ArcelorMittal enjoys biggest earnings jump in seven years
London — ArcelorMittal’s biggest earnings jump in seven years and forecasts for better steel demand shows the recovery in commodities is gaining strength. The shares added 6.5% to €8.01 in Amsterdam trading, extending a rally that has more than tripled the value of the world’s top steelmaker in the past year.
Earnings before interest, taxes, depreciation and amortisation jumped 20%, the most since 2010, bolstered by higher prices for steel and iron-ore. The Luxembourg-based company has undergone a dramatic turnaround in the past year as steel prices jumped on the back of stronger economic growth in China and a broader commodities recovery.
ArcelorMittal said its main financial goal is to pay down debt and return to an investment-grade credit rating, so the board decided against paying a dividend. "We model significant further earnings gains" based on better steel demand and expanding margins, Seth Rosenfeld, an analyst at Jefferies in London said. "The Europe performance is very positive for the company. It’s the biggest earnings driver."
Global steel consumption may rise as much as 1.5% in 2017, after a 1% increase last year, the company said. European steel prices surged 82% last year, while benchmark rates for iron ore and coking coal, which ArcelorMittal also mines, also jumped.
Earnings before interest, taxes, depreciation and amortisation rose to $6.26bn last year, the company said. The figure beat the $6.14bn average estimate from a survey of analysts. Ebitda in the fourth quarter was $1.66bn, 51% higher than a year ago.
While the company stopped providing earnings guidance, the forecast for more steel consumption suggests profit will increase further, analysts from Goldman Sachs said. Net debt decreased by $4.6bn to $11.1bn at year-end, the company said.
Aditya Mittal, the company’s chief financial officer, said it would benefit from more spending on US infrastructure and policies that enforce fair trade. "There needs to be a comprehensive solution to the Chinese over-capacity issue, as well as the subsidies that they grant to their steel industry," he said. "We’re very supportive of the US enforcing existing rules, and ensuring there’s a level playing field."