Arcelor Shows New Weakness in Steel Sector

Posted by Peers

October 30, 2009

LONDON — ArcelorMittal, the world’s largest steelmaker by volume and revenue, on Wednesday saw its third-quarter results improve sequentially and top expectations, even though net income was still low compared to the previous year due to weak steel demand.

The Luxembourg-based steelmaker now expects fourth-quarter earnings to improve compared to the third quarter. Shipments and average steel selling prices are expected to be higher in the fourth quarter, prompting the company to raise its profit guidance for the next quarter.

The company posted a net profit of $903 million in the three months to Sept. 30 compared with a net profit of $3.82 billion a year earlier, beating analysts’ expectations for a net loss of $53 million, according to a Dow Jones Newswires poll of eight analysts. The latest results were buoyed by a $899 million tax benefit as well as an unexpected foreign exchange and net financing gain of $106 million.

Revenue fell 54% to $16.17 billion from $35.2 billion in the same period a year ago but was nearly 7% higher compared to the second quarter as higher shipments helped offset lower average prices after some long-term contracts were renegotiated lower.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, of $1.59 billion was 81% below $8.58 billion a year earlier but 30% higher than $1.22 billion in the second quarter. The figure was lower than analysts’ expectations of $1.68 billion.

The steelmaker said it expects its closely watched Ebitda to rise to between $2.0 billion to $2.4 billion in the fourth quarter, broadly in line with analysts’ expectations of $2.38 billion.

Lakshmi Mittal, chief executive and chairman of ArcelorMittal, said the company had seen the first signs of recovery in the third quarter, as anticipated. “In response to this increased demand, a number of our facilities have now been restarted, and we expect fourth-quarter crude steel capacity utilization to be approximately 70%,” he said. “We should continue to see further gradual improvement through 2010, although the operating environment remains challenging.”

The company had been operating at about 55% to 60% during the third quarter, Chief Financial Officer Aditya Mittal said at the end of July.

By ROBERT GUY MATTHEWS
Wall Street Journal
10/29/09

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