Strong expectation: Lakshmi Mittal
TOP GLOBAL steelmaker ArcelorMittal said on Wednesday (May 11) its first quarter net profit rebounded to $1.07bn (£5650m/€744m) following a setback at the end of last year due to exceptional items.The company, by far the biggest steelmaker by volume, said it expected profitability to improve further in the second quarter due to increased seasonal factors and increased underlying demand.The group reported a loss for the last quarter of 2010 because of costs arising from the sale of its stainless steel division.In the comparable first quarter of last year it made a net profit of $640m (£393m).“As anticipated, we have seen a stronger start to the year, with an increase in both shipments and selling prices,” chief executive Lakshmi Mittal said.First quarter sales rose by 27.3 per cent on a 12-month basis to $22.2bn (£13.7bn).It made a gross operating profit of $2.6bn, marking an increase of 52 per cent. This was slightly higher than its forecast range of $2bn-$2.5bn.The outcome included the recovery of $300m (£184m) in the form of unused provisions.Net debt rose by $2.9bn to $22.6bn in the first quarter due to investment in working capital, mergers and acquisition and foreign currency operations.Sales and prices are “expected to further improve in the second quarter as the underlying demand recovery continues”, added Mittal.The company now expects gross operating profit to come in at between $3bn and $3.5bn in the quarter.Capacity utilisation is expected to rise to approximately 80 per cent from 75 per cent.High commodity prices affecting the costs of its inputs have so far been more than offset by higher increases to its sales prices.ArcelorMittal said however that certain markets such as Japan and North Africa had begun to slow, which might weigh second quarter results, and that a rise in interest rates in China could also dent growth.Net debt is expected to increase further due to additional investment in working capital.The company expects the global steel market to rise by 6.5 to seven per cent this year.“We remain confident that 2011 will be a stronger year than 2010,” said Mittal.ArcelorMittal has begun reporting the results of its mining operations separately, but dismissed suggestions it was considering spinning them off, saying there were significant synergies with steel production.A 6.3 per cent drop in iron ore production in the first quarter should corrected in the second quarter, it said.
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