BRUSSELS (Reuters) - World No. 1 steelmaker ArcelorMittal (ISPA.AS) reported record second-quarter results, far above expectations, on Wednesday as it managed to raise prices and offset raw material costs despite economic gloom.
"In contracts which have been renegotiated and closed, we have achieved significant (price) increases and we expect that trend to continue until the end of the year and in 2009," Chief Financial Officer Aditya Mittal told a conference call.
Mittal said the group's policy to acquire mines and boost its self sufficiency in raw materials had also been key in boosting profits.
ArcelorMittal shares rallied, gaining 8 percent to 57.57 euros at 4:40 a.m. EDT, having hit 57.87, while the DJ Stoxx basic material index .SXPP gained 3.5 percent. The stock was top gainer in the blue-chip DJ Stoxx 50 index .STOXX50.
"These new record-high results are far above what could be expected," said BHF Bank analyst Hermann Reith, adding that the analyst community had underestimated ArcelorMittal's ability to increase steel prices charged to its customers.
Earnings before interest, tax, depreciation and amortization (EBITDA) were $8.05 billion against the average forecast in a Reuters poll of 10 analysts of $6.75 billion and a previous record of $5.32 billion in the year-ago quarter.
The company, roughly three times bigger than its closest rival Nippon Steel (5401.T), had guided towards a second-quarter figure above $6.5 billion and now aims to achieve EBITDA exceeding $8.5 billion in the third quarter.
"You will probably see many rating upgrades, there is a good pricing dynamic," said one analyst, explaining that the new profit target for the third quarter was much higher than expected.
Sales and net profit were $37.84 billion and $5.84 billion while the Reuters poll of analysts gave averages of $34.65 billion and $3.97 billion respectively.
"We continue to look for opportunities to further enhance our raw material self sufficiency," Chief Executive and main owner Lakshmi Mittal said in a statement, adding the company expected capital expenditure of $7 billion this year.
"We have a few investment ideas," his son Aditya said, declining to be more specific but pledging to pursue the strategy aggressively.
ArcelorMittal aims to raise its iron ore self sufficiency to 75 percent by 2012 from 45 percent currently and has recently raised it coal self sufficiency to 20 percent from 15 percent after acquiring mines in Russia and the U.S this year.
Analysts speculate on what will be ArcelorMittal's next move after press reports said it could consider fully buying Coal of Africa Ltd (CZA.L) CZA.AU or Australian miner Macarthur Coal Ltd MCC.AX.
Since its creation in 2006, ArcelorMittal has aggressively pursued consolidation, with a flurry of investments and acquisitions in developing countries such as Senegal, India, Russia and China as well as in mature economies.
(Editing by Mike Nesbit and Louise Ireland)