ArcelorMittal’s Q2 2016 Earnings Preview: Cost Reduction Initiatives To Offset Impact Of Weak Steel Prices

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Arcelor Mittal

We expect ArcelorMittal to match its Q2 2015 earnings result in its upcoming Q2 2016 earnings announcement despite significant pricing pressure arising from weakness in steel prices. The company announced a series of steps for 2016 at the time of the announcement of its Q4 2015 results which are expected to boost the company’s EBITDA in 2016 by $1 billion relative to its Q4 2015 annual run rate level. These steps include an improved value-added product mix with the ramp up of output from the company’s Calvert steel plant (which produces steels used in automotive applications), a further 10% year-over-year reduction in the company’s iron ore mining cash costs, and the impact of cost rationalization initiatives implemented at the company’s NAFTA and Europe steel operations. These initiatives will offset the impact of weak steel pricing on the company’s operations  with steel prices impacted by subdued economic conditions in Europe and Brazil and competition from cheap steel imports in Europe and the U.S. Our pricing forecasts for ArcelorMittal’s various divisions are indicative of this pricing pressure.

MT Q2 2016 Earnings Preview 1

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ArcelorMittal

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