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What Really Drove ArcelorMittal’s 1Q16 Earnings?

Why ArcelorMittal’s 1Q16 Earnings Were a Non-Event for Markets

(Continued from Prior Part)

1Q16 EBITDA

You can use several metrics to measure a company’s profitability. However, for companies in the commodity space, EBITDA (earnings before interest, taxes, depreciation, and amortization) are the most common metric. It’s important for investors to follow current and forward EBITDA estimates. In this part of our series, we’ll look at ArcelorMittal’s 1Q16 EBITDA.

EBITDA fell

ArcelorMittal generated adjusted EBITDA of $927 million in 1Q16. The company had posted EBITDA of $1.1 billion and $1.3 billion in 4Q15 and 1Q15, respectively. Just like revenues, ArcelorMittal’s 1Q16 EBITDA have been hurt by lower steel selling prices.

Looking at the performance of MT’s different business segments, we see that the NAFTA segment generated EBITDA of $339 million in 1Q16. Apparently, NAFTA was the only region where MT actually posted higher sequential EBITDA. In 1Q16, NAFTA accounted for 36.5% of MT’s consolidated EBITDA with a revenue share of ~28%. Note that the US flat-rolled market has been quite strong in 1Q16, largely due to the impact of trade cases. U.S. Steel Corporation (X), AK Steel (AKS), and Nucor (NUE) also supply flat steel products.

Other segments

Meanwhile, in the absence of trade protection, Europe (FDD)(IEV) continues to reel under the onslaught of Chinese steel products. ArcelorMittal’s EBITDA in Europe fell to $363 million in 1Q16 from $544 million in 4Q15.

ArcelorMittal’s EBITDA in Brazil also fell steeply in 1Q16 as the slowdown there has only aggravated. However, its Mining segment EBITDA rose ~10% in 1Q16 due to higher iron ore prices and MT’s cost cutting initiatives. The ACIS (Africa and Commonwealth of Independent States) 1Q16 EBITDA was similar to 4Q15.

Though steel market conditions have improved greatly over the last two months, MT has kept its 2016 EBITDA guidance unchanged. We’ll discuss this outlook more in the next part of this series.

Continue to Next Part

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