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How Brazil and Mining Added Flavor to ArcelorMittal’s 2Q Performance

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2Q16 performance

The Brazil (EWZ) and Mining segments have been ArcelorMittal’s (MT) Achilles heels for quite some time now—and for obvious reasons. While Brazil has been plagued by recessionary conditions for the last several quarters, mining operations have been hurt by lower iron ore prices. We should note that ArcelorMittal is among the top five iron ore miners globally. Other integrated miners including U.S. Steel (X), Gerdau (GGB), and POSCO (PKX) also have iron ore mining operations.

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Mining

  • In 2Q16, the Mining segment generated an EBITDA (earnings before interest, tax, depreciation, and amortization) of $163 million as compared to $98 million in the sequential quarter.
  • The segment also managed to generate an operating profit of $62 million in the quarter after posting an operating loss for six consecutive quarters. ArcelorMittal attributed the improved performance to seasonally higher shipments and higher iron ore prices.

Brazil

  • The graph above shows the financial performance of ArcelorMittal’s Brazil operations. ArcelorMittal generated revenues of $1.5 billion in Brazil in 2Q16 as compared to $1.3 billion in the sequential quarter. The EBITDA also rose to $213 million in 2Q16 from $145 million in the sequential quarter.
  • According to ArcelorMittal, while the domestic demand in Brazil remains subdued, the company’s Brazilian operations benefited from higher international steel prices. We should note that MT uses its Brazilian operations as an export hub.

Until now, we’ve looked at ArcelorMittal’s 2Q16 financial performance. In the next and final part of the series, we’ll see what the company’s management had to say about the industry and company outlook during its 2Q16 earnings call.

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