ArcelorMittal’s Q1 2017 Earnings Preview: Improved Business Conditions To Drive Earnings Growth

May 10th, 2017 by Trefis Team
-1.14%
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ArcelorMittal

ArcelorMittal is set to release its first quarter earnings result and conduct a conference call with analysts on May 12. [1] We expect the company to report a significant improvement in its earnings result as a result of improved business conditions. In addition, ArcelorMittal’s cost reduction and productivity enhancement initiatives will also provide a boost to the company’s earnings.

The U.S. steel industry has been negatively impacted by unfair competition from imported steels from a number of countries such as China and South Korea. The domestic steel industry alleged that a significant proportion of these steel imports were priced unfairly low. In response to petitions by domestic steelmakers, the Department of Commerce imposed antidumping duties on these unfairly traded steel imports over the course of 2016. [2] The imposition of punitive tariffs on unfairly traded imports has weakened the negative impact of competition from these imports on the domestic steel industry, translating into higher steel prices. In addition, strengthening economic conditions in the U.S. and the federal government’s proposed $1 trillion overhaul of domestic infrastructure has boosted the demand outlook for steel. [3] Apart from the U.S., regulatory authorities in Europe have also imposed punitive tariffs against unfairly traded steel imports, which is likely to boost price realizations for the company’s European operations as well. [4]

Apart from the improved business conditions, ArcelorMittal’s ‘Action Plan 2020’, the company’s ongoing cost reduction and productivity enhancement initiative, is expected to support earnings growth. Through a combination of cost reduction, an improved product mix, and higher production volumes, the company is targeting $3 billion worth of margin improvement (with respect to 2015 as the base year) by 2020. While the impact in 2017 is expected to be less than the 2020 target (it was $900 million in 2016), the company’s cost reduction and productivity enhancement efforts will certainly prop up the company’s Q1 earnings. The following tables summarize our expectations for ArcelorMittal’s Q1 2017 results.

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MT Q1 2017 Earnings Preview

Have more questions about ArcelorMittal? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ArcelorMittal

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Notes:
  1. Financial Calendar, ArcelorMittal Website [↩]
  2. US issues final antidumping duties for hot-rolled coil steel from seven nations, Platts [↩]
  3. Trump to unveil $1 trillion infrastructure plan in 2017: Official, CNBC [↩]
  4. EU announces fresh anti-dumping duties on Russian and Chinese steel imports, Financial Times [↩]