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ArcelorMittal’s 2014 Earnings Beat Management’s Guidance

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ArcelorMittal 2014 earnings

ArcelorMittal’s management had given guidance for full-year earnings before interest, taxes, depreciation, and amortization (or EBITDA) in excess of $7 billion. The company managed to deliver EBITDA of $7.2 billion, beating its guidance. Though the actual earnings have beaten expectations only modestly, the difference is significant if you look at headwinds from lower steel and iron ore prices. Let’s discuss these results in detail.

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Revenues decline

The chart above shows the key financials of ArcelorMittal (MT) in 4Q. As you can see, its revenues have declined by ~7% year-over-year. Steel shipments have increased over 1% since 4Q 2013. The decline in revenues is due to a sharp fall in steel prices. ArcelorMittal’s average steel selling prices dropped by more than 9% compared to 4Q 2013. Other steelmakers have also been negatively affected by the decline in steel prices.

Competition

Steel producers like Steel Dynamics (STLD) and Nucor (NUE) have reported lower profits in 4Q 2014 due to a drop in steel prices. For Steel Dynamics, average selling prices came down by $34 per metric ton from 3Q 2014. Nucor’s 4Q average steel selling price came down by 2% compared to 3Q 2014. It currently forms 2.52% of the Materials Select Sector SPDR ETF (XLB). AK Steel’s (AKS) average selling prices in 4Q dropped by ~10% compared to 3Q 2014.

Surprisingly, average selling prices for U.S. Steel (X) were unchanged over 3Q 2014. U.S. Steel attributes this consistency to a higher percentage of value-added products in its sales mix.

Even with the steep fall in steel prices, ArcelorMittal managed to protect its profit margins. We’ll discuss this in detail in our next part.

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