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ArcelorMittal Posts Profit in Q4, Earnings Top Estimates

Steel giant ArcelorMittalMT logged a net income of $403 million or 13 cents 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 16 cents per share in the reported quarter, topping the Zacks Consensus Estimate of 13 cents.

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.

ArcelorMittal Price, Consensus and EPS Surprise

ArcelorMittal Price, Consensus and EPS Surprise | ArcelorMittal Quote

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.

Price Performance

ArcelorMittal has outperformed the Zacks categorized Steel-Producers industry over a year, supported by its efforts to reduce debt, lower costs, expand capacity and improve efficiency. The company's shares gained 178.1% over this period while the industry saw a gain of 96.7%.

Zacks Rank & Key Picks

ArcelorMittal is a Zacks Rank #1 (Strong Buy) stock.

Other well-placed companies in the basic materials space include United States Steel Corporation X , Ternium S.A. TX and Kronos Worldwide, Inc. KRO , all sporting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

U.S. Steel has an expected long-term growth of 8%.

Ternium has an expected long-term growth of 18.4%.

Kronos has an expected long-term growth of 5%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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