like environment occurring,” he said. “The risks are reduced from where we were in November.”

Net debt rose $1.1 billion to $23.6 billion in the quarter. The company forecast debt would fall in the three months through June thanks to “improved operating cashflows” and asset sales. The steelmaker expects to be below its $22.5 billion net-debt target by the end of the second quarter, the CFO said.

First-quarter steel shipments rose 7.8 percent to 22.2 million metric tons from the prior three months. While they are expected to be similar in the second quarter, all the company’s steel businesses are “expected to show improved underlying profitability” in the second quarter, ArcelorMittal said.

Improving Outlook

Profit in the three months ending June will be bolstered by higher steel prices, while seasonally higher iron-ore shipments will drive earnings in mining, Mittal said. Ebitda is forecast at $4.48 billion for the first half, according to the average estimate of six analysts surveyed by Bloomberg. The company posted a figure of $4.1 billion in the prior six months.

Ebitda in the first quarter fell 24 percent from a year earlier on lower steel and iron ore prices. Steelmakers are posting lower earnings as the European debt crisis saps demand for steel and commodity prices weaken on concern Chinese growth may slow. South Korea’s Posco, the third-biggest steel producer, reported a 42 percent slump in quarterly profit last month.

ArcelorMittal, based in Luxembourg, reported a 21 percent drop in earnings from its mining division as declining prices overshadowed a 12 percent gain in iron-ore production.

Prices for hot-rolled steel coil, a benchmark product used in vehicles and buildings, averaged $703.50 a ton in the first quarter, from $793.70 a ton a year earlier, according to Steel Business Briefing’s global price index. Iron ore, a steelmaking ingredient, averaged 20 percent less than a year earlier.

Global steel use will rise 3.6 percent this year, less than last year’s 5.6 percent increase, as European demand contracts and Chinese use slows, according to the World Steel Association.


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