16 Nov

Why ArcelorMittal Reported Lower Cash Flows in 3Q16

WRITTEN BY Mohit Oberoi, CFA

3Q16 cash flows

So far in this series, we’ve looked at steel companies’ 3Q16 earnings. But given the current challenging situation, the market is more interested in cash flows.

Generating negative free cash flow could lead to cash burn. As a result, companies might have to borrow to fund their deficits. Negative free cash flow will only make things worse in the current market scenario.

Why ArcelorMittal Reported Lower Cash Flows in 3Q16

Cash flows have risen

United States Steel (X) posted free cash flow of $213.0 million in 3Q16. It was the second consecutive quarter of positive free cash flow. Before 2Q16, it had a cash burn in every quarter since 4Q14.

Nucor (NUE) posted free cash flow of $215.0 million in 3Q16. To put this in context, the company posted free cash flow of $160.0 million in 2Q16 and $455.0 million in 3Q15. Steel Dynamics (STLD) reported free cash flow of $137.0 million in 3Q16 and $122.0 million in the sequential quarter.

ArcelorMittal’s cash flow fell

ArcelorMittal (MT) reported free cash flow of $341.0 million in 3Q16. That was slightly lower than 2Q16. Its lower cash flow in 3Q16 could be attributed to investment in working capital.

AK Steel (AKS) generated a negative free cash flow of $13.0 million in 3Q16. It was affected by higher working capital investment.

In the next part, we’ll look at some key takeaways from various steel companies’ 3Q16 earnings calls.

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