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UPDATE 1-Aperam sees slowdown compounding seasonally weak Q3
July 24, 2012 / 5:12 PM / 5 years ago

UPDATE 1-Aperam sees slowdown compounding seasonally weak Q3

* Second quarter core profits beat expectations

* Sees weak economy compounding seasonally lower Q3

* Confident of pick-up of steel prices in second half

BRUSSELS, July 24 (Reuters) - Stainless steel maker Aperam forecast weaker earnings in the third quarter with the economic slowdown compounding a traditional summer slowdown, but said it was confident prices would pick up during the final quarter of 2012.

The Luxembourg-based company reported a fourth consecutive quarterly net loss on Tuesday and second-quarter core profit in line with that of the first three months, as it had forecast.

The company, floated by ArcelorMittal early last year, said it had kept on track due to cost savings, a good performance in Brazil and a better product mix in alloys.

Stagnant consumption and cheaper imports from Asia have left Europe with a capacity glut, prompting industry consolidation such as Outokumpu’s takeover of the stainless steel business of ThyssenKrupp earlier this year.

The industry has also suffered steadily falling nickel prices since early 2011, with an early 2012 recovery now wiped out. Distributors stock up when prices rise, and hold off when they fall in the hope of even cheaper prices in the future.

Benchmark nickel prices on the London Metal Exchange have dropped by more than 25 percent since early February.

Aperam said it was confident prices would rise in the second half.

“The confidence comes because the nickel price is very low. There is a consensus that it is at a low and might go up,” Chief Executive Philippe Darmayan told a conference call. “When they go up, the market goes up.”

Core profit in the second quarter was $65 million, in line with the first quarter and ahead of the average $58 million forecast in a Reuters poll.

Aperam said the figure would be lower in the third quarter, a traditionally weak quarter, compounded by the poor economy.

Darmayan said its cost cutting plan had produced $231 million of annual savings. It is targeting $350 million by 2013.

He said he was also encouraged by recent weakness in the euro and the Brazilian real to the dollar. Aperam’s operations are in Europe and Brazil. (Reporting by Philip Blenkinsop; Editing by Louise Ireland)

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