November 7, 2014 / 8:20 AM / 5 years ago

UPDATE 3-ArcelorMittal says strength in key steel markets offsets mine pain

* Q3 core profit (EBITDA) $1.91 bln vs Reuters poll $1.82 bln

* Keeps 2014 forecast for core profit in excess of $7 bln

* Cuts 2014 global steel forecast, sees U.S. sharply higher

* Shares up 3.8 pct, among best performing European blue chips (Adds shares, CFO, analyst comment)

By Philip Blenkinsop

BRUSSELS, Nov 7 (Reuters) - ArcelorMittal, the world’s largest steelmaker, pointed to rising demand in its key markets next year and confirmed its profit forecast for 2014 on Friday, as improvements in U.S. and European steel more than offset plunging iron ore prices.

Analysts had feared that the company — which makes about 6 percent of global steel and is one of the world’s largest iron ore producers — would temper its outlook given the impact on its mining operations of iron ore prices at five-year lows.

“The steel business is strong enough — due to volume improvements, cost improvements we have made, as well as the overall steel market — to offset the price decline in iron ore,” Chief Financial Officer Aditya Mittal said.

ArcelorMittal shares were up 3.3 percent at 10.21 euros at 1120 GMT, making them the top riser in the STOXX Europe 600 basic resources index and among the best performers in the FTSEurofirst index of leading European stocks.

“They’ve beaten market consensus by 5 percent. There had also been some doubt as to whether they would be able to hold on to their guidance,” said ING analyst Jaap Kuin, who has a ‘buy’ recommendation and 13 euro price target.

ArcelorMittal, a benchmark for worldwide manufacturing, cut its estimate for 2014 global steel consumption growth to 2.25-2.75 percent from 3.0-3.5 percent because of a slowdown in China and heavy declines in Brazil and former Soviet states.

Importantly, however, it made a sharp upward revision of its overall market estimate for U.S. steel consumption, while that for Europe was left little changed. The two regions account for about two-thirds of ArcelorMittal’s steel shipments.

“What we say, which is important, is that we are constructive on the U.S. economy and the European economy next year,” Mittal said, adding he also saw a steel rebound next year in Brazil, which fell into recession in the first half of 2014.

ArcelorMittal expects a core profit (EBITDA) this year of above $7 billion. The “smart” estimate of Thomson Reuters’s StarMine, which weights analyst’s forecasts according to past performance, had been for core profit of $7.2 billion.

In the third quarter it beat estimates, with earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.91 billion, above the average $1.82 billion in a Reuters poll of brokers and up nearly 12 percent on the same period last year.

The company said it had fared well in Europe, partly due to an improved market but also due to savings from past years of plant closures and job cuts.

North America, dampened earlier in the year by a harsh and extended winter, had increased profit from higher steel shipments and average prices even as fixed costs rose.

ROARING U.S. DEMAND

The group, double the size of rival Nippon Steel and Sumitomo Metal Corp, said U.S. steel consumption would be 8.25-8.75 percent higher this year, buoyed by a broad-based recovery and the building of inventories for next year.

Top U.S. steelmakers, such as Nucor and U.S. Steel Corp, have cited strong demand from the auto, appliance and oil and gas industries, as well as lower energy costs.

The construction sector, which uses about half of the world’s steel, has also improved from 2013.

ArcelorMittal said that strong demand in key developed markets meant it would maintain its forecast that steel shipments would be 3 percent higher this year than last.

Iron ore shipments, it said, would be up 15 percent after the ramp-up of capacity at its mines in eastern Canada.

The company has, however, suffered from sharply lower iron ore prices, largely the result of the slowdown in China weakening demand while miners have boosted output.

The spot benchmark Asian iron ore price .IO62-CNO=MB has fallen by about 40 percent this year to below $80 a tonne, prompting ArcelorMittal in August to cut its 2014 group profit estimate. (Editing by David Goodman and Clara Ferreira Marques)

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