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ArcelorMittal (MT) Q2 Earnings Top, Sales Lag Estimates
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Steel giant ArcelorMittal (MT - Free Report) posted net income of $1.1 billion or 38 cents per share in second-quarter 2016, up from net income of $179 million or 10 cents per share recorded a year ago. Earnings topped the Zacks Consensus Estimate of 8 cents per share.
However, revenues declined 12.7% year over year to $14,743 million in the quarter and missed the Zacks Consensus Estimate of $15,971 million. The year-over-year decline resulted from lower average steel selling prices, lesser market-priced iron ore shipments and a fall in iron ore reference prices
ArcelorMittal's shares fell around 2.3% to close at $6.37 on Aug 1.
Segment Review
NAFTA: Crude steel production inched up 1.6% sequentially to 5.7 million tons. Steel shipments were down 0.4% sequentially due to lower long product shipment volumes. Sales rose 2.6% sequentially to $3.9 billion owing to higher average steel selling price. Average steel selling price for flat products and long products improved 3.8% and 2.8%, respectively, on a sequential basis.
Brazil: Crude steel production went up 5% sequentially to 2.8 million tons in the quarter. Shipments were up 8.8% sequentially to 2.7 million tons, primarily due to higher flat steel shipments and improved long product shipments.
Sales jumped 18.6% sequentially to $1.5 billion. The sequential increment was due to higher average steel selling prices and increase in steel shipments.
Europe: Crude steel production fell 4% sequentially to 10.7 million tons due to reline extended ramp up at a blast furnace in France and ongoing blast furnace reline at Krakow in Poland. Sales were up 9.2% sequentially to $7.8 billion as a result of higher steel shipments and elevated average steel selling prices. Average steel selling prices went up 6% sequentially to $562 per ton.
Asia Africa and CIS (ACIS): Sales jumped 32.7% sequentially to $1.6 billion owing to higher average steel selling prices and increased steel shipments. Production came in at 3.9 million tons, up 7% sequentially. Average selling prices were $409 per ton, up 27.8% sequentially.
Mining: Iron ore production was down 4.8% sequentially to 13.5 million metric tons. The sequential decrease was due to lower production at CIS, U.S. and Liberia operations.
Coal production was on par sequentially at 1.4 million tons. Revenues surged 34.8% sequentially to $809 million.
Balance Sheet
Cash and cash equivalents (including restricted cash) was $2.4 billion as of Jun 30, 2016 compared with around $4.7 billion as of Jun 30, 2015. The company’s long-term debt was about $14 billion as of Jun 30, 2016 as aginst roughly $18 billion as of Jun 30, 2015.
Net cash provided by operating activities was $869 million in the reported quarter compared with $1,019 million in the year-ago quarter.
In May 2016, ArcelorMittal USA entered into a new, five-year senior secured asset-based revolving credit facility of up to $1 billion. This facility will be utilized for general corporate purposes of ArcelorMittal USA and its subsidiaries.
Developments
On Jun 30, 2016, ArcelorMittal and Marcegaglia declared the submission of an offer for the acquisition of Ilva in Italy.
In Jun 2016, ArcelorMittal declared that its new contract with the United Steelworkers (USW) has been ratified by USW-represented employees. The three-year collective bargaining agreement covers more than 12,000 USW-represented employees at 13 of its U.S. facilities across Indiana, Illinois, Minnesota, Ohio, Pennsylvania and West Virginia.
Guidance
ArcelorMittal expects global apparent steel consumption to grow modestly year over year in 2016.
The company expects EBITDA in 2016 to be more than $4.5 billion. Notwithstanding the steel spread recovery losing momentum in the past weeks, the effect of lagged prices is expected to be a key factor for operating results as the company steps in to a period of seasonally slower steel demand.
The company’s cash requirements are expected to total $4.5 billion for 2016, a more than $1 billion reduction from the 2015 level. This includes lower capital expenditure of about $2.4 billion compared with $2.7 billion in 2015, lesser interest expenses of roughly $1.1 billion as against $1.3 billion in 2015, no dividend with respect to financial year 2015, and reduced cash taxes.
ArcelorMittal currently sports a Zacks Rank #1 (Strong Buy).
Some other well-ranked companies worth considering in the steel sector include ThyssenKrupp AG (TYEKF - Free Report) , Schnitzer Steel Industries, Inc. and Ryerson Holding Corporation (RYI - Free Report) . All three stocks sport the same Zacks Rank as ArcelorMittal.
