ArcelorMittal Joins U.S. Steel and AK Steel with 3Q16 Revenue Miss



3Q16 revenue miss

ArcelorMittal (MT) reported revenues of $14.5 billion in 3Q16. In contrast, ArcelorMittal posted revenues of ~$15.6 billion in 3Q15 and ~$14.7 billion in 2Q16, and the company’s 3Q16 revenues fell on a sequential as well as a yearly basis while falling short of analysts’ expectations. According to Bloomberg, analysts expected ArcelorMittal to post revenues of $15.0 billion in 3Q16.

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Peer companies

ArcelorMittal, along with most other US-based steelmakers (XME), missed its consensus revenue estimates in 2Q16, and the trend was no different in 3Q16. Nucor (NUE) and AK Steel (AKS) missed their 3Q16 consensus revenue estimates, though Steel Dynamics’ (STLD) 3Q16 revenues were more or less in line with estimates. U.S. Steel (X) also missed its 3Q16 revenue estimates—by a big margin—but its 3Q16 revenue miss was partially due to unplanned outages at some of its facilities.

Key drivers

We should note that steel companies’ revenues are basically a function of shipments and average selling prices. ArcelorMittal shipped 20.3 million metric tons of steel to outside customers in 3Q16, which represents a sequential fall of 8.1%. The sequential decline in steel shipments is not surprising, given the seasonal demand slowdown, especially in Europe. However, MT’s 3Q16 steel shipments also fell on a yearly basis.

While the seasonal demand slowdown was a drag on ArcelorMittal’s 3Q16 revenues, it was supported by sequentially higher steel prices. The company reported ASP (average selling prices) of $601 per metric ton in 3Q16. To put this in context, the company’s ASP stood at $560 per metric ton in 2Q16 and $614 per metric ton in 3Q15.

That said, higher ASP positively impacted MT’s 3Q16 profitability. We’ll discuss this more in the next part of the series.


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