ArcelorMittal share price up, projects lower 2015 profit

ArcelorMittal reported on Friday a smaller net loss in the quarter but lowered its profit expectations for this year as lower iron ore prices offset higher demand for steel.

The worlds largest steelmaker by production stated a net loss of $955 million in the fourth quarter compared with a negative result of $1.23 billion a year ago.

The figure also compares with a net income of $22 million reported in the previous quarter. However, the maker of around 6% of the worlds steel took impairments charges of more than $1 billion, including a $621 million writedown on its stake in China Oriental Ltd.

ArcelorMittal was also hit by the stronger US dollar, the company said it booked $620 million in losses during 2014 due to unfavorable foreign exchange rates, particularly from the 12% increase in value of the dollar against the euro. In comparison the company reported $248 million in foreign exchange losses in 2013.

Revenue in the quarter fell from $20.07 billion to $18.72 billion.

Despite the improving European vehicle market, following six years of decreases, ArcelorMittal projected to deliver lower profit in 2015. The company is largest supplier of flat steel for the international automotive industry.

Earnings before interest, taxes, depreciation and amortization are projected to land between $6.5 billion to $7 billion, down compared to the $7.2 billion the company reported in the past year.

The company also projected to spent around $300 million less on new projects compared to the previous year, with capital expenditure expected to stand at $3.4 billion in 2015.

ArcelorMittals operation has been significantly hurt by the decline of iron ore prices, which have fallen by nearly 50% in 2014 as a result of low Chinese demand and market surplus.

Additionally, the company is more exposed to fluctuations in iron-ore prices compared to rival steelmaker. ArcelorMittal has significant mining operations, which provide around a third of companys input materials, while selling the remaining ores.

For the quarter the company reported an operating loss of $50 million from its mining business, compared to $324 million in profit a year earlier.

All-in-all ArcelorMittal reported a net loss of $1.1 billion for the full-year compared to net loss of $2.5 billion in 2013. Excluding the charge from China Oriental, other impairments and other non-recurring items, net income would have been positive in 2014, the company said.

“For 2015, although operating conditions remain tough we expect steel markets to continue to improve, particularly for high value-added products such as automotive,” said Chief Executive Lakshmi Mittal.

ArcelorMittal gained 4.35% on Thursday and closed at €9.12 in Amsterdam. On Friday the stock edged up 2.51% to €9.35 at 12:48 GMT, marking a one-year decrease of 23.37%. The company is valued at €15.09 billion.