Overview
Luxembourg-based ArcelorMittal (MT) is the world’s leading steel and mining company. With a presence in more than 60 countries, it operates a balanced portfolio of cost competitive steel plants across both the developed and developing world. It is the leader in all the main sectors – automotive, household appliances, packaging and construction.
ArcelorMittal’s steel-making operations have significant geographic diversification with roughly 38% of its crude steel produced in the Americas, 47% in Europe and around 15% in other countries. Long-term contracts add to the stability of the company’s business. ArcelorMittal had steel shipments of 83.9 million tons and iron ore shipments of 55.9 million tons in 2016.
ArcelorMittal has changed its organizational structure, effective Jan 1, 2014, to reduce organizational complexity and layers, simplify processes, and take advantage of the scale effect within the regions. The new reporting segments now include – NAFTA (27% of 2016 sales), Brazil (10%), Europe (50%) and Asia Africa and CIS/ACIS (9%) with the Mining (4%) segment remaining unchanged.
ArcelorMittal maintains a strategy of selective divestment of non-core assets. As part of this, the company has sold its steel foundation distribution business in NAFTA (North American Free Trade Agreement), namely Skyline Steel and Astralloy to Nucor Corporation for a total consideration of roughly $605 million on a debt free and cash free basis.
ArcelorMittal, in January 2013, also agreed to sell its 15% stake in one of its iron ore operations, ArcelorMittal Mines Canada (AMMC), for $1.1 billion. The company sold the stake to a consortium led by South Korean steelmaker Posco and Taiwan-listed China Steel Corp. The transaction closed in May 2013. AMMC now retains 85% stake in the joint venture.
In November 2013, ArcelorMittal entered into a 50-50 joint venture with Nippon Steel & Sumitomo Metal Corporation to buy 100% of ThyssenKrupp Steel USA (TK Steel USA) from ThyssenKrupp for $1,550 million. The acquisition was closed in February 2014.
Last Earnings Report
Quarter Ending 12/2016
Report Date Feb 10, 2017
Sales Surprise -3.83%
EPS Surprise 23.08%
Quarterly EPS 0.16
Annual EPS (TTM) 0.66
ArcelorMittal Posts Profit in Q4, Earnings Top Estimates
ArcelorMittal logged a net income of $403 million or $0.13 per share in fourth-quarter 2016, as against a net loss of around $6.7 billion or $2.89 per share recorded a year ago. The results in the year-ago quarter was hurt by impairment charges of roughly $4.7 billion.
Barring one-time items, earnings came in at $0.16 per share in the reported quarter, topping the Zacks Consensus Estimate of $0.13.
Revenues edged up 1% year over year to $14,126 million in the quarter, aided by higher steel shipments and steel prices. Sales, however, trailed the Zacks Consensus Estimate of $14,689 million.
Total steel shipments rose 1.6% year over year to 20 million metric tons in the reported quarter. Average steel selling prices went up 3.5% year over year.
Segment Review
NAFTA: Crude steel production rose 1.2% year over year to 5.2 million tons in the fourth quarter. Steel shipments were up 9% year over year to 5 million tons. Sales rose 5.4% year over year to $3.8 billion. Average steel selling price fell 3.5% year over year.
Brazil: Crude steel production went down 2.5% year over year to 2.8 million tons in the quarter. Shipments edged down 1.1% year over year to 2.8 million tons. Sales slipped 16.3% year over year to $1.8 billion. Average steel selling price was flat year over year.
Europe: Crude steel production rose 1.9% year over year to 10.2 million tons in the reported quarter. Shipments edged up 0.7% year over year to 9.6 million tons. Sales inched up 0.9% year over year to $7.1 billion while average steel selling price rose 3.9%.
Asia Africa and CIS (ACIS): Sales climbed 22% year over year to $1.5 billion. Crude steel production came in at 3.6 million tons, down 0.5% year over year. Average selling prices increased 21.3% year over year.
Mining: Iron ore production was down 10.4% year over year to 13.9 million metric tons. Coal production increased 23.1% year over year to 1.8 million metric tons. Revenues jumped 18.4% year over year to $896 million.
Balance Sheet
Cash and cash equivalents (including restricted cash) was $2.6 billion as of Dec 31, 2016, down 36% year over year. The company’s long-term debt was around $11.8 billion as of Dec 31, 2016, down 32% year over year. Net debt decreased to $11.1 billion at the end of 2016 from $15.7 billion at the end of 2015.
Net cash provided by operating activities was roughly $1.6 billion in the reported quarter and $2.7 billion for full-year 2016.
Guidance
ArcelorMittal said that it entered 2017 with good momentum in the business and the market. The company will remain focused on making progress in three areas of cost optimization, product mix and volume growth.
ArcelorMittal expects global apparent steel consumption to rise 0.5%-1.5% year over year in 2017. In the U.S., it sees apparent steel consumption growth of 3% to 4% in 2017. The company also expects a modest growth (of 0.5% to 1.5%) in apparent steel consumption in Europe. Moreover, apparent steel consumption is forecast to rise 3% to 4% in Brazil. Demand is expected to stabilize in China in 2017.
The company expects capital spending to rise to $2.9 billion in 2017 from $2.4 billion in 2016. Cash needs of the business is expected to increase to $5 billion in 2017 from $4.5 billion in 2016. Interest expense is expected to decline to $0.9 billion in 2017 from $1.1 billion in 2016.
Recent News
ArcelorMittal, Votorantim Merge Brazil Long Steel Businesses - Feb 23, 2017
ArcelorMittal and Votorantim S.A. have agreed to combine their long steel businesses in Brazil. Pursuant to the definitive agreement, Votorantim’s long steel businesses in Brazil – Votorantim Siderurgia – will become a subsidiary of ArcelorMittal Brasil and Votorantim will hold a minority interest in ArcelorMittal Brasil.
The transaction does not include Votorantim’s long steel operations in Argentina and Colombia. Financial terms of the deal were not divulged.
The companies noted that the merger will result in a long product steel producer with annual crude steel capacity of 5.6 million tons and annual rolling capacity of 5.4 million tons. Production plants include ArcelorMittal Brasil’s sites at Monlevade, Cariacica, Juiz de Fora, Piracicaba and Itauna, and Votorantim Siderurgia’s sites at Barra Mansa and Resende.
The combination is expected to deliver cost, logistical and operational synergies. The production plants of the combined entity are geographically complementary, allowing closer proximity and improved levels of services to its customer base.