uploads///part  net debt to EBITDA

How Are Steel Companies Managing Their Leverage Ratios?


Sep. 12 2015, Updated 3:06 p.m. ET

Steel companies’ leverage ratios

In such uncertain times, it has become important for companies in the commodity business to address their leverage ratios. Several mining companies have announced plans to cut their surging debt levels.

Let’s explore how steel companies are working on their leverage ratios.

  • AK Steel’s total debt was reduced by $86 million in 2Q15. This is the first quarter since 1Q12 that AK Steel’s debt levels have come down on a quarter-over-quarter basis. AK Steel’s net debt also came down by $72 million in 2Q15. You can define net debt as total debt minus cash and cash equivalents. As of the end of 2Q15, AK Steel has a net debt to trailing 12-month EBITDA (earnings before interest, taxes, depreciation, and taxes) of 5.86. Its net debt-to-EBITDA ratio went up in 2Q15 as a result of the company’s lower profits in 2Q15.
  • U.S. Steel Corporation’s (X) net debt went up by $20 million in 2Q15. Its trailing net debt-to-EBITDA ratio rose to 8.97 in 2Q15 compared to 3.20 in the previous quarter. As we’ve already seen, U.S. Steel’s EBITDA fell steeply in the quarter, negatively impacting its net debt-to-EBITDA ratio.
  • Nucor (NUE) was able to bring down its net debt by $415 million in 2Q15. Its net debt-to-EBITDA ratio fell to 1.38 in 2Q15 compared to 1.57 in the previous quarter, as you can see in the above graph.
  • Steel Dynamics’ (STLD) net debt also came down by $258 million in 2Q15. It had a trailing net debt-to-EBITDA ratio of 3.86 at the end of 2Q15 compared to 4.04 in the previous quarter. STLD currently forms 0.30% of the iShares Core S&P Small-Cap ETF (IJJ).
  • ArcelorMittal’s (MT) net debt-to-EBITDA ratio rose to 2.55 in 2Q15 compared to 2.43 in the previous quarter. The company has a net debt of $16.55 billion at the end of 2Q15, largely unchanged from the previous quarter. ArcelorMittal has a target to bring down its net debt to $15 billion in the medium term.

In the next part, we’ll look more at the recent performance of steel companies.

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