MT Arcelor Mittal New

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)

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