Arcelor Mittal Posts Better Numbers For March 2012 Quarter

The world’s largest steel producing company, Arcelor Mittal, has posted better results for the March 2012 quarter on a QoQ basis. The net profit during the quarter stood at USD 11 million as compared to the loss of USD 1 billion in the previous quarter. The highlight of the result is the improvement in the EBITDA margin of the company on a sequential basis. The EBITDA margin improved by 110 basis points to 8.7 per cent. The improvement was on the back of changes in the employee benefit charges during the quarter. 

Moreover, the net sales of the company during the quarter grew by 2.34 per cent on a YoY basis to USD 22,703 million however the net profit declined by 98 per cent on a YoY basis to USD 11 million. The decline in net profit is on the back of high input prices and high interest cost as compare to previous year 2011. The increase in sales was mainly on account of the increase in the steel shipments by 1.2 per cent on a YoY basis to 22.23 million tonnes.

The company’s mining business has not done that well. The iron ore shipments declined by 24 per cent on a YoY basis to 11.7 million tonnes on the back of the seasonal effect in North America. However, being seasonally impacted during the quarter the next quarter will see a seasonal rebound.

Against the backdrop of a weak global steel scenario, the company has done better as compared to the previous few quarters when the steel demand remained muted due to a global slowdown.  The apparent steel consumption in China improved by 11 per cent on a YoY basis as against 0.5 per cent in the March 2011 quarter. And on the global front, steel consumption increased by 8.1 per cent on a YoY basis vs. 1.3 per cent in the March 2011 quarter.

A statement released the company says that the demand in North America continues to grow, driven by the automotive and white & yellow good sectors. However, it also mentions that Europe will continue to remain a big challenge for the company in the coming quarter also. In Northern Europe the uncertainty over the euro debt crisis and the falling demand in South Europe are hampering the company’s growth prospects.

As for the steel consumption outlook, the company expects the world steel consumption to grow by 4-4.5 per cent in 2012. We expect the apparent steel demand in Europe to decline slightly (-1 to -2 per cent) this year, but to grow in all the other regions. The consumption of other major economies such as China is expected to grow by 5 per cent as compared to the growth of 7 per cent in FY11 while Europe may witness a decline in consumption by -1 to -2 per cent.

On the price front the company has mentioned that the steel prices are currently lower, which is supported by the lower raw material prices that have cooled off in the international markets in the last one quarter. And as for guidance the company has stated that the first half of the year will remain better than the second half of 2011. 

In conclusion we believe that internationally steel companies will see better demand in the coming quarter on the back of improvement in demand from China and the US. Also, raw material prices have moved down on the back of weak steel demand. This will help the company to report better margins in the coming quarter