ArcelorMittal earnings drop 86%, swings from profit to loss

ArcelorMittal’s South Africa’s EBITDA declined 86% in the first half of 2023, which saw the mining company swing from a R3.03 billion profit to a headline loss of R448 million.

The company released its financial results for the six months ended 30 June 2023 today, which showed its EBITDA went from R3.59 billion in the first half of 2022 to R499 million in H1 2023. 

ArcelorMittal pointed to a weaker trading environment “with substantially lower international market prices and stagnant economic growth” as the reason for this drop in earnings.

The company recently saw its share price fall by more than 40% when it announced in a trading update that it had “underestimated” the economic effects of load-shedding on its customers.

“Despite the buoyance of 2021 and the first half of 2022 having passed, the international trading environment in the first half of 2023 benefitted from the end to de-stocking and less painful energy prices,” the company said.

“However, locally, the trading environment caught no such tailwinds, as the burden of electricity load-shedding, high inflation, high interest rates and mixed growth in key steel consuming sectors pummelled already fragile consumer confidence.”

ArcelorMittal said it “very much underestimated” the softness of the market amid the unprecedented severity of load-shedding in the last six months, which affected the response time with which production could be adjusted in a responsible and well-considered manner. 

“Building and maintaining any semblance of operating rhythm, which is an absolute necessity in running a continuous, integrated steel-making process in a cost-aware manner, proved especially problematic.”

The company did not declare dividends for the six months ended 30 June 2023.

Looking forward, the company said that, internationally, the World Steel Association expects a 2.2% increase in steel demand and locally, steel demand is expected to improve as economic indicators strengthen. 

“Inflation is moving back towards the target range of between 3% to 6%, which should lessen the pressure on interest rates and assist with lifting consumer confidence.” 

Renewables and regional infrastructure projects are also expected to support steel demand.