Steel giant ArcelorMittal (MT) posted a net loss of $1.2 billion or 69 cents per share in the fourth quarter of 2013, narrower than a net loss of $3.8 billion or $2.47 a year ago.
Barring one-time items (excluding impairment and restructuring charges), loss was 31 cents per share, wider than the Zacks Consensus Estimate of a loss of 16 cents per share.
Revenues rose 2.8% year over year to $19.8 billion in the reported quarter but missed the Zacks Consensus Estimate of $20.1 billion. Sales also increased 1% sequentially due to improved marketable mining shipments volumes. Steel shipments rose 4.5% year over year to 20.9 million metric tons.
For full-year 2013, ArcelorMittal posted net loss of $2.5 billion, or $1.46 per share, lower than a net loss of $3.4 billion, or $2.17 per share. Barring one-time items (excluding impairment and restructuring charges), loss was 90 cents per share.
The company’s revenue decreased 5.7% to $79.4 billion in 2013 from $84.2 billion in 2012 mainly due to lower average steel selling prices.
Segment Review
Flat Carbon Americas: Production increased 5.4% year over year but declined 1.4% sequentially to 6.3 million tons in the quarter. The sequential decline was due to operational issues in Brazil and annual maintenance in the company’s Canadian operations. Average selling prices went up 2.8% year over year to $819 per ton. Sales climbed 4.8% year over year and were almost flat sequentially at $4,906 million. Sales were impacted by lower shipments, partly offset by higher average steel selling prices.
Flat Carbon Europe: Revenues from this segment rose 7.1% year over year and 3.8% sequentially to $6,576 million. The sequential increase in sales was attributable to higher steel shipment volumes and higher average steel selling prices. Average selling prices showed a year-over-year decrease of 3.7% to $816 per ton. Production increased 16.1% on a year-over-year basis but was almost flat sequentially at 7.4 million tons.
Long Carbon Americas and Europe: Revenues rose 2.3% year over year and 4.3% sequentially to $5,353 million due to higher average steel selling prices, mainly in the Long Carbon Europe and Tubular businesses. Steel production increased 6.9% from a year ago but declined 2.9% sequentially. The sequential decline was due to lower production in the Long Carbon Americas division. Average selling prices inched up 1% from the prior-year quarter to $866 per ton.
Asia Africa and CIS (AACIS): Sales dropped 8.5% from the year-ago quarter and showed a 7.7% decrease from the previous quarter to $1,949 million. Lower steel volumes and lower average steel selling prices led to the sequential decline. Production recorded a 15% year-over-year decline and was flat sequentially at 3.7 million tons. Average selling prices were $589 per ton compared with $611 per ton in the year-ago quarter.
Distribution Solutions: Revenues declined almost 9.7% year over year but increased 1.6% on a sequential basis to $3,481 million due to higher steel shipment volumes. Average steel selling prices was flat year over year at $833 per ton.
Mining: Iron ore production rose 10% year over year and 3.4% sequentially to 15.4 million tons in the reported quarter due to increased production from the Canadian mining operations. Coal production remained flat both on year–over-year basis and sequentially at 2 million tons. Revenues climbed 26.7% year over year and improved 1.6% sequentially to $1,621 million.
Balance Sheet
Cash and cash equivalents (including restricted cash) amounted to $6.2 billion as of Dec 31, 2013, compared with $4.5 billion as of Dec 31, 2012. The company’s long-term debt was $18.2 billion as of Dec 31, 2013, down from $22 billion as of Dec 31, 2012.
New developments
In Nov 2013, ArcelorMittal announced that it has entered into a 50:50 joint venture with Nippon Steel & Sumitomo Metal Corporation to buy 100% of ThyssenKrupp Steel USA from ThyssenKrupp for $1,550 million. The acquisition, which is subject to closing conditions, is expected to close in first-quarter 2014.
Outlook
ArcelorMittal expects earnings before interest, taxes, depreciation and amortization (EBITDA) to be about $8 billion for 2014. The company expects net interest expense to be roughly $1.6 billion in 2014, down from $1.8 billion in 2013 mainly due to lower average debt.
Capital expenditure is expected to be in the range of $3.8–$4 billion in 2014, a modest increase from 2013, with some of the expected spending from last year rolling into this year as well as the continuation of the phase II Liberia project. The company maintains its medium-term net debt target of $15 billion
Net debt in the first quarter of 2014 is expected to increase due to investment in working capital as well as the announced redemption of the perpetual bond ($650 million).
During the investor day held in Mar 2013, the company announced a new management gain improvement target of $3 billion by the end of 2015. As of Dec 31, 2013, $1.1 billion of improvements had been achieved on an annualized run-rate basis.
ArcelorMittal currently holds a Zacks Rank #2 (Buy).
Other companies in the steel industry with favorable Zacks Rank include Companhia Siderurgica Nacional (SID), Ternium S.A. (TX) and United States Steel Corporation (X). All three hold a Zacks Rank #1 (Strong Buy).
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