World’s Biggest Steel Maker Returns to Quarterly Profit

Monday, August 4th, 2014
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Recovering markets in Europe and the United States have enabled the world’s largest manufacturer of steel to deliver its first quarter of underlying profits in several years, albeit with the company being forced to reduce its full year profit outlook because of lower than expected iron ore prices.

Unveiling its second quarter results, Luxembourg based ArcelorMittal delivered a bottom line net profit attributable to equity holders of the parent of $US52 million amid higher levels of shipments and stronger margins, albeit with the company still incurring an overall loss for the first half of $US153 million as bad weather in the United States impacted first quarter results.

The result compares with a quarterly loss of $US780 million in the same quarter last year, albeit with comparisons being somewhat skewed as the previous year’s result was artificially impacted by restructuring charges.

Having gone through a period of extremely weak conditions which saw prices drop by more than a quarter over a two year period from mid-2011 until mid-2013, steel makers around the world now seem to be on a much better footing as economic conditions in Europe have now stabilised and US construction conditions continue to  improve.

Having virtually flattened out throughout 2011 and 2012, apparent steel consumption grew by a more respectable 3.6 percent last year, and the World Steel Association reckons demand will grow by over three percent both this year and next.

Utilisation rates (78.3 percent), though not growing, remain stable – as do prices, which have stabilised since bottoming out in the middle of last year whilst albeit remaining low.

In ArcelorMittal’s case, steel shipments edged up from 41.4 megatons during the first half of 2013 to 42.4 million during the first half of 2014, mostly in the United States and Canada, whilst shipments within its iron business ramped up from 15.5 megatons to 19.8 megatons.

Nevertheless, a fall in the iron ore price has caused the company to slash its full year earnings guidance from $US8 billion in earnings before interest, tax, depreciation and amortisation to $US 7 billon, albeit whilst saying forward indicators looked positive for steel markets in Europe and the United States.

arrcelor report

Whilst acknowledging the impact of the lower iron ore price, ArcelorMittal Chairman and Chief Executive Officer Lakshmi N. Mittal welcome the latest result.

“The second quarter and first half results reflect the anticipated improvement in steel shipments and margins, supporting an underlying EBITDA improvement compared with last year,” Mittal said.

“The expansion of our iron ore business is also on track, although increased iron ore shipments were offset by the lower than anticipated iron ore price, which has led us to revise our EBITDA guidance for the full year.

“Looking ahead, indicators in both Europe and the US, which together account for two thirds of our shipments, continue to be positive and we have increased our steel demand forecasts for both markets.”

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