ArcelorMittal announces significant drop in earnings due to low steel prices
“Our first quarter results reflect the challenging operating environment the industry has faced in recent months. Margins were affected by declining steel prices due to weaker economic activity and persistent global overcapacity, as well as rising raw material costs, ”commented Lakshmi N. Mittal, Chairman and CEO of ArcelorMittal.
Net income of $ 414 million (approximately € 370 million) was about a third of what the company earned in the first three months of last year.
Nonetheless, ArcelorMittal maintained stable sales at US $ 19.2 billion thanks to higher shipments and higher iron ore prices.
Sales beat the analyst consensus calculated by Bloomberg, but earnings before interest, taxes, depreciation and amortization (EBITDA), which fell 34 percent to $ 1.65 billion, were below forecast.
ArcelorMittal raised its forecast for global steel demand growth this year from 1 percent to 1.5 percent, while lowering expectations from the European market by one percent.
The company said maintaining its investment grade rating remains its financial priority and has adjusted the company's target to reduce net debt from $ 6 billion to $ 7 billion.
The company's net debt rose by $ 1 billion to $ 11.2 billion in the quarter thanks to the introduction of new accounting measures.
ArcelorMittal's net debt rose to over $ 18 billion earlier this decade as steel demand declined.
In recent years, the company has championed measures to protect steel producers from unfair competition from subsidized Chinese producers.
“We are still faced with a high level of imports, especially in Europe, where the protective measures imposed by the European Commission have not been fully effective. While we are somewhat encouraged by the tighter pricing environment in China, this is not reflected in Europe, where, in order to adapt to current market conditions, we recently announced an annual production cut of three million tonnes in our flat steel operations. It is important to have a level playing field to combat unfair competition, and this includes adjusting the green border to ensure that imports to Europe cost as much as producers in Europe can charge, ”emphasized Mr Mittal.