Steel companies’ financial health
Previously, we looked at the leverage ratios of the steel companies in our coverage universe. However, there are several other metrics by which you can understand a company’s financial health. In this article, we’ll look at the upcoming debt maturities for steel companies.
Some steel companies have significant debt maturities over the next three years. ArcelorMittal (MT) has a debt repayment schedule of more than $2.5 billion per year for the next three years. The company could face refinancing risk if steel market conditions continue to worsen.
ArcelorMittal has a medium-term target to reduce its net debt to $15 billion. However, looking at the current steel market conditions, this target looks tough for ArcelorMittal. Currently, the company forms 1.25% of the iShares MSCI Global Metals & Mining Producers ETF (PICK).
ArcelorMittal might look at selling non-core assets in order to strengthen its balance sheet. Last year, it sold its stake in the Gallatin steel plant to Nucor (NUE). The plant was a joint venture between ArcelorMittal and Gerdau S.A. (GGB).
Though AK Steel has precarious leverage ratios, the company does not face any long-term debt maturities over the next three years. U.S. Steel Corporation (X) also has no major debt maturities until 2016. However, between 2017 and 2018, the company has $950 million worth of debt maturities.
Nucor looks comfortable
Nucor has no major debt maturities until December 2017. Considering its lower leverage ratios and investment-grade credit rating, Nucor looks comfortable. The company has announced a share buyback program of $900 million to utilize the excess cash on its balance sheet. Steel Dynamics also does not face any major debt repayment until 2019.
In the next article, we’ll look at current valuations of the different steel companies.