EARNINGS PREVIEW: EU Steelmakers Eye Profits But Outlook Cautious
26 Luglio 2011 - 4:44PM
Dow Jones News
TAKING THE PULSE: European steel producers are broadly set to
post higher profits for the quarter ending June 30 due to higher
volume sales and steel prices as demand and cost inputs continue to
rise, analyst say.
Steelmakers such as ArcelorMittal (MT), the world's largest
steelmaker, ThyssenKrupp AG (TKA.XE), the world's 14th largest, and
German steelmaker Salzgitter AG (SZG.XE) are expected to report
that selling prices have caught up with a significant rise in raw
material costs in earlier quarters.
Rebounding industrial demand, particularly in the automotive and
machinery sectors, are due to boost sales volume even though
construction markets in developed countries such as the U.S. and
the European Union remain a challenge due to weak demand.
Looking ahead, steelmakers are likely to be cautious about
earnings performance in the third quarter when summer holidays in
the northern hemisphere result in lower demand. U.S. Steel Corp
(X), the world's eighth largest steelmaker, Monday reported a
return to net profit after nine consecutive quarters of losses but
said it expects this quarter's earnings to be lower than the
previous quarter. More specifically, U.S. steel expects its
European segment's third quarter performance to be in line with its
second quarter performance.
"Although we expect an overall decline in average realized
prices, we expect seasonal effects to result in increased demand
late in the quarter. Raw materials costs are expected to be in line
with the second quarter," the company added.
Alessandro Abate, equity analyst at JP Morgan expects EU prices
to pick up from the middle of the third quarter as global demand
rises. "In our view, [there is] headroom for European steelmakers
price uplift from mid-third quarter onwards."
COMPANIES TO WATCH:
ArcelorMittal (MT) - reports July 27
MARKET EXPECTATIONS: Average second-quarter Ebitda is forecast
to rise 16% on year to $3.31 billion while net profit attributable
to shareholders is forecast to drop 18% to $1.4 billion, according
to a Dow Jones Newswires poll of five analysts. Third quarter
Ebitda guidance is forecast to be $2.61 billion, according to the
analysts.
MAIN FOCUS: Analysts expect ArcelorMittal to announce higher
Ebitda due to a rise in volume sales and prices. The mining
division will be a key earnings driver due to higher raw material
prices while flat products in the Americas and Europe should also
deliver higher profitability due to a rise in automotive demand.
Net profit however is forecast to fall due to higher tax and
financial expenses versus the same quarter a year ago when both
were very low. Analysts will focus on the company's global view
about supply and demand in coming quarters and its third quarter
Ebitda guidance. They will also seek updates on the company's
M&A strategy following a string of raw material acquisitions,
including a bid for Macarthur Coal Ltd. (MCC.AU).
Salzgitter AG (SZG.XE) - reports Aug. 11
MARKET EXPECTATIONS: Second quarter sales are forecast to rise
about 17% to EUR2.46 billion while pretax profit is forecast to
rise more than four fold to EUR56.6 million, according to a Factset
and Dow Jones Newswires poll of four analysts.
MAIN FOCUS: The sales rise is largely pinned on a strong
performance from its steel business, which is expected to offset a
decrease in earnings from its trading division that benefited from
windfall profits in the same quarter last year when prices surged.
Analysts will be keen to hear whether the company plans to increase
its full-year guidance based on this quarter's results and will
seek an update on the start up of its second electric arc furnace
in light of weak construction demand.
ThyssenKrupp AG (TKA.XE) - reports Aug. 12
MARKET EXPECTATIONS: Third fiscal quarter sales for the three
months ending June 30 are forecast to rise 10% to EUR12.85 billion
while Ebitda is forecast to rise nearly 22% to EUR1.03 billion,
according to a Factset and Dow Jones poll of four analysts. Net
profit attributable to shareholders is forecast to rise 7% to
EUR320 million.
MAIN FOCUS: ThyssenKrupp's positive earnings growth will hinge
on strong performance at its European steel division, where sales
prices and volumes have increased, and improved performance at its
components technology division which benefits from higher sales to
automotive and wind turbine customers, equity analyst Hermann Reith
of BHF Bank said. Stainless steel is forecast to fall due to lower
volume sales and prices while the Americas steel division is
expected to perform poorly as it continues to ramp up production.
Analysts are seeking an update on the company's progress in
restoring its credit rating following several downgrades stemming
from spiraling U.S. and Brazilian steel project costs. ThyssenKrupp
is also looking to sell businesses that generate around EUR10
billion in annual revenue and employ some 35,000 people.
-By Alex MacDonald, Dow Jones Newswires; +44 207 842 9328;
alex.macdonald@dowjones.com
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