How Is ArcelorMittal Likely To Grow In The Next Two Years?

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Arcelor Mittal

ArcelorMittal (NYSE: MT) is the world’s largest steel producer and the future growth prospects of the company looks bright with its latest approval of the European Commission (EC) for its planned acquisition of Ilva. Although the latest market turmoil with respect to the global trade war will most likely make the company’s performance volatile in the near term, we expect the company to continue to display strength and display a revenue growth rate of 6% (CAGR) over the next two years.

The recent trade tariff imposed by the U.S. government on its steel imports would definitely remain a plus for ArcelorMittal’s NAFTA operations. However, contrary to the above benefit, the European Union (EU) currently holds the threat of being flooded with an increasing amount of cheap steel imports redirected from the U.S. as a consequence of the increased tariffs in the country. This would remain a detrimental factor for ArcelorMittal given that the company derives a significant proportion of its valuation from the EU. Nevertheless, The EU is currently investigating the impact of the same and is expected to take provisional measures to protect its steel industry in the near term. Given that such protective measures are taken, we expect the company’s European division to display a steady growth rate as the demand environment in the EU is expected to remain strong in the near term. The World Steel Association (WSA) expects steel demand in the EU to grow at a rate of 2% in 2018 and decline to 0.8% in 2019, supporting the revenue growth in the company’s European division.

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A significant highlight for the company has remained its Brazilian and the African & Commonwealth of Independent States (ACIS) markets which have displayed a prominent revenue growth rate of 25% and 30%, respectively in 2017. These divisions have historically displayed several years of subdued performances due to weaker economic strength in these respective countries. A revival of the economic growth of these countries is likely to translate into consistently higher regional revenue for ArcelorMittal in the upcoming years. As per the International Monetary Fund (IMF), the Brazilian and the CIS economy are expected to grow at a rate of 2.3% and 2.2%, respectively, in 2018 in comparison to an experienced growth rate of 1% and 2.1% 2017. This further enhances our outlook on the company’s performance in these emerging regions.

ArcelorMittal’s approval from the European Commission (EC) to acquire Ilva has been a major milestone for the company for closing its most anticipated deal. Ilva presents a significant growth opportunity for ArcelorMittal, especially in the southern European region, where its operations are currently limited. Although the ultimate strategic benefit of the deal is still under constant speculation, the deal will most likely provide the company with an immense growth opportunity. Our expectations for the company’s expected revenue growth rate is highlighted in our interactive dashboard How Is ArcelorMittal Likely To Grow. In case you do not agree with our assumptions, you can use our platform to reflect your outlook and understand the impact of this on the company’s revenue growth.

 

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