ArcelorMittal posts $680 net profit in Sept qtr

Steel major ArcelorMittal today reported a net profit of USD 680 million in the third quarter ended September 30 on account of improved market conditions and better utilisation of operational efficiencies.

The Luxembourg-based firm had posted a net loss of USD 711 million in the year-ago period, it said in a regulatory filing.

However, net profit during the period witnessed a fall of 39 per cent on quarterly basis to USD 680 million compared with USD 1.11 billion in the June quarter.

The April-June period profit included exceptional income of USD 832 million relating to a one-time gain on employee benefits that followed signing of the new US labor contract in June 2016.

Net sales of the firm led by billionaire Lakshmi N Mittal fell by 7 per cent to USD 14.52 billion in July-September of 2016 against USD 15.60 billion during the same quarter in 2015. It follows January-December as fiscal year.

On a sequential basis, the decline in sales was lower at 1.5 per cent from USD 14.74 billion in April-June 2016.

The world's largest steel maker forecasted that profits will be impacted in the October-December period compared to September quarter on account of "impact of lower US steel prices and higher coking coal prices".

Commenting on the performance, Mittal, who is Chairman of ArcelorMittal, said: "Our third quarter results reflect the progress the company is making to improve the underlying performance of the business, as well as improved market conditions since the start of the year." Steel shipments fell 8.1 per cent to 20.3 million tonnes (MT) in September 2016 quarter compared to the previous three months primarily due to a seasonal slowdown in Europe (13.8 per cent) and NAFTA (1.4 per cent) and Africa & CIS (1.3 per cent), which was partly offset by 2.3 per cent improvement in Brazil.

Compared to July-September 2015, sales fell by 4 per cent from 21.1 MT.

Its net debt fell to USD 12.2 billion as of September 30, 2016, compared to USD 12.7 billion on June 30 and USD 16.8 billion on September 30, 2015.

"Taking into account an expected full-year investment in operating working capital of around USD 1 billion (versus previous estimate of about USD 0.5 billion), the firm expects cash flows from operating activities to exceed capex in 2016," ArcelorMittal said.

On outlook, the Chairman said: "Looking ahead, while real demand remains stable, we will be impacted by the unexpected significant increase in the price of coal.

"While expectations are for steel prices to align with the increased costs, in the interim the higher coal price will impact steel spreads and fourth quarter performance." Overcapacity remains a concern, reinforcing importance of a comprehensive trade response to minimise impact of unfair trade across all product categories, he added.

"We are supported by a strong balance sheet, we have seen positive price momentum in our main markets and organisation is fully aligned to successfully implement our five year strategic plan, Action 2020," Mittal said.