By Alex MacDonald
LONDON--ArcelorMittal (MT) is forecast to report its third
consecutive quarterly net profit on Friday, as a broadly stronger
performance in its steel business more than offset the negative
impact of a falling iron ore price in its mining operations during
the fourth quarter.
Here's what you need to know:
EARNINGS FORECAST: ArcelorMittal is forecast to report a net
profit of $442 million for the fourth quarter, compared with an
impairment-weighted $1.23 billion net loss in the same period a
year earlier, according to a Factset poll of analysts'
expectations. The world's largest steelmaker should benefit from
the receipt of nearly $400 million in proceeds from the sale of its
50% stake in the Gallatin joint venture and the absence of hefty
impairment charges.
EBITDA FORECAST: Earnings before interest, taxes, depreciation
and amortization is forecast to fall 6.3% to $1.79 billion in the
fourth quarter, compared with the same period a year before.
However, Ebitda should still rise 5.4% rise to $7.28 billion for
the full-year, in line with the company's previous guidance for
Ebitda of more than $7 billion in 2014.
REVENUE FORECAST: Revenue is forecast to fall 3% to $19.3
billion in the fourth quarter compared with the same period a year
earlier, largely due to a slump in the iron ore price, which will
more than offset an increase in iron ore output during the period.
Revenue, will however rise 1.3% to $80.42 billion over the
full-year, buoyed by higher steel output.
WHAT TO WATCH:
OUTLOOK: Analysts will seek an update about the steelmaker's
global steel demand outlook for this year and for views on how
currency devaluation in Brazil, Europe, and the Commonwealth of
Independent states will affect its business. Analysts are
forecasting the company will give guidance of Ebitda toward $7.49
billion in 2015, according to a Factset poll. Anglo American, one
of the world's largest iron ore producers, forecasts global crude
steel production to grow by approximately 2% in 2015, with slower
growth of 1% to 2% in China and slightly stronger growth in the
rest of the world.
MORE IRON ORE WOES: Analysts are calling into question whether
the steelmaker will be able to ramp up its production capacity to a
targeted 84 million tons by the end of 2015, after an the Ebola
crisis in Liberia prompted many of the company's contract workers
there to declare force majeure on the its Liberian mine expansion
plan. The mine is Ebola free and still running normally, but the
delay may mean that the steelmaker will struggle to meet its
expansion target.
DEBT CONCERNS: ArcelorMittal dropped deeper into junk territory
when credit ratings agency Standard & Poor's downgraded the
company's debt due to weaker iron ore prices earlier this month.
The rating agency said it lowered its long-term credit rating on
ArcelorMittal to BB from BB+, but maintained a stable outlook on
the company's credit ratings. "We believe that ArcelorMittal has
some flexibility and capacity to support the current rating," it
noted. ArcelorMittal wants to reduce its net debt to $15 billion
over the medium term, but analysts aren't sure whether it's still
feasible to expect such a feat over the next year or two.
Write to Alex MacDonald at alex.macdonald@wsj.com
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