ArcelorMittal, one of the largest steel producers in the world, predicts that its rolled metal shipments will decline to a third in the second quarter, which will lead to a sharp decline in profits, as restrictions on coronaviruses affect demand.
The company said it had suspended dividend payments until further notice and cut its planned investments this year by a quarter, but CFO Aditya Mittal said while there is great uncertainty, the second quarter could be a trough. Blocks have eased in Europe, India and some US states as automakers resumed production and demand in China has increased significantly, he said.
“We expect the second quarter to be a low point in terms of activity levels, but obviously this is difficult to predict at the moment, but there are certain signs that may indicate this,” Aditya Mittal said on a conference call.
The Luxembourg-based group was up 2.4% to € 9.79 by 0840 GMT, although it is still down 27% since the beginning of the year.
ArcelorMittal said that because the overall impact of the pandemic was “highly uncertain” and varies from country to country, the group has withdrawn its guidance on global steel consumption.
Now it is simply said that the demand for steel will be lower than in 2019.
The company said its core profit (earnings before interest, taxes, depreciation and amortization) in the second quarter will be $ 400-600 million. In the second quarter of last year, it was $ 1.56 billion.
The core first quarter profit this year was $ 967 million, surpassing the company’s average forecast of $ 867 million.
In April-June, ArcelorMittal steel supplies will be in the range of 13.5-14.5 million tons. This will be lower by a quarter and a third from the level of the first quarter of 19.5 million tons, which is 10.7% less than a year earlier.
Mittal said the demand for steel for packaging, often used for food, remained the same; production and construction declined, but not as much as expected in many countries; while automakers closed their facilities early.
ArcelorMittal has offered a 2019 dividend of $ 0.30 per share, which is now on hold. He said he is also cutting his cash requirements this year.
“It is expected that in 2020 certain cash needs of the enterprise will amount to approximately $ 3.5 billion (against $ 4.5 billion in the previous forecast) due to a decrease in planned capex (a decrease to $ 2.4 billion from 3.2 billion dollars in the previous forecast) and tax cuts, ”it was reported.
Jefferies analysts said in their research that suspended dividends and low cash requirements highlighted that the company was focusing on preserving cash as COVID-19 disruptions peaked in the second and third quarters.
ArcelorMittal said its net debt rose to $ 9.5 billion in the first quarter from $ 9.3 billion at the end of 2019. He reiterated that he wants to reduce this amount to $ 7 billion in the near future.