Shares of ArcelorMittalMT are getting hammered following its lackluster fourth-quarter 2015 results. Its shares tanked to a fresh 52-week low of $3.16 yesterday, before eventually closing marginally higher at $3.23.
The world's biggest steel maker has seen its shares decimate roughly 66% over a year, hit by a slump in steel prices. The stock is also down around 23% year to date.
What's Weighing on MT?
ArcelorMittal racked up a net loss of $6.7 billion in the fourth quarter, which ballooned from a loss of $711 million in the year-ago quarter. Lower iron ore & steel prices and hefty impairment charges (of $4.7 billion) mostly related to its mining assets dragged down the bottom line in the quarter.
Lower steel shipments and prices also hurt the company's revenues in the quarter. Its sales plunged around 25% year over year to roughly $14 billion. Cheap Chinese exports weighed on steel prices in the quarter. The company's shares took a tumble after the weak earnings report last Friday, ending the day nearly 10% lower at $3.73.
ArcelorMittal expects its profits to decline sequentially in first-quarter 2016. Its profit forecast for 2016 also indicates a year over year decline as weak steel demand and depressed prices are expected to weigh on its results for the year. Moreover, the company plans no dividend payment in respect of the 2015 financial year considering the challenging operating environment.
ArcelorMittal remains hamstrung by weak steel industry fundamentals. The steel industry is reeling under the effects of excess capacity. The company also continues to contend with difficult global economic environment, especially in its biggest markets Europe. Its European business remains under pressure due to lower steel selling prices. In addition, steel consumption is expected to be lower in China and Brazil this year.
Moreover, China (accounts for around half of global steel output) continues to pose a threat to the global steel industry. Accelerated steel exports from the country amid waning domestic demand and a cooling economy have been hurting steel prices.
China's move to devaluate its currency has triggered increased steel exports from the country as a cheaper yuan is making Chinese exports less expensive in overseas markets. China's total steel exports swelled 20% year over year to 112.4 million tons in 2015, per data released by the General Administration of Customs. Steel exports from the country topped 100 million tons for the first time last year.
Moreover, lower iron ore pricing hurt ArcelorMittal's mining business in 2015 and is expected to remain a headwind moving ahead. Seaborne iron ore prices tumbled 43% in 2015.
ArcelorMittal is taking aggressive actions to pare debt. The company, last week, announced its plans to raise $3 billion in fresh capital. The capital raise is expected to complete in first-half 2016.
ArcelorMittal also sold its 35% stake in Spain-based automobile parts maker Gestamp Automocion. The company expects these actions to help it reduce its net debt by $4 billion to less than $12 billion. It ended 2015 with net debt of $15.7 billion.
ArcelorMittal is a Zacks Rank #4 (Sell) stock.
Better-ranked companies in the basic materials sector include AK Steel Holding Corporation AKS , Harmony Gold Mining Company Limited HMY and Agnico Eagle Mines Limited AEM , all carrying a Zacks Rank #2 (Buy).
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