ArcelorMittal SA, the world’s largest steelmaker, cut its forecast for earnings this year after lower than anticipated iron ore prices ate into the profit of its mining business, sending its shares down some 6 per cent.
The company, which makes about 6 per cent of world steel and is also one of the world’s largest iron ore producers, making it a broad gauge for the health of global manufacturing, said it now expected yearly core profit to be “in excess of” $7 billion (€5.2 billion).
It previously gave a figure of about $8 billion (€6 billion).
"The guidance cut is driven by mining. Even if no one was expecting $8 billion, the new guidance appears a notch more cautious than the market had expected," said Commerzbank analyst Ingo Schachel, who has a "hold" rating and €11 price target.
ArcelorMittal shares fell as much as 6.3 per cent to €10.655, a 2½-week low, making them among the weakest members of the FTSEurofirst 300 index of leading European stocks. The Stoxx Europe 600 basic resources index was down 2 per cent.
Chief financial officer Aditya Mittal said lower iron ore prices were the result of weaker than anticipated demand from China and increased supply.
Spot Asian iron ore has fallen nearly 30 per cent this year, while ArcelorMittal and the big three iron ore miners – BHP Billiton, Rio Tinto and Vale – have been boosting output.
ArcelorMittal said it had adjusted its assumption for iron ore prices to $105 a tonne from $120 before, implying a second- half average of $100.
The group, double the size of its nearest steelmaking rival Nippon Steel and Sumitomo Metal Corp, said its steel business was faring well and it had increased demand forecasts for Europe and the United States, which account for about two- thirds of its shipments.
"We remain cautiously optimistic about the global economy, and in particular the outlook for the developed world," Mr Mittal said. – (Reuters)
