ArcelorMittal Sees Steel Market Improving
ArcelorMittal said it remained cautious about a nascent recovery in its steel markets, and was considering “structural changes”.
(Bloomberg) -- ArcelorMittal said it remained cautious about a nascent recovery in its core steel markets, and was considering “structural changes” in light of the disruptions caused by the coronavirus pandemic.
“There are now signs of activity picking up, especially in regions where lockdowns have ended, but clearly it is prudent to remain cautious about the outlook,” Chief Executive Officer Lakshmi Mittal said in a statement. “Against this context, we are examining what structural changes might be required to ensure the company is well configured to prosper in the coming years as demand recovers.”
The global steel industry in April saw its biggest slump in production in a decade as demand from key consumers, including automakers, was hit hard by coronavirus lockdowns. While top producer China was quick to rebound, ArcelorMittal said a recovery in the global market was not without risks.
ArcelorMittal, the biggest steelmaker outside China, last quarter suspended dividends, cut its spending plans and withdrew its global guidance over uncertainty caused by the virus.
The worst of the demand environment is over, but the recovery will take time, especially if lockdowns are reintroduced, the company said Thursday. Second-quarter earnings before interest, taxes, depreciation and amortization were $707 million, beating analyst estimates. The shares rose as much as 4.3%.
Positive Measures
The company doesn’t expect a repeat of strict lockdowns and, under its base case, forecasts demand to normalize “in the medium term,” Chief Financial Officer Aditya Mittal told reporters on a conference call. The producer isn’t ready to disclose details of “structural” changes and permanent cost cuts, but will provide details with its full-year results, he said.
“There are still plenty of macroeconomic uncertainties, so I am not surprised that the company’s outlook statement is somewhat vague,” said Ingo Schachel, an analyst at Commerzbank AG. “I find it positive that the company has outlined clear measures to lower costs and cash needs during these challenging times.”
While contraction outside China has eased, output in some regions remains a long way off pre-pandemic levels, according to the World Steel Association. Steel demand -- a barometer of the global economy -- will take more than a year to fully recover even with massive stimulus measures worldwide, it said in June.
“The first six months of the year, and particularly the second quarter, have been one of the most difficult periods in the history of the company, with demand for steel considerably disrupted by the Covid-19 pandemic,” CEO Mittal said.
Other highlights:
- ArcelorMittal second-quarter Ebitda beats highest estimate
- Net debt fell to $7.8 billion by end of June, taking company closer to $7 billion target
- Company says $2 billion asset portfolio program is progressing
- The steelmaker plans to resume dividend payments once operating conditions normalize
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