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Key Investor Takeaways from ArcelorMittal’s Q1 Earnings

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ArcelorMittal’s Q1 earnings

Today, ArcelorMittal (MT), the leading steel producer globally, released its first-quarter earnings. It posted revenues of $19.2 billion in the quarter as compared to $18.3 billion in the fourth quarter. However, the revenues were similar to the first quarter of 2018. The company posted adjusted EBITDA of $1.65 billion in the fourth quarter as compared to $1.95 billion in the fourth quarter and $2.5 billion in the first quarter of 2018. The EBITDA was the lowest since the first quarter of 2016.

ArcelorMittal’s CEO, Lakshmi Mittal, said, “Profitability has been impacted by lower steel pricing due to weaker economic activity and continued global overcapacity, as well as rising raw material costs as a result of supply-side developments in Brazil.”

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Europe

ArcelorMittal’s earnings have been hit by the slowdown in Europe. The company gets almost half of its revenues from Europe. Earlier this week, ArcelorMittal temporarily curtailed some of its capacity in Europe, citing record imports and higher carbon costs. After the United States imposed Section 232 tariffs last year, we saw import deflection in some of the other developed markets, especially in Europe. U.S. Steel (X) also highlighted the weakness in Europe as a headwind during its first-quarter earnings call.

Higher iron ore prices

While iron ore prices have spiked this year, there hasn’t been a commensurate rise in steel prices due to the subdued demand environment. Last year, we saw something similar in the aluminum industry. While supply disruptions led to a spike in alumina prices, aluminum prices couldn’t follow alumina higher due to the weak demand environment.

ArcelorMittal also has mining operations. The company’s Mining segment posted a sequential rise in EBITDA while all other operating segments posted a sequential fall in their first-quarter earnings.

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