Brussels: ArcelorMittal, the world’s largest steelmaker, slumped more than expected in the first quarter as demand collapsed, and the prospect of a second quarter uptick was not enough to halt a slide in its shares.
The much-watched EBITDA (earnings before interest, tax, depreciation and amortisation) dropped 82 percent to $883 million in the January-March period, compared with the average $1.0 billion in a Reuters poll of 11 analysts.
The company’s shares yo-yoed in early trading but by 12:45pm, were down 4.1% at €17.90, extending a 6% drop on Tuesday, against a 1.5% gain in the DJ Stoxx European basic resources index.
ArcelorMittal had forecast a figure of about $1 billion, with a 15% variation, due to final quarter price cuts of up to 40% and nearly halved output as key auto and construction markets fell into crisis.
It forecast production would remain at around 50% of capacity in the second quarter.
The World Steel Association forecast on Monday that steel demand would tumble 15% in 2009, its steepest fall since World War Two, and one exacerbated by consumer destocking.
US auto sales slid 37% in March and home sales a month-on-month 0.6%.
ArcelorMittal’s slump mirrors that of rivals. China’s top steelmaker Baosteel reported a 98% drop in first-quarter net profit on Tuesday.
Economists believe the first quarter may have been as bad, or even worse, than the wretched fourth quarter of 2008.
ArcelorMittal forecast core profit in the second quarter would recover to some $1.2 billion to $1.5 billion. It had previously seen the first quarter as the low point in terms of profitability.
It made a net loss in the first quarter of $1.1 billion due in part to $1.2 billion of pretax exceptional charges, mainly for writing down inventories. In the fourth quarter, it booked exceptionals of $4.4 billion.
It also said it saw potential for price increases during the second and third quarters across major markets and products, although in a presentation it said that it expected a lower average steel price.
“Although market conditions remain challenging, a technical recovery is inevitable and ArcelorMittal will benefit from this,” chairman and chief executive Lakshmi Mittal said.
The market had been braced for a weak first quarter, but some analysts commented that the EBITDA figure was really far worse than forecast given it included a $503 million gain from unwinding a currency hedge.
The second-quarter guidance, at least of an improvement, was generally deemed positive.
The steelmaker repeated a series of downturn-inspired goals, including bringing net debt down by $10 billion by the end of the year and securing temporary fixed-cost reductions of $7.5 billion in the second quarter, after $6 billion in the first.
The company, formed from Mittal Steel’s takeover of then world number two Arcelor, went on a spending spree during the commodities boom, ratcheting up debt.