ArcelorMittal SA (ADR) (NYSE: MT) in the first quarter of FY 17 has more than doubled its core profit (EBITDA) in the quarter on higher steel prices and shipments. MT in 1Q 2017 has reported the adjusted earnings per share of 33 cents, beating the analysts’ estimates for the adjusted earnings per share of 18 cents. The Core profit grew by 140% in the March quarter to $2.23 billion, above the $2.1 billion forecast by the analysts. The operating income has increased to $1.6 billion, compared to $0.8 billion in 4Q 2016. The net income of $1.0 billion in the 1Q 2017 as compared to $0.4 billion in 4Q 2016
Moreover, the steel prices have climbed amid increasing demand and capacity cuts in China. The global steel demand is expected to grow more than previously forecast in 2017 due to a recovery in developed economies and accelerating growth in emerging and developing markets, especially Russia, Brazil and India, industry group World Steel Association (Worldsteel) said last month. As per the Worldsteel, the demand is likely to expand 1.3% in 2017 to 1.535 billion tonnes and an additional 0.9% in 2018 to 1.549 billion tonnes.
Additionally, in the first quarter, the steel shipments grew 5.1% to 21.1 Mt compared to the fourth quarter 2016 and down 1.9% compared to the first quarter 2016 (down 0.9% on a comparable basis). However, due to seasonal working capital investment ($2.2 billion), the net debt has increased to $12.1 billion as of March 31st, 2017, as compared to $11.1 billion as of December 31st, 2016.
Meanwhile, MT has announced the approval of the Reverse Stock Split by the Extraordinary General Meeting of shareholders of ArcelorMittal held on 10th May 2017. According to it MT will proceed to consolidate each three existing shares in the company without nominal value into one share without nominal value. The Reverse Stock Split will become effective on 22nd May 2017.
On the other hand, the union workers at MT’s Mont-Wright iron ore mine in northern Quebec have ratified a new four-year contract with the steelmaker. The 2,000 members have voted on a contract that maintains the pension plan for all employees and provides pay parity for workers at the company’s smaller, nearby Fire Lake mine.
ArcelorMittal stock falls this morning by 7.7% and investors could be booking profits in the stock (as of 1:10PM EDT; Source: Google Finance). According to tipranks.com, MT has an average price target of $12.17, which is a further upside of 56.63%.