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ArcelorMittal (MT) Q2 Earnings Top, Sales Lag Estimates
Steel giant ArcelorMittal (MT - Free Report) posted net income of $1.1 billion or 38 cents per share in second-quarter 2016, up from net income of $179 million or 10 cents per share recorded a year ago. Earnings topped the Zacks Consensus Estimate of 8 cents per share.
However, revenues declined 12.7% year over year to $14,743 million in the quarter and missed the Zacks Consensus Estimate of $15,971 million. The year-over-year decline resulted from lower average steel selling prices, lesser market-priced iron ore shipments and a fall in iron ore reference prices
ArcelorMittal's shares fell around 2.3% to close at $6.37 on Aug 1.
Segment Review
NAFTA: Crude steel production inched up 1.6% sequentially to 5.7 million tons. Steel shipments were down 0.4% sequentially due to lower long product shipment volumes. Sales rose 2.6% sequentially to $3.9 billion owing to higher average steel selling price. Average steel selling price for flat products and long products improved 3.8% and 2.8%, respectively, on a sequential basis.
Brazil: Crude steel production went up 5% sequentially to 2.8 million tons in the quarter. Shipments were up 8.8% sequentially to 2.7 million tons, primarily due to higher flat steel shipments and improved long product shipments.
Sales jumped 18.6% sequentially to $1.5 billion. The sequential increment was due to higher average steel selling prices and increase in steel shipments.
Europe: Crude steel production fell 4% sequentially to 10.7 million tons due to reline extended ramp up at a blast furnace in France and ongoing blast furnace reline at Krakow in Poland. Sales were up 9.2% sequentially to $7.8 billion as a result of higher steel shipments and elevated average steel selling prices. Average steel selling prices went up 6% sequentially to $562 per ton.
Asia Africa and CIS (ACIS): Sales jumped 32.7% sequentially to $1.6 billion owing to higher average steel selling prices and increased steel shipments. Production came in at 3.9 million tons, up 7% sequentially. Average selling prices were $409 per ton, up 27.8% sequentially.
Mining: Iron ore production was down 4.8% sequentially to 13.5 million metric tons. The sequential decrease was due to lower production at CIS, U.S. and Liberia operations.
Coal production was on par sequentially at 1.4 million tons. Revenues surged 34.8% sequentially to $809 million.
Balance Sheet
Cash and cash equivalents (including restricted cash) was $2.4 billion as of Jun 30, 2016 compared with around $4.7 billion as of Jun 30, 2015. The company’s long-term debt was about $14 billion as of Jun 30, 2016 as aginst roughly $18 billion as of Jun 30, 2015.
Net cash provided by operating activities was $869 million in the reported quarter compared with $1,019 million in the year-ago quarter.
In May 2016, ArcelorMittal USA entered into a new, five-year senior secured asset-based revolving credit facility of up to $1 billion. This facility will be utilized for general corporate purposes of ArcelorMittal USA and its subsidiaries.
Developments
On Jun 30, 2016, ArcelorMittal and Marcegaglia declared the submission of an offer for the acquisition of Ilva in Italy.
In Jun 2016, ArcelorMittal declared that its new contract with the United Steelworkers (USW) has been ratified by USW-represented employees. The three-year collective bargaining agreement covers more than 12,000 USW-represented employees at 13 of its U.S. facilities across Indiana, Illinois, Minnesota, Ohio, Pennsylvania and West Virginia.
Guidance
ArcelorMittal expects global apparent steel consumption to grow modestly year over year in 2016.
The company expects EBITDA in 2016 to be more than $4.5 billion. Notwithstanding the steel spread recovery losing momentum in the past weeks, the effect of lagged prices is expected to be a key factor for operating results as the company steps in to a period of seasonally slower steel demand.
The company’s cash requirements are expected to total $4.5 billion for 2016, a more than $1 billion reduction from the 2015 level. This includes lower capital expenditure of about $2.4 billion compared with $2.7 billion in 2015, lesser interest expenses of roughly $1.1 billion as against $1.3 billion in 2015, no dividend with respect to financial year 2015, and reduced cash taxes.
ARCELOR MITTAL Price, Consensus and EPS Surprise
ARCELOR MITTAL Price, Consensus and EPS Surprise | ARCELOR MITTAL Quote
Zacks Rank
ArcelorMittal currently sports a Zacks Rank #1 (Strong Buy).
Some other well-ranked companies worth considering in the steel sector include ThyssenKrupp AG (TYEKF - Free Report) , Schnitzer Steel Industries, Inc. and Ryerson Holding Corporation (RYI - Free Report) . All three stocks sport the same Zacks Rank as ArcelorMittal.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>