(News Bulletin 247) – The steelmaker delivered free cash flow and gross operating income significantly above expectations in the third quarter. The group recorded the largest increase in the CAC 40 this Thursday.

The environment for steelmakers remains complicated this year. “Oversupply continues to weigh on the global sector and, while US prices remain firm, weak demand and imports have undermined prices in Europe,” Deutsche Bank recently summarized.

Despite this difficult context, Arcelormittal did not disappoint in the third quarter. “The economic climate remains gloomy, but we delivered a solid financial performance, reinforcing the structural strength of the group. Apparent demand is expected to be stronger in the second half of this year than in 2023, and inventory levels are low, which which indicates that restocking will take place when actual demand recovers,” Aditya Mittal, the company’s chief executive, said in a statement.

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“Unsustainable” overproduction in China

In the third quarter, Arcelormittal saw its turnover stand at $15.2 billion, down 6.5% year-on-year. The company was mainly penalized by a decline in steel shipments in Europe of 8.2% over the period.

Gross operating income (Ebitda) exceeded expectations by 6%, notes Morgan Stanley, standing at $1.58 billion. This still reflects a drop of 15% over one year, due in particular to a negative jaws effect (price-costs) in North America and lower volumes in Europe.

“This performance comes in the context of several warnings on the results issued by comparable companies, which demonstrates the relative resistance of the profits of (Arcelormittal, Editor’s note) in a period of economic slowdown”, appreciates Morgan Stanley.

Another pleasant surprise, free cash flow stood at 275 million euros while analysts expected a negative figure of 191 million euros. This is explained both by the company’s better results as well as a need for working capital and less intense investments. As a result, the company’s net debt reached $6.2 billion at the end of September, compared to consensus expectations of $6.79 billion, according to Morgan Stanley.

On the Amsterdam Stock Exchange, ArcelorMittal (which is also listed in Luxembourg, Paris and Spain) rose 6.8% and recorded the largest increase in the CAC 40.

Regarding its outlook, the company confirmed that it aims to achieve positive free cash flow in 2024 and beyond. She also pointed out “current unsustainable market conditions” including production surpluses in China which lead to “aggressive exports”.