November 7, 2019 / 7:23 AM / 6 days ago

UPDATE 2-ArcelorMittal beats expectations despite weak U.S., Europe

* Q3 core profit (EBITDA) $1.06 bln vs consensus $930 mln

* Now sees U.S. demand contraction, worse downturn in Europe

* Net debt rises to $10.7 bln vs target of $7 bln

* Shares up 8.2%, among strongest performers in Europe (Updates with shares)

By Philip Blenkinsop

BRUSSELS, Nov 7 (Reuters) - ArcelorMittal, the world's largest steelmaker, cut its forecasts for demand in its main U.S. and European markets but reported a higher-than-expected core profit.

The Luxembourg-based company said on Thursday its third-quarter core profit (EBITDA), the figure most watched by the market, was $1.06 billion, compared with the average forecast in a company poll of $930 million.

ArcelorMittal shares were up 8.2% at 15.70 euros at 0720 GMT, making them among the strongest performers in the FTSEurofirst 300 index of top European shares. The seesaw stock is 29% higher than a month earlier, but 31% lower year-on-year.

"There is a lot of pressure on European steel spreads. There's nothing positive on selling prices. Clearly they have done a good job managing their cost base," Commerzