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ArcelorMittal profit beats expectations, but sees rising risks
Global Banking & Finance Review®
Company
By Charlotte Van Campenhout
AMSTERDAM (Reuters) -ArcelorMittal, the world’s second-largest steelmaker, reported higher than expected second-quarter earnings on Thursday helped by sharply increased prices, but saw threats from spiralling inflation, the war in Ukraine and China’s COVID-19 restrictions.
The Luxembourg-based company did not give a specific forecast, but highlighted downside risks.
Inflationary pressure presented a significant headwind, the company said, with a slowdown in real demand, exacerbated by destocking.
Steel prices were declining at a faster rate than those for raw materials.
Gas supply problems in Europe and COVID-related lockdowns in China were further risks.
ArcelorMittal said it was well placed to manage the gas supply risk, with sites in nine countries across Europe, meaning it could meet market demand.
It was also taking steps to reduce the gas consumption of its blast furnaces, such as through oxygen enrichment.
The company reports a second-quarter core profit (EBITDA) of $5.16 billion, topping the $5.09 billion forecast by analysts in a company-provided poll.
ArcelorMittal’s steel shipments in the April-June quarter were down 9.9% from a year earlier, largely due to the impact of war in Ukraine, but sales rose as its average selling price rose by 30.8%.
Separately, ArcelorMittal said it had agreed with the shareholders of Brazil’s CPS – Brazil’s Vale and South Korea’s Dongkuk and Posco – to buy the company for $2.2 billion. CSP is a major producer of semi-finished steel ‘slab’ with an expected lower carbon footprint due to a nearby renewable and green hydrogen energy project. ArcelorMittal said it had identified $50 million in synergy savings from the deal.
(Reporting by Charlotte Van Campenhout, Marine Strauss @StraussMarine; editing by Philip Blenkinsop and Jason Neely)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's overall financial performance and profitability.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
Steel shipments refer to the quantity of steel products delivered to customers or sold in a given period.
Core profit is a company's earnings derived from its primary business operations, excluding any income from non-operational activities.
A strategic acquisition is the purchase of a company or asset that aligns with the buyer's long-term business goals and objectives.
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