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ArcelorMittal Shifts to Loss

Shares of ArcelorMittal SA (NYSE:MT) declined 1.78% to close at $15.44 on Thursday after the steel company shifted to a second-quarter net loss of $447 million from a net profit of $1.87 billion in the prior-year quarter.

The loss was the result of approximately $900 million in impairments the company booked during the quarter. The bottom line was also hurt by lower iron ore and steel prices as well as higher raw material costs.

Revenue decreased 3.6% year over year to $19.28 billion due to the persistence of challenging operating conditions and a 1% decline in market prices on nearly 64% of total iron ore shipments of 15.5 million tons, which was up 6.1%. Steel shipments also increased 4.8% to 22.8 million tons.

Moreover, earnings before interest, taxes, depreciation and amortization was $1.6 billion, topping sell-side analysts' consensus of $1.529 billion.

During the quarter, ArcelorMittal cut its net debt by $1 billion to $10.2 billion. In an effort to further reduce debt, the company will use cash flow generated from operations and will unlock about $2 billion from assets sales.

The company also reported the following financial and production results for the first six months of 2019.

Sales decreased 1.8% to $38.5 billion and Ebitda tumbled 42.6% to $3.2 billion.

Crude steel production was 47.8 million tons, up 2.8%; steel shipments was 44.6 million tons, up 3.5%; and iron ore production from ArcelorMittal's own resources was 28.7 million tons, down 1.4%. In addition, iron ore shipments of 19.1 million tons were flat at market prices.

"Despite the current challenges, the company is well positioned to benefit from any improvement in market conditions and the current very low spread environment," Chairman and CEO Lakshmi N. Mittal said.

For full 2019, the company expects 0.5% to 1.5% growth in global steel demand and steel shipments to increase from 2018. ArcelorMillal said it will use $5.4 billion to finance the business in 2019.

The Luxemburg-based steel giant had a market capitalization of $16.22 billion on Thursday. The 52-week range is $14.66 to $32.93.

The stock has declined 52% so far this year to below the 200-, 100- and 50-day simple moving average lines.

On June 13, the company paid an annual dividend of 20 cents per common share, which, if held constant in 2020, produces a forward dividend yield of 1.27% based on Thursday's closing price.

Wall Street issued an overweight recommendation rating for American depositary receipts of ArcelorMittal with an average target price of $24.19.

Disclosure: I have no positions in any securities mentioned.

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