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How bold does a CEO have to be to say, “Our performance in the quarter reflects the results of the management action we have taken,” when the performance was a net loss of $345 million?
I’d say he’d have to be even bolder to make that statement especially when the company made a net profit of $92 million during Q1 of the previous year. Well, that’s exactly what the CEO of ArcelorMittal (NYSE:MT) did today with the release of its first quarter results.
ArcelorMittal’s share price chart looks like a train wreck. Frankly, it has looked like a wreck since the 2008-2009 financial crisis. Whilst many other companies have, in some cases significantly, regained ground, the world’s largest steelmaker’s share price plunged from above the 100.00 mark to 15.00 in late October 2008, then breathed a sigh of relief that lasted until it hit 49.02 in January 2010. From there it has slowly ground down to 13.03, recovering only slightly (3.22%) to 13.1715 when its pulse was checked at 15:39 UCT today.
The bold statement by CEO Lakshi Mittal was based on operational actions and underlying performance. Essentially, he was able to put a positive spin on an ugly report in which the company’s EBITDA dropped by 26% to $1.57 billion. It’s hard to cull any good news out of that, unless the general consensus was that it would fall to $1.32 billion – which is exactly what happened.
Waning sales and massive debt put MT behind the eight-ball when the financial crisis hit. The debt was acquired prior to the crisis when the company moved heavily into mergers and acquisitions. Unfortunately global demand for steel came to a near stand-still and the best laid plans of ArceloMittal went astray through no real fault of their own.
Now the board has to keep the company afloat by focusing primarily on reducing debt, which is within their ability to do. They were able to reduce their debt from $21.8 billion at the end of the year, to $18.0 billion at the end of Q1. At least that’s heading in the right direction.
The steel market is going to continue to struggle for the foreseeable future, but with MT’s idling of some of its plants and selling off billions of dollars of assets, as long as it continues to take the measures to stay operational and reduce debt, it would be fair to assume that, although they suffered more than most from the financial crisis and although their road to recovery is long than most, it will, nonetheless, regain investor confidence.
And, all the while, the company must be ready to respond to a potential unexpected demand for its products in order to retain its position as the as the world’s leading steel producer.
