Steel giant ArcelorMittal (
) reported net income of $52 million or 3 cents per share in the
second quarter of 2014, contrary to a net loss of $0.8 billion or
44 cents a year ago.
Revenues went up 2.5% year over year to $20.7 billion in the
reported quarter. Sales increased year over year due to improved
steel shipments and higher marketable iron ore shipments. Total
shipments rose 2.9% year over year to 21.5 million metric tons in
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,
Brazil, Europe and Asia Africa and CIS (ACIS) with the Mining
segment remaining unchanged.
Crude steel production increased 7.6% year over year but decreased
1.7% sequentially to 6.2 million tons in the quarter. The
sequential decline was due to planned blast furnace reline at
Indiana Harbor No.7 and unplanned maintenance downtime at
Cleveland. Average selling prices went up 1.8% year over year to
$856 per ton. Sales increased 13.1% year over year and 10%
sequentially to $5,423 million. The sequential increase in sales
was attributed to higher shipments and higher average steel selling
Crude steel production fell 7% year over year and 1.3% sequentially
to 2.4 million tons in the quarter. Sales decreased 7.1% year over
year but rose 3.2% sequentially to $2.4 billion in the quarter. The
sequential increase in sales was due to higher average steel
selling prices. Average selling prices went down 2.6% year over
year to $934 per ton but rose 4.4% sequentially.
Crude steel production increased 3.9% year over year and was almost
flat sequentially at 10.9 million tons in the quarter. Sales
declined 0.3% year over year but increased 1.9% sequentially to
$10.5 billion due to higher steel shipment volumes. Average steel
selling prices declined 1% year over year to $799 per ton.
Asia Africa and CIS (ACIS):
Sales rose 6.9% from the year-ago quarter and 14.6% from the
previous quarter to $2.3 billion. Improved volumes and higher
average steel selling prices led to the sequential increase in
sales. Production recorded a 2.2% year-over-year decline and a 5.5%
sequential increase to 3.6 million tons. The sequential increase in
production was due to higher production in Ukraine and Kazakhstan,
partly offset by lower production in South Africa following the
reline of the Newcastle blast furnace, which commenced during the
quarter. Average selling prices were $592 per ton compared with
$628 per ton in the year-ago quarter.
Iron ore production rose 10.7% year over year and 11.7%
sequentially to 16.6 million tons in the reported quarter due to
higher production from the Canadian mining operations which were
hurt by harsh winter conditions in the previous quarter. Coal
production declined 10% year-over-year and was flat sequentially at
1.8 million tons. Revenues rose 2.4% year over year and 10.1%
sequentially to $1,383 million.
Cash and cash equivalents (including restricted cash) amounted
to $4.4 billion as of Jun 30, 2014, compared with around $6.9
billion as of Jun 30, 2013. The company's long-term debt stood at
to $18.1 billion as of Jun 30, 2014 compared with $18.9 billion as
of Jun 30, 2013.
In Jun 2014, ArcelorMittal completed the divestment of its 78%
stake in European port handling and logistics company ATIC Services
S.A. (ATIC) to HES Beheer for €155.4 million (roughly $212
million). With this transaction, HES Beheer now owns 100% stake in
ATIC where it previously held 22% stake. The transaction reflects
ArcelorMittal`s strategy of selective deposal of non-core
On Jul 29, 2014, ArcelorMittal and Billiton Guinea B.V. inked a
sale and purchase deal for the acquisition by ArcelorMittal of a
43.5% stake in Euronimba Limited (Euronimba), which holds a 95%
indirect stake in the Mount Nimba iron ore project in Guinea. The
Project comprises a 935 million ton direct shipped ore resource
with an average grade of 63.1% Fe. ArcelorMittal also entered into
a sale and purchase pact with Compagnie Française de Mines et
Metaux (a member of the Areva group) for the purchase of its 13%
interest in Euronimba. The closing of these two deals would give
ArcelorMittal a 56.5% stake of Euronimba.
ArcelorMittal now expects earnings before interest, taxes,
depreciation and amortization (EBITDA) in excess of $7 billion for
2014 (down from $8 billion expected earlier) as a result of weaker
than expected iron ore price. The company still expects global
apparent steel consumption (ASC) to increase roughly 3%-3.5% in
Steel demand growth in Europe remains strong and the company has
increased its forecast for ASC growth in 2014 to 3%-4% and, in the
U.S, it has raised the projection to a range of 5%-6%. In China,
the company foresees signs of stabilization due to the government's
targeted stimulus, and sees steel demand in the range of
ArcelorMittal expects net interest expense to be about $1.6
billion in 2014 compared with $1.8 billion in 2013 mainly due to
lower average debt.
Capital expenditure is expected to be roughly $3.8-$4 billion, a
modest rise over 2013, with some of the expected expenditure from
2013 rolling into 2014 as well as the continuation of the phase II
ArcelorMittal does not plan to ramp-up any major steel growth
capital expenditure or increase dividends until the medium term $15
billion net debt target has been achieved and market conditions
ArcelorMittal currently has a Zacks Rank #3 (Hold).
Other companies in the steel industry with favorable Zacks Rank
include Grupo Simec S.A.B. de C.V. (
), Olympic Steel Inc. (
), and ThyssenKrupp AG (
). While Grupo Simec sports a Zacks Rank #1 (Strong Buy), Olympic
Steel and ThyssenKrupp carry a Zacks Rank # 2 (Buy).
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