ArcelorMittal sees a significant improvement in profitability

ArcelorMittal sees a significant improvement in profitability

25 February 2021Reading time: 3 minutes

The corona crisis and a struggling car industry significantly reduced demand for steel and iron ore, putting global steel prices under pressure in the past year. The car industry now appears to be recovering and due to the global corona vaccination program, an economic recovery could be on the horizon.

Fourth quarter 2020 results

Over the past quarter, ArcelorMittal's sales increased 6.9 percent on a quarterly basis to USD 14.2 billion. Compared to the fourth quarter of 2019, sales was nevertheless still 8.6 percent lower. The net profit was USD 1.2 billion. In the third quarter of 2020, ArcelorMittal posted a net loss of USD 261 million and the company was also unable to make a profit in the fourth quarter of 2019. Analysts were especially positively surprised by the EBITDA result of USD 1.7 billion. This is also a significant improvement compared to the third quarter of 2020 (USD 901 million) and the fourth quarter of 2019 (USD 925 million). The operating result rose from USD 718 million to nearly USD 2 billion on a quarterly basis.

The steel company expects this upward trend to continue in 2021 and assumes that the number of steel shipments will increase this year compared to 2020. For this year a recovery of the global steel market of 4.5 to 5.5 percent is expected. For 2020, the company is proposing a dividend of USD 0.30 per share.

Selling large stake in Cleveland-Cliffs

Early February this year, ArcelorMittal announced that it is selling a large stake in the American steel company Cleveland-Cliffs. This involves the sale of 40 million shares, with a total value of USD 651.6 million. The transaction is part of the merger between the American subsidiary ArcelorMittal North America Holdings LLC and steel company Cleveland-Cliffs. After the sale, ArcelorMittal will retain an interest of 38 million shares and 58 million preference shares in the American steel company.

ArcelorMittal wants to use the proceeds from the transaction, amongst others, to finance a share buyback program worth USD 650 million. After completion of this program, a second program will follow with an additional 570 million in treasury shares. Both buy-back programs must be completed by the end of this year.

Stock price development

The ArcelorMittal share price has risen sharply since the beginning of the fourth quarter and is now (19.02.2021) approximately 38 percent higher than a year ago. The question is whether the recovery of the steel market will actually continue, while the corona crisis has not yet ended and its effect on the economy is uncertain.

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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26/09/2021 01:53:19