ArcelorMittal's Steel and Profit Outlook 2013

The world's largest steelmaker, ArcelorMittal, has cut its 2013 profit guidance due to weaker than estimated steel demand in Europe and U.S. The company expects steel consumption in the United States to remain flat or rise by 1% at most in 2013 while the European market could shrink by 1.5 to 2.5%. Previously, it had seen US growth between 2 and 3% and European consumption falling between 0.5 and 1.5%. 

Overall, the group sees steel shipments rising between 1 and 2% in 2013, driven by a 3% rise of global steel consumption. The company believes Europe will be the only region where demand will fall.

The firm expects it's EBITDA to be more than $6.5 billion in 2013, versus a previous forecast to beat the $7.1 billion reported in 2012. ArcelorMittal, which sold around 45% of its steel in Europe last year, said second-quarter EBITDA, or core profit, fell 33.5% year-on-year to $1.70 billion, below the analysts' average forecast of $1.75 billion in a Reuters poll. The company, which lost its investment grade credit rating last year, said that its net debt fell to $16.2 billion at the end of the second quarter but that this figure would rise to about $17 billion in the second half of 2013 because of investment in working capital and the payment of the annual dividend.

Share of ArcelorMittal (MT) has lost around 30% since 1st Jan 2013 and is currently hovering around $12 valuing the company at around $21.5 billion. With Enterprise value at around $38 billion the company share are trading at an EV to EBIDTA valuation of 5.8 times which is quite cheap compared to it's historical averages and replacement cost.

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