By Alex MacDonald
LONDON-- ArcelorMittal warned on Friday that it will miss its
target for full-year earnings as the world's biggest steelmaker by
shipments bears the brunt of lower commodity prices, despite
swinging to a second-quarter net profit for the first time in
nearly two years.
ArcelorMittal said higher steel and iron-ore shipments more than
offset lower prices in the three months to the end of June compared
with a year earlier.
The company, which produces more steel than its next two biggest
competitors, swung to a net profit of $52 million in the second
quarter, compared with a net loss of $780 million a year earlier.
Sales rose 2.5% to $20.7 billion.
Earnings before interest, taxes, depreciation and amortization
or Ebitda, rose 3.7% to $1.76 billion in the second quarter,
missing analysts' expectations of $1.86 billion based on a FactSet
poll of nine analysts, largely due to a $90 million charge related
to the settlement of U.S. antitrust litigation on price fixing.
The group said its full-year Ebitda would likely be more than $7
billion, below a previous forecast of around $8 billion. The
downgraded forecast reflected a likely average iron ore price of
$105 a metric ton for this year, compared with $120 previously
expected, which will hurt the profitability of its mining division,
the company's largest earnings driver.
ArcelorMittal invested heavily in developing new iron ore mines
during the recent decadelong commodity boom to protect itself--even
profit from--burgeoning iron-ore prices. The price of the
steelmaking raw ingredient rose as high as $186 a ton in 2010 as
insatiable appetite from China, the world's largest consumer of
iron ore, continued to grow.
But the benchmark iron ore price has fallen to $95.60 a metric
ton as of Thursday, reflecting a surge in supply, particularly from
Australia, that has outstripped demand growth just as the
commodities boom has begun to sputter.
ArcelorMittal expects that growing iron-ore shipments from its
mine expansions will offset some of the price decline, but not
enough to support its previous earnings guidance.
The company also expects the profit margins of its U.S. and
European steel operations to benefit from a demand recovery
there.
"Looking ahead, indicators in both Europe and the U.S., which
together account for two thirds of our shipments, continue to be
positive and we have increased our steel demand forecasts for both
markets," said Lakshmi Mittal, the company's chief executive.
ArcelorMittal raised its European steel demand forecast to 3% to
4% growth this year from up to 3% previously, and expects demand
from the area comprising the U.S., Canada and Mexico to grow 6%
instead of 5% this year.
The growth in Europe and North America, however, will be largely
offset by a decline in Chinese steel demand, which the steelmaker
now expects to grow by up to 3.5% instead of up to 4%.
ArcelorMittal kept its global demand forecast unchanged at 3% to
3.5% for 2014.
Write to Alex MacDonald at alex.macdonald@wsj.com
ArcelorMittal has warned that lower iron-ore prices will dent
its earnings in 2014. The headline on an earlier version of this
article mistakenly referred to steel prices.
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