Mittal Steel (NYSE:MT)
Historical Stock Chart
5 Years : From Sep 2012 to Sep 2017
TAKING THE PULSE: European steel producers are set to post lower profits for the quarter ending March 31 as raw material costs remained high relative to broadly lower steel prices, prompting profit margins to shrink, particularly in Europe where steel demand remains weak.
Crude steel production within the bloc of 27 European Union member states fell 3.9% on year in the first quarter despite a 1.1% rise on year globally during the same period, according to the World Steel Association.
Meanwhile, average European composite steel prices dropped 11% during the same period to average $875 a metric ton, marking the steepest price decline out of the regions covered by data provider U.K. steel consultancy firm MEPS International Ltd.
European apparent steel demand is estimated to have fallen about 11% on year in the first quarter and will fall by a smaller 5.5% on year in the second quarter until swinging back to growth from the third quarter onward.
Apparent consumption will swing to growth as industrial activity in steel consuming sectors begins to recover later in the year, the European steel body, Eurofer reported.
"With prices dropping, steelmakers will certainly have their margins squeezed," said Peter Fish, managing director of MEPS. Eurofer forecasts EU apparent steel demand down 2.7% in 2012 before rising 2.5% in 2013.
"We are confident that in 2013 a further improvement in the business cycle will result in a modest rebound in real consumption and trigger some restocking," Eurofer's Director General Gordon Moffat said in a statement.
Companies such as ArcelorMittal and Thyssenkrupp have already shut down production capacity as result of weak demand. Analysts expect ArcelorMittal to outperform its Germany-based counterparts ThyssenKrupp AG (TKA.XE) and Salzgitter AG (SZG.XE) partly due to its exposure to markets outside of Europe and the fact that its mining division accounts for a large portion of its profitability and continues to benefit from relatively high iron ore and coking coal prices and expanding output for those two steelmaking raw materials.
Analysts will seek updates on when demand will pick up again and when a recent drop in steelmaking raw material prices will start to filter into the bottom line.
COMPANIES TO WATCH:
--- ArcelorMittal (MT) (May 10) (1Q12) ---
MARKET EXPECTATIONS: Average first-quarter Ebitda is forecast to drop 34% on year to $1.70 billion, according to a Dow Jones poll of eight analysts, due to high raw-material prices, broadly stable steel shipments and lower steel prices, particularly in Europe. Net profit is forecast to fall 89% to $120 million due in part to an exceptional charge related to the sale of a stake in Turkish steel producer Erdemir.
MAIN FOCUS: Analysts expect ArcelorMittal to announce higher second quarter Ebitda, in keeping with its previous guidance for the first half of the year as lower costs begin to filter into the bottom line and demand starts to recover. Analysts will seek an update on the company's steel supply and demand outlook, progress on its $1 billion structural savings program, and plans for additional non-core asset sales to lower its debt profile.
--- ThyssenKrupp AG (TKA.XE) (May 15) (2Q 11/12) ---
MARKET EXPECTATIONS: Second quarter fiscal quarter sales is forecast to fall 14% to EUR10.5 billion while Ebit is forecast to drop 83% to EUR86 million, according to a Dow Jones poll of four analysts. Commerzank said in a note that the European steel division is expected to report continued weak demand and lower selling prices while the Americas steel division report improved, but sees still significantly negative results as the coke battery C is still in its ramp up phase. The Materials Services division is expected to be affected by profit margin pressure in the European stockholding steel distribution segment while the Elevator Technology division is expected to see strong order intake and solid earnings for the quarter.
MAIN FOCUS: Analysts will seek an update on the company's progress in ramping up its coke battery C in Brazil, which should limit the costs of purchasing coke and paying for contracted electricity that isn't used, BHF Bank analyst Hermann Reith said. Analysts will also seek an update on ThyssenKrupp's European and Americas steel demand and supply outlook and will seek an update on the company's debt profile in light of the current operating environment.
--- Salzgitter AG (May 15 1Q12) ---
MARKET EXPECTATIONS: First quarter sales are forecast to rise 4.8% to EUR2.42 billion but pretax earnings is forecast to swing to a loss of EUR14 million from a pre-tax profit of EUR56.3 million in the first quarter of 2011, according to a Dow Jones poll of four analysts. Pre-tax earnings is forecast to fall due to losses in flat-rolled steel, Peiner Sections and sheet pilings; a loss in Tubes due to the underutilization of Europipe and a negative result at its Technology segment due to price pressure in the market for filling machinery, said Commerzbank in a note.
MAIN FOCUS: Analysts will focus on the company's second quarter outlook given the recent fall in raw material prices and the expected turnaround in the tubes division due to a large order from Australia. Analysts will also seek an update regarding the company's views on the European steel market.
-By Alex MacDonald, Dow Jones Newswires; +44 207 842 9328; firstname.lastname@example.org