24 June 2019Reading time: 3 minutes

In the first quarter of 2019, ArcelorMittal kept their revenue on an annual basis at the same level as last year at 19,2 billion dollar. Nevertheless the operational profit over the same period was halved from 1,6 billion dollar to 769 million dollar. Also the ebitda decreased with more than 34 percent to almost 1,7 billion dollar. In the end this resulted in a net profit of 414 million dollar, which is a decrease of 65 percent on an annual basis and the lowest quarterly profit since 2016.

ArcelorMittal claims that the disappointing results are due to the lower steel prices and weaker demand. The steel company also criticizes the European Union for not doing enough to prevent China from dumping cheap steel on the European market. Since the United States introduced new import tariffs last year on steel and aluminium from China and Europe, the European steel market has been pressurized even more. ArcelorMittal therefor asks the EU to also set extra import tariffs on Chinese steel.

To be able to somewhat cope with the problems, ArcelorMittal has announced to temporarily lower their European steel production with 3 million tons. This could mean the loss of approximately 19.000 jobs. It remains to be seen which influence this will have on the results of the steel company.

Other steel companies are also having problems due to the recent market developments. For example, competitor Voestalpine has recently achieved a record revenue of 13,6 billion euro over the first quarter, but despite this the ebitda plummeted with 20 percent to 1,56 billion euro on an annual basis. According to Reuters, British Steel is even facing serious financial problems and would have asked the British government for an emergency loan of 30 billion pounds.

Meanwhile it seems that the merger between Tata Steel and ThyssenKrupp is definitely cancelled, because the European Commission has disapproved it. The merger would have created the second largest steel manufacturer in Europe, with a combined turnover of 15 billion euro per year.

It remains to be seen if the steel market will recover itself on short term. Especially the demand from the car industry is lagging behind, while the steel production in the United States and China was increased in April to 7,3 percent and 12,7 percent. For the remainder of this year, ArcelorMittal expects that the worldwide demand for steel might increase to 1 or 1,5 percent. This could contribute to the support of the steel prices.

The share price of ArcelorMittal has dropped in one year time with 49,7 percent and is now (14.06.2019) at 14,61 euro. The share has a price-to-earnings ratio of 3,8 and offers a dividend yield of 1,2 percent.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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03/08/2020 14:07:24