(Bloomberg) — ArcelorMittal withdrew its closely watched global steel guidance because of the coronavirus pandemic, but sounded a relatively upbeat tone as lockdown restrictions start to ease.
While ArcelorMittal likened the suddenness of the virus impact to the global financial crisis, it looked forward to economies reopening. A recovery in Chinese demand, coupled with easing lockdowns in some parts of Europe and the U.S., including restarts at auto plants is “a good start,” Chief Financial Officer Aditya Mittal said.
Goldman Sachs Group Inc. and Morgan Stanley economists said earlier this week that there is evidence the world economy is starting to recover from the coronavirus and the restrictions placed on businesses and consumers. Steel demand — a barometer of the global economy — has dropped about 30% in Europe and North America.
“We would expect that Q2 would be the low point in terms of activity levels,” Mittal said on a conference call on Thursday. “Clearly it’s difficult to predict at this time but there are certain signs that would suggest that.”
Arcelor shares rose as much as 5.4%, even after the company suspended dividend payments.
“It seems likely that over the course of this month countries will start to announce details of their “exit” strategies,” ArcelorMittal Chairman Lakshmi Mittal said in a statement. “Construction and manufacturing are expected to be among the first sectors to be permitted to re-start operations and indeed we are seeing signs of customers re-starting production.”
ArcelorMittal expects second-quarter earnings before interest, taxes, depreciation and amortization to drop to $400 million to $600 million, from $967 million in the first quarter. Those earnings were better than anticipated, according to Citigroup Inc.
When demand improves, the company is set to ramp up production quickly and resume dividends when the operating environment normalizes.
Three months ago, the company had expected the coronavirus to only have a short-term impact on steel demand, after the sector was pummeled in 2019 by slumping demand from automakers, trade wars and sluggish economies in Europe.
The company joined other industrial producers in cutting spending to protect its balance sheet. It expects fixed costs this quarter to be 25% to 30% below first-quarter levels thanks to measures including salary cuts for its senior management, temporary layoffs and state aid