Arcelor Mittal, the world's largest steelmaker, reported 2007 results in line with expectations on Wednesday and took an upbeat view of the steel industry in 2008, expecting favourable market trends to persist.
"Despite the potential recession in the US and despite the credit crisis (...), the steel industry has been able to differentiate itself," Chief Executive Lakshmi Mittal told a news conference.
Analysts believe that a combination of lower Chinese exports, modest inventory levels in Europe and resilient prices in the United States should provide the steel group enough pricing power to cover likely sharp increases in raw materials costs later this year.
The company gave guidance for core profit of $4.7 to $5.0 billion for the first quarter, above the $4.3 billion it posted during the same period last year and in line with its performance in the last quarter of 2007.
The steel behemoth's shares slipped, however, as analysts noted the guidance was not at the top end of expectations and that the stock's recent rise had triggered some profit-taking.
"It's a robust but not a blow-out outlook," said Exane BNP Paribas analyst Vincent Lepine. ArcelorMittal shares were down 4.05 percent at 47.18 euros at 1225 GMT while the Dow Jones Stoxx European basic resources index retreated about two percent.
The group, formed by Mittal Steel's take-over of Arcelor, finalised the merger last year and is roughly three times bigger than its closest rival Nippon Steel. It has achieved $1.4 billion of synergies so far, well in sight of its $1.6 billion target for 2008.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 27 percent to $19.4 billion, the top-end of its guidance, and compared with an average forecast of $19.35 billion in a Reuters Knowledge poll of 24 analysts.
The company posted annual sales and net profit slightly above expectations of $105.2 billion and $10.4 billion, the latter up 30 percent year-on-year.
The group also announced it would return $3.1 billion to shareholders in 2008, of which $2.1 billion will be in cash dividends and $1.0 billion in share buybacks, in line with its policy of giving back 30 percent of net income.
ArcelorMittal executives said during the press conference they would continue to look for investment opportunities, particularly in China and South America, after making 35 global acquisitions in 2007.
It scored a major coup last year when it snatched China Oriental Group Co Ltd, giving it rare foreign control of a Chinese steel mill. The group said it believed more consolidation was the way forward for the industry and took a sceptical view on the London Metals Exchange plans to start trading steel billets futures.
"The solution for the steel industry is consolidation and continuing to become more global, not futures," Mittal said. ArcelorMittal is also seeking to raise its own iron ore production to 75 percent of consumption in the coming years, a goal which was announced before BHP Billiton announced its plan to acquire rival Rio Tinto.
That combined group would hold over a quarter of the world market for iron ore, a concentration that draws competition concerns from the steel industry, which fears the concentration will push prices upwards. Mittal, the group's main owner, will replace current Chairman Joseph Kinsch this year, reinforcing his control of the company. Kinsch is then expected to head a foundation which will aim at defending the values of the company, a source at the company said.
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