Steel giant ArcelorMittal (MT - Free Report) posted net income of $680 million or 22 cents per share in third-quarter 2016, as against net loss of $711 million or 31 cents per share recorded a year ago. However, revenues declined 6.8% year over year to $14,523 million in the quarter, affected by lower steel shipments and steel prices.
Total steel shipments fell 3.6% year over year to 20.3 million metric tons in the reported quarter. Average steel selling prices fell 2% year over year.
NAFTA: Crude steel production fell 1.8% sequentially to 5.6 million tons. Steel shipments were down 1.4% sequentially due to lower long product volumes due to weak demand. Sales rose 8.9% sequentially to $4.3 billion owing to higher average steel selling price. Average steel selling price for flat products and long products rose 8.5% and 4%, respectively, on a sequential basis.
Brazil: Crude steel production went up 3.2% sequentially to 2.9 million tons in the quarter. Shipments were up 2.3% sequentially to 2.8 million tons, mainly due to higher flat steel shipments offset by declining long product shipments.
Sales jumped 16.2% sequentially to $1.7 billion. The sequential increment was due to higher average steel selling prices and increase in steel shipments.
Europe: Crude steel production decreased 1.4% sequentially to 10.6 million tons due to production outages in the Fos plant and disposal of ArcelorMittal Zaragoza during the reported quarter. Sales were down 8.2% sequentially to $7.2 billion as a result of lower steel shipments.
Asia Africa and CIS (ACIS): Sales remained flat sequentially at $1.6 billion as higher average steel selling prices were offset by lower shipments. Crude steel production came in at 3.6 million tons, down 9.5% sequentially. Average selling prices were $419 per ton, up 2.4% sequentially.
Mining: Iron ore production was up 1.4% sequentially to 13.7 million metric tons. The sequential increase was due to higher production in Kazakhstan, Canada and the U.S.
Coal production increased 11.4% sequentially to 1.6 million metric tons. Revenues were at par sequentially at $809 million.
Cash and cash equivalents (including restricted cash) was $2.3 billion as of Sep 30, 2016 compared with around $3.6 billion as of Sep 30, 2015. The company’s long-term debt was around $12.6 billion as of Sep 30, 2016 as against roughly $17.9 billion as of Sep 30, 2015.
Net cash provided by operating activities was $876 million in the reported quarter compared with $68 million (including adjustments of non-cash items, mainly unrealized foreign exchange losses) in the year-ago quarter.
ArcelorMittal expects global apparent steel consumption to rise modestly (by about 0.5%) year over year in 2016.
Steel shipments in fourth-quarter 2016 are expected at par with the third-quarter steel shipments.
Lower steel prices in the U.S., along with the impact of rapidly rising metallurgical coal prices on steel spreads in other geographies, is expected to result in a decline in profitability in fourth quarter as compared with the third.
Factoring in an expected full year investment in operating working capital of roughly $1 billion (compared with earlier view of about $0.5 billion), driven by higher selling prices and raw material costs during 2016, ArcelorMittal sees cash flows from operating activities to surpass capital expenditure in 2016.
ArcelorMittal currently carries a Zacks Rank #2 (Buy).
Other well-placed companies in the basic materials space include Innophos Holdings Inc (IPHS - Free Report) and POSCO sporting a Zacks Rank #1 (Strong Buy) and Celanese Corp. (CE - Free Report) carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Innophos has an expected earnings growth of 51.4% for the current year.
POSCO has an expected earnings growth of 914.3% for the current year.
Celanese has an expected earnings growth of around 9.4% for the current year.
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