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ArcelorMittal’s 3Q16 EBITDA Rises but Falls Short of Expectations

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ArcelorMittal’s 3Q16 EBITDA

There are several metrics that you can use to measure a company’s profitability. However, for companies in the commodities space (XME), EBITDA (earnings before interest, tax, depreciation, and amortization) is generally used.

ArcelorMittal (MT) generated adjusted EBITDA of ~$1.9 billion in 3Q16. To put this in context, ArcelorMittal posted adjusted EBITDA of $1.8 billion in 2Q16 and ~$1.4 million in 3Q15. MT’s 3Q16 adjusted EBITDA is, in fact, the highest it has seen since 3Q14. But although MT’s 3Q16 EBITDA rose sharply on a yearly basis, it still fell slightly short of analysts’ expectations.

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Key drivers: MT, X, AKS, NUE, XME

All of ArcelorMittal’s reporting segments (with the exception of Brazil) reported YoY (year-over-year) rises in EBITDA, but the most significant yearly rise came from NAFTA (North America Free Trade Agreement), wherein MT’s EBITDA rose from $340 million in 3Q15 to $566 million in 3Q16.

Notably, US flat steel prices rose steeply earlier this year, boosting the earnings of U.S. Steel (X), AK Steel (AKS), and Nucor (NUE).

Europe operations

ArcelorMittal’s Europe operations also reported a sharp rise in earnings, with EBITDA jumping from $553 million in 3Q15 to $717 million in 3Q16. We should remember that Europe is MT’s biggest market, accounting for almost half of its revenues.

ArcelorMittal consolidates its African and Commonwealth of Independent States operations under one reporting segment. This segment reported adjusted EBITDA of $233 million in 3Q16, as compared to an EBITDA of $35 million in 3Q15.

Meanwhile, while ArcelorMittal reported a sharp increase in its 3Q16 earnings, it sounded a profit warning for 4Q16. We’ll discuss this detail further in the next part.

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