ArcelorMittal Narrows Losses, Cautions on China
May 06 2016 - 3:50AM
Dow Jones News
LONDON—ArcelorMittal narrowed its net loss in the first quarter
and forecast improved earnings to come as steel prices begin to
recover, but cautioned that excess steel capacity in China still
remains a concern.
The Luxembourg-based steelmaker, the world's largest by
production accounting for some 6% of global steel output, reported
a net loss of $416 million in the three months ended March 31,
2016, compared with a $728 million net loss in the same period a
year earlier. The narrower net loss stemmed in part from a swing to
a small foreign exchange gain last quarter compared with a foreign
exchange and net financing loss of $756 million in the same quarter
a year earlier.
Still, the steelmaker incurred a net loss due to a 22% drop in
revenue to $13.4 billion as a result of lower steel and iron ore
prices as well as lower steel and iron ore shipments. This caused
its keenly watched earnings before interest, taxes, depreciation
and amortization, or Ebitda, to drop 33% to $927 million.
"Our results for the first quarter reflect the very tough
operating conditions in the second half of 2015," said Chief
Executive Lakshmi Mittal. "Since that time we have seen a recovery
in spreads in our core markets to more sustainable levels, which is
expected to result in improved results in the coming quarters," he
said. Mr. Mittal, however, cautioned that the global steel market
remains fragile given excess steel capacity in China. He urged
governments to remain vigilant about unfair trade.
Steelmakers have been hammered globally by an onslaught of cheap
steel exports from China, the world's largest steel producer. China
produced more steel than all the other countries combined last year
even as steel demand slackened at home. The wave of cheap Chinese
steel shipments prompted European Union and U.S. governments to
slap import tariffs to protect their steelmakers, but not quickly
enough in the EU to stem the bleeding.
ArcelorMittal earlier this year raised €2.8 billion, or $3.2
billion, through a rights issue to strengthen its balance sheet
given a protracted steel price rout globally. Other steelmakers
such as Sweden's SSAB AB followed suit.
ArcelorMittal's shares rallied after the rights issue was
announced and are up 55% so far this year, buoyed by a pickup in
steel prices in its key U.S. and European markets as well as
China.
The company expects the impact of rising steel prices to be
fully reflected in its earnings in the second half of the year but
kept this year's Ebitda guidance of more than $4.5 billion
unchanged.
Jefferies analyst Seth Rosenfeld said he was "slightly
surprised" that ArcelorMittal didn't raise its guidance, although
he noted that ArcelorMittal doesn't necessarily need to revise the
guidance since it is open-ended.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
May 06, 2016 03:35 ET (07:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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