Arcelor Beats Zacks Consensus

Recently, Arcelor Mittal (MT - Snapshot Report) reported encouraging results for the third quarter of 2009. The company recorded a net income of $0.9 billion, or $0.60 per share, as compared with a net loss of $0.8 billion, or $(0.57) per share, for the three months ended June 30, 2009, and net income of $3.8 billion or $2.79 per share, for the three months ended September 30, 2008. Net earnings of $0.06 were above the Zacks Consensus Estimate of $(0.07).

Sales were $16.2 billion, higher as compared with $15.2 billion in the previous quarter and down sharply from $35.2 billion in the same period of 2008. Despite the improved demand during the third quarter of 2009 as compared to the second quarter of 2009, sales remain substantially lower year-on-year due to the global economic crisis, including a steep fall in selling prices.

ArcelorMittal expects a surge in steel demand in the coming months largely due to the technical recovery that is taking place as inventory de-stocking nears completion. Although the steel sector scenario remains unpredictable, we also expect gradual sales recovery in the next couple of quarters.

A reversal of global economic activity triggered by the intensification of the credit crisis last September led steelmakers to stop operations at several plants, lay off staff and refinance debt. The U.S. steelmakers are still operating at almost half their capacity. According to the American Iron and Steel Institute, U.S. plant capacity is at 53.9%, below the 90.4% a year ago.

However, global steel prices have fallen more than 70% in July in some regions from their peak in mid-2008, as a recession in three of the four major world economies demand reduced in sectors such as construction and automotives. We believe this will continue in the very near term.