Higher steel prices and a one-off boost from a labour deal led to a rise in second-quarter earnings at ArcelorMittal, as the world’s largest producer of the metal offered a cautiously confident outlook.
Global oversupply provoked a sharp slide in the value of steel last year, wreaking havoc on companies from the UK to Australia, but prices have rallied in 2016.
Hopes for a sustained recovery will be fuelled after ArcelorMittal posted net income of $1.11bn in the three months to the end of June. That compared with a net loss of $416m in the preceding quarter and net income of $179m in the same period last year.
The Luxembourg-based group was helped by an exceptional gain of $832m relating to reduced employee benefits following the signing of a new contract for its US workforce. Revenue, earnings per share and steel shipments were all higher on the preceding quarter.
Lakshmi Mittal, chief executive, said the improved showing was “l(fā)argely due to a more supportive pricing environment in our leading market”.
He added: “Although the industry continues to face the challenges of structural overcapacity we are seeing better market conditions compared with the second half of 2015, which lead us to be cautiously optimistic about the remainder of the year.”
Although steel prices have recently dipped in some regions, ArcelorMittal’s results are likely to give investors some cause for cheer. Shares in the Amsterdam-listed company gained 7.8 per cent early on Friday to €5.87.
In the teeth of the slump, ArcelorMittal raised $3bn in capital to reduce its debt pile after posting a record annual net loss of $7.9bn in February.
China is accused of worsening conditions in the world steel market by dumping excess output at lowball prices, and its total exports have increased 9 per cent so far this year.
However, Aditya Mittal, chief financial officer of ArcelorMittal, said trade actions by EU and US authorities were “ensuring a more level playing field”.
Seth Rosenfeld, analyst at Jefferies, described the results as “robust”.
“[ArcelorMittal] is well placed to benefit from gradually normalising market conditions following a painful 2015 trough,” he wrote in a note.
Core profits — on the industry’s preferred metric of earnings before interest, taxes, depreciation and amortisation — were $1.77bn, surpassing analyst forecasts. The figure was nearly double the preceding quarter.
Sales jumped 10 per cent from the first quarter to $14.7bn, but in a sign of the lasting effects of the commodities slump, revenue was lower year-on-year.
The company reiterated its full-year ebitda guidance of above $4.5bn.
