By Ed Frankl

 

ArcelorMittal shares rose in Thursday trading after it lifted its steel-demand outlook and posted results that beat expectations as the market recovers from pandemic-related slumps.

At 1020 GMT, ArcelorMittal shares were up 3.4% at EUR29.46.

The Luxembourg-based company, one of the world's biggest steel producers, raised its 2021 growth outlook on global steel consumption to between 7.5% and 8.5%, above previous estimates of 4.5% to 5.5%.

It posted a swing to second-quarter net profit of $4.01 billion in the quarter, well above analysts' estimates of $3.10 billion, polled by FactSet.

Earnings before interest, taxes, depreciation and amortization rocketed to $5.05 billion from $707 million last year, in its best quarter and strongest six-month performance since 2008, the company said.

"Our performance is clearly very welcome after the unprecedented disruption the business faced in 2020," ArcelorMittal Chief Executive Aditya Mittal said.

Strong demand, coupled with low inventories in the supply chain, led to significant increases in steel spreads, ArcelorMittal said. Actions by the Chinese government to subdue steel manufacturing to meet climate targets also helped prices to rise.

"Steel margin spreads increased significantly in the quarter [...] while spot steel prices are implying a potential for even better magnitude of increase in margins in 3Q," analysts at Citi said.

Given order book and contract lags, the improvement in the market isn't yet fully reflected in 2Q results, ArcelorMittal said.

"That ArcelorMittal sees demand further improving into the second half is another positive sign for the sustainability of current supply-demand balance and robust pricing/margins," the U.S. bank Jefferies said.

The company also launched a $2.2 billion share-buyback program given its strong performance and cash generation, as well as the redemption of Cleveland Cliffs preference shares following ArcelorMittal USA's sale late last year.

However, mining results were disappointing, with strikes in Canada and a rail accident in Liberia leading to loss of volume, the company said.

ArcelorMittal also pledged to invest $10 billion in low-carbon investments to reduce carbon intensity --a measure of the emissions companies add to the atmosphere for every dollar of sales-- by 25% before 2030.

Executive pay would be linked to hitting emissions targets, as ArcelorMittal aims to provide "compelling commercial opportunities given the evident customer appetite for green steel solutions."

Earlier this month, the company said it would open its first zero-carbon-emissions steel plant in northern Spain, switching to renewable energy and introducing new technologies that replace the use of fossil fuels in the steel-making process.

 

Write to Ed Frankl at edward.frankl@dowjones.com

 

(END) Dow Jones Newswires

July 29, 2021 06:53 ET (10:53 GMT)

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