BRUSSELS 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
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
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
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)