Why ArcelorMittal’s profitability decreased

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The global steel giant

ArcelorMittal (MT) has 119 million tonnes of steel production capacity. It has an industrial presence in 22 countries spread across four continents. ArcelorMittal is the world’s largest steel manufacturer.

Its size can be seen when it’s compared to Japan. Japan is the second biggest steel producer. Japan’s annual steel production is less than ArcelorMittal’s annual steel capacity.

MT has operations spread across the globe. It has exposure to emerging and developed markets. We’ll discuss ArcelorMittal’s key markets.

key segments

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Understanding ArcelorMittal’s key markets 

ArcelorMittal has major operations in the developed markets of the North American Free Trade Agreement (or NAFTA). It also has operations in Europe. The operations in Europe account for more than 75% of its revenues.

It also has operations in Brazil, Africa, and Commonwealth of Independent States (or CIS). The above chart shows ArcelorMittal’s major geographical markets. The company also owns captive iron ore and coal mines. The mines help it fulfill its raw material requirements. Steel companies—like AK Steel (AKS) and US Steel Corp. (X)—also operate iron ore and coal mines.

ArcelorMittal suffers from low profitability

Even with its mammoth size, ArcelorMittal generated net profits of $22 million. Let’s look at Nucor (NUE). Its installed capacity is less than a quarter of ArcelorMittal’s capacity. However, its net profit in the third quarter was $147 million. This is almost seven times more than ArcelorMittal’s third quarter profits. This is one reason why Nucor pays steady dividends, while ArcelorMittal lags on this measure. Currently, NUE is a part of the SPDR S&P Metals and Mining ETF (XME).

Under the stewardship of Lakshmi N. Mittal, the company’s CEO, ArcelorMittal has been a successful business enterprise. Lakshmi Mittal is known for turning around sick steel companies.

What led to MT’s current circumstances? We’ll discuss this in more detail in this series. In the next part of the series, we’ll analyze ArcelorMittal’s third quarter results.

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