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ArcelorMittal Reports 19% Profit Gain, Keeps 2013 Target

ArcelorMittal's Steel Plant
A worker operates in the blast furnace at ArcelorMittal's steel plant in Ostrava, Czech Republic. Photographer: Martin Divisek/Bloomberg

ArcelorMittal, the world’s biggest steelmaker, is increasingly positive about next year’s outlook after cost cuts and plant closings boosted profit 19 percent.

“The bottom of the cycle is behind us,” Chief Executive Officer Lakshmi Mittal said. “Although operating conditions remain challenging, as economic indicators are improving we are cautiously optimistic about the prospects for 2014.”

Third-quarter earnings before interest, taxes, depreciation and amortization rose to $1.71 billion from $1.45 billion a year earlier, ArcelorMittal said in a statement. That beat the $1.53 billion average of 18 analyst estimates compiled by Bloomberg.

The company will lower costs by $3 billion by end-2015 to counter excess European capacity. It shut plants at Liege in Belgium and Florange in France and is reviewing sites in eastern Europe. Industry cuts are reining in surplus supply in Europe. German steel trader Kloeckner & Co SE yesterday reported a doubling in profit after reducing costs, while ThyssenKrupp AG and Salzgitter AG plan to lose a total of 2,800 jobs to 2018.

Luxembourg-based ArcelorMittal rose 3.9 percent to close at 12.415 euros in Amsterdam, the highest level since Feb. 19.

“It’s a solid set of numbers,” said Luc Pez, an Exane BNP Paribas analyst in Paris. “We don’t think it moves consensus materially and neither is there anything overly surprising. But the outlook commentary focuses on recovery and that’s what the bulls want to see, so we would expect this share-price strength to continue.”

Rising Demand

Chief Financial Officer Aditya Mittal said today he expects steel use to rise in 2014 in Europe and the U.S., the company’s biggest markets. Demand is set to fall by as much as 1 percent in the U.S. and as much as 2.5 percent in Europe this year.

The steelmaker cut this year’s Ebitda target in August on weaker steel demand than expected in both regions. ArcelorMittal today reiterated full-year Ebitda of more than $6.5 billion. It shipped 21.1 million metric tons of steel in the quarter, up 6 percent, and iron-ore output rose 4.5 percent to 14.9 million tons. Steel shipments will grow 1 percent to 2 percent in 2013.

Net debt rose to $17.8 billion by end-September and will be $17 billion next quarter. ArcelorMittal plans to lower borrowing after its ratings were cut to below investment grade by Moody’s Investors Service, Standard & Poor’s Corp. and Fitch Ratings.

Download: Earnings

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