ArcelorMittal Returns to Profit in Third Quarter on Cost Cuts, Demand -- 2nd Update
November 08 2016 - 9:43AM
Dow Jones News
By Alex MacDonald and John W. Miller
LONDON-- ArcelorMittal reported a return to profitability
Tuesday thanks to cost cuts and strong demand for cars and
construction in the U.S.
The Luxembourg-based steelmaker reported a net profit of $680
million in the third quarter ended September 30, compared with net
loss of $711 million in the same period a year earlier. "Demand is
good and we are making good progress thanks to our cost
competitiveness," Chief Executive Lakshmi Mittal said in an
interview, citing line and plant closures and sales in the U.S. as
examples.
Operating income in the company's North American division
improved to $424 million from $88 million. The automotive and
construction sectors were the key drivers, Mr. Mittal said.
The fourth quarter, however, is expected to be clouded by the
rising price of coking coal, a key ingredient in steelmaking.
Prices have nearly tripled to around $236 a metric ton in the past
five months on declines in output around the world, particularly in
China, where authorities reduced the number of days when mining is
allowed, shrinking output.
Chief Financial Officer Aditya Mittal said the company was
"surprised by the rapid and unexpected rise." The increase "will be
reflected in steel prices, but in the interim there will be
negative impacts," he said.
Earnings came in slightly below expectations and shares in the
company fell 5.8% in afternoon European trading.
The company's share price has risen about 90% this year after
ArcelorMittal tapped shareholders with a $3.1 billion rights issue
earlier this year to shore up its balance sheet after a slump in
steel prices last year. The company has reduced its net debt to
$12.2 billion from $16.8 billion a year earlier.
Since then higher steel prices in its main markets, the U.S.,
Europe and in China, have provided some respite. Mr. Mittal, the
CEO, said he now expects a 0.5% rise in steel demand in China this
year after previously forecasting a decline, with orders helped by
home building and government-backed infrastructure projects.
That is still not enough to suck up the glut in Chinese metal,
which has flooded the world with excess steel and aluminum, and
remains a headache for ArcelorMittal. On Monday, the Commerce
Department launched an investigation into whether Chinese
steelmakers are transporting steel through Vietnam to evade U.S.
import tariffs.
CFO Mr. Mittal called for a "comprehensive trade solution", a
reference to broader and more stringent import tariffs, and for
China to "be serious about overcapacity."
ArcelorMittal's mining division, a $3 billion a year business
with mines in Liberia, Ukraine, Canada, the U.S. and elsewhere,
reported higher profit on higher iron-ore prices and lower unit
costs which more than offset lower output from Canada, Ukraine and
Liberia.
Write to Alex MacDonald at alex.macdonald@wsj.com and John W.
Miller at john.miller@wsj.com
(END) Dow Jones Newswires
November 08, 2016 09:28 ET (14:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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