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What to Make of ArcelorMittal’s 1Q17 Performance

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ArcelorMittal’s 1Q17 performance

ArcelorMittal’s (MT) 1Q17 operating income rose sharply in 1Q17 compared to 4Q16. There are several other metrics we can look at to assess a company’s financial performance—revenue, for example.

Note that steel companies’ (TX) revenues are basically functions of shipments and average selling prices. In this article, we’ll look at a detailed breakup of ArcelorMittal’s 1Q17 revenue.

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1Q17 revenue

ArcelorMittal reported revenue of $16.0 billion in 1Q17. In contrast, the company posted revenue of $14.1 billion in 4Q16 and $13.4 billion in 1Q16. ArcelorMittal’s 1Q17 revenue rose on a sequential basis as well as on a yearly basis. Nonetheless, its revenue fell short of analysts’ consensus estimate.

ArcelorMittal shipped 21.0 million metric tons of steel in 1Q17, compared to 20.0 million metric tons in 4Q16 and 21.5 million metric tons in 1Q16. The yearly fall in MT’s 1Q17 steel shipments was partially due to asset divestitures the company made to reduce its debt. Its shipments also fell on a yearly basis in Europe and Brazil.

In our view, MT’s 1Q17 revenue miss is primarily due to the yearly fall in its steel shipments, which is something the markets might not be factoring in, considering the yearly rises in steel production in Europe and Brazil.

Average selling price

For steel companies such as Gerdau (GGB), POSCO (PKX), and Commercial Metals Company (CMC), steel prices tend to be bigger drivers compared to volumes. 

Although MT’s 1Q17 steel shipments fell slightly on a yearly basis, they were more than offset by higher average steel selling prices. Higher steel prices had a compound effect on ArcelorMittal’s 1Q17 profits, too, as we’ll find out in the next article.

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