ArcelorMittal cuts profit expectations for 2015 amid steel glut
World’s leading steel producer ArcelorMittal (NYSE:MT) has cut its 2015 earnings target amid growing competition from Chinese and Russian steel exports in the U.S. market, which has added to a world-wide glut, and a sharp fall in iron ore prices.
The company now expects earnings before interest, tax, depreciation and amortization, which is a more closely watched metric than net income in the steel industry, to be between $6bn and $7bn. ArcelorMittal’s previous guidance was of $6.5bn to $7bn in February.
The Luxembourg-based firm also reported a net loss of $728m in the three months to March 31, compared with $205m in the same period last year, caused mainly by weak performance of its mining division and unfavourable movements in foreign exchange.
“We faced a number of headwinds,” said Lakshmi Mittal, the company’s chief executive, in a news release.
Weakness in the United States was fully offset, however, by a better performing European business, where the company continues to reap the benefits of a restructuring programme which has seen the closure of several steel operations.
In that market, ArcelorMittal sees steel demand growing much as 2.5%, but it is not as optimistic when it comes to the rest of the world.
The company lowered its expectations for growth in global steel use to 0.5% to 1%this year from 1.5% to 2%. It expects U.S. demand to contract as much as 3% and Chinese sales to expand as little as 0.5%.
“Europe remains a bright spot,” Aditya Mittal, the chief financial officer, said on a call with reporters. “Europe has been performing well compared to past periods.”
Despite being the top player in the steel industry, ArcelorMittal controls less than 10% of the global market.