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 (PKX - Free Report) 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.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time? Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>