Why ArcelorMittal’s 3Q results are important for investors

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ArcelorMittal’s third quarter results

During the second quarter earnings conference call, ArcelorMittal’s (MT) management expressed that the third quarter earnings might be lower compared to the second quarter. The negative third quarter seasonality in Europe and planned maintenance activities at some of ArcelorMittal’s facilities were the reasons for the lower earnings. We’ll analyze the third quarter results in detail.

3 q summary

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Sales increased marginally compared to 3Q13

ArcelorMittal’s sales increased ~2%—compared to 3Q13. The steel shipments increased by ~3%—compared to the third quarter last year. The average selling prices came down by ~1% during the period. This can be seen in the previous chart.

Revenues of Steel Dynamics (STLD), and AK Steel (AKS) increased ~ 20%, year-over-year (or YoY). This was led by an increase in average selling prices and strong growth in steel shipments. Currently, STLD is a part of the SPDR S&P Metals and Mining ETF (XME).

Profitability rises over previous quarters

The earnings before interest, tax, depreciation, and amortization (or EBITDA) was $ 1.9 billion in the third quarter. This is significantly higher compared to the same period last year. The EBITDA per ton also improved by ~7%—compared to 3Q13. Although MT’s profitability improved compared to previous quarters, it’s still below its competitors.

ArcelorMittal’s management expressed hope that it should be able to deliver EBITDA in excess of $7 billion in 2014.

ArcelorMittal’s net income in the third quarter was $22 million. ArcelorMittal reported a net loss of $193 million in 3Q13. This is the second consecutive quarter where ArcelorMittal generated positive net profits. ArcelorMittal’s cost rationalization program has been one of the reasons behind the increased profitability. US Steel Corp. (X) is also working on a similar exercise to restore its long-term profitability.

In the next part of the series, we’ll look at the performance of ArcelorMittal’s various business segments. We’ll begin with its European operations. ArcelorMittal gets almost half of its revenues from European markets.

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