ArcelorMittal Net Loss Seen Narrowing Friday - Earnings Preview
May 05 2016 - 11:32AM
Dow Jones News
By Alex MacDonald
LONDON--ArcelorMittal (MT), the world's largest steelmaker by
volume, is scheduled to report third-quarter earnings on Friday.
Here's what you need to know:
EARNINGS FORECAST: The steelmaker is forecast to narrow its net
loss to $319 million in the first quarter compared with a net loss
of $728 million in the same quarter a year ago, according to a
Factset poll of six analysts. This takes into account a collapse in
the iron ore price and weaker steel prices due to increased
competition from Chinese steel imports.
EBITDA FORECAST: First-quarter earnings before interest, taxes,
depreciation and amortization, or Ebitda, are forecast to fall 34%
on the year to $914 million, according to a Factset poll of 11
analysts. All of the company's geographical divisions, with the
exception of North America, are forecast to post a fall in
year-on-year earnings as a result of regionally weaker iron ore and
steel prices. North America is an exception since it was hit hard
by a stronger dollar and influx of cheap steel imports in the first
quarter last year.
REVENUE FORECAST: First-quarter revenue is forecast to fall 18%
on the year to $14.1 billion, according to a Factset poll of ten
analysts.
What to Watch:
PRICE OUTLOOK: Steel prices in China, the U.S. and Europe have
started to pick up in the second quarter, thanks to an increase in
raw material prices, depleted steel inventories and lower import
pressure. RBC Capital Markets analyst Ioannis Masvoulas forecasts
steel imports into Europe and the U.S. to ebb in coming months
since an increase in Chinese steel prices makes it more attractive
to sell domestically than ship the product abroad. Analysts will be
interested to find out whether these current steel price hikes are
sustainable or not in coming quarters.
EARNINGS GUIDANCE: The Luxembourg-based steelmaker forecast in
February that it would generate in excess of $4.5 billion in
earnings before interest, taxes, depreciation and amortization or
Ebitda this year, assuming market conditions don't improve. Since
then, steel prices globally have started to pick up, prompting
analysts to wonder whether the earnings guidance is now too
conservative and therefore susceptible to upgrade.
ACQUISITIONS: ArcelorMittal surprised investors by announcing a
$3 billion rights issue in February. Since steel prices and demand
in the steelmaker's key market has picked up, prompting some
analysts to wonder whether the steelmaker may have surplus cash to
spend on acquisitions. ArcelorMittal a year ago reaffirmed its
interest in buying Italy's privately owned Ilva which is currently
held under special administration by the Italian government and
which owns Europe's largest steelworks in the southern Italian city
of Taranto.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
May 05, 2016 12:17 ET (16:17 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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