(By Salman - iStockAnalyst Writer)ArcelorMittal (
) is scheduled to report second quarter results on Wednesday, July 29. Analysts on average expect the company to report 21 cents a share on revenue $15.20 billion. For the second quarter, ArcelorMittal expects EBITDA of about US$1.2 billion - US$1.5 billion. In the year ago period; ArcelorMittal reported earnings of $4.19 on revenue of $37.84 billion.
Luxembourg-based ArcelorMittal,
the world’s largest steelmaker, are grappling with prices that have yet to rebound after demand plunged the most since World War II. ArcelorMittal cut production to half of capacity, shed jobs and scaled back growth plans amid a worldwide recession. First-quarter net loss was $1.06 billion or $0.78 per share, compared to a net profit of $2.37 billion or $1.68 per share in the year-ago period. The company's results were impacted by exceptional charges of US$1.25 billion, chiefly related to inventory write-downs. Revenue tumbled to $15.12 billion from $29.81 billion in the prior-year quarter. Analysts on average were looking for loss of $0.39 a share on revenue of $15.95 billion.
Steel makers have been hit particularly hard by the global recession, which has led to sharply lower orders for the metal from key customers in steel-intensive industries such as construction and autos. Average steel prices in the US plummeted 6.7% in May to a five-year low as builders and manufacturers withheld orders amid the worst US recession in decades. Prices plunged 63% from a record $1 068/t in July, Purchasing magazine said in June. With U.S. steel prices up 17 percent from their May lows, steel manufacturing is slowly ramping up off all-time lows, with mill capacity utilization crossing the 50 percent threshold earlier this month. Though orders and prices have picked up recently, they remain well below record levels reached a year ago.
ArcelorMittal has boosted steel production and prices but is less positive on the market outlook. Gonzalo Urquijo, a member of ArcelorMittal's Group Management Board, recently said that demand is still weak. "We are experiencing what we have called 'a technical recovery', due to the low inventory levels currently existing in the warehouses of our customers....Real demand is still at very low levels," he added.
Early this month,
ArcelorMittal said it had liquidity of $23 billion at the end of the first quarter and raised more than $11 billion from share and bond sales this year. The company said further that it has made “good” progress toward its target of cutting debt by $10 billion this year. According to media reports, steelmaker is looking into a possible joint venture spin-off of its stainless steel business, worth around $3 billion.
The trade group Eurofer recently said it has been seeing
signs that the E.U. steel market is bottoming out. A report shows that output of the E.U.'s steel-using sectors - such as automotive and the construction sector - fell by almost 25% year-on-year in the first quarter of 2009; a similar drop in output is estimated for the second quarter. Steel demand dropped by 43% in the first half. According to the report destocking and weak activity in the steel using sectors will continue to depress apparent steel consumption in the third quarter of 2009. However, from the fourth quarter onwards the market is expected to see a low-level equilibrium as the negative effect of the stock cycle starts to ease. It expects apparent steel consumption to grow by almost 14% in 2010. Similarly, according to the World Steel Association, steel demand is expected to stabilize in the latter part of 2009 leading to a mild recovery in 2010.
Shares of the company are currently trading at roughly 14 times consensus 2010 EPS estimates. In terms of stock performance, ArcelorMittal shares have gained 28% since the beginning of the year. On Monday, shares of the company rose 17 cents or 0.47% to $37.50 in afternoon trade.
Disclosure: Author doesn’t own any of the stocks mentioned here.
