Key Takeaways From ArcelorMittal’s First Quarter Results
ArcelorMittal (NYSE: MT) reported its first-quarter 2018 results and conducted a conference call with analysts on May 11. The company reported an adj-EPS of $1.17, vis-à-vis an adj-EPS of $0.33 reported in the same period last year. Revenue displayed a 19% year-on-year (y-o-y) growth and was reported at $19.19 billion. The company benefited from a favorable steel market environment with higher realized steel and iron ore prices in the first quarter translating into improved performance, while steel and iron ore shipment volume displayed moderate growth.
ArcelorMittal reported an EBITDA of $2.5 million, almost 13% higher y-o-y and 9% ahead of average consensus market estimates. The company’s strong performance was led by a strong improvement in its average realized steel prices across geographic locations. Average steel prices displayed an 18.2% y-o-y improvement, with the double-digit growth experienced in Europe, ACIS, and Brazil. Steel prices gained strength in the first quarter as a result of improving economic conditions across the globe. ArcelorMittal expects this trend to continue throughout 2018, with global (ex-China) apparent steel consumption (ASC) to grow between 3%-4%. In comparison to 2017, a relatively higher growth rate is anticipated for the U.S. (between 1.5% to 2.5%), with an increased machinery and construction demand in the region and in Brazil (between 6.5% to 7.5%) as the economy revives from its 2 years of depression.
Furthermore, the company has maintained its focus to de-lever the company and has been reaping benefits in the form of lower interest expense and lower cost of debt. Net interest expense in Q1 2018 was $164 million, 26% lower y-o-y as a result of the aforementioned factors. Although the company’s net debt in the first quarter increased by approximately one billion (in comparison to Q4 2017) as a consequence of increased working capital investment, share buyback, and a negative forex impact, the company continues to remain focused on reducing its net debt level to $6 billion in order to maintain its balance sheet strength.
We have kept our key expectations for the company’s 2018 results unchanged based on the latest results. These have been highlighted in our interactive dashboard where you can make changes to our assumptions to arrive at your own fair price estimate for the company.
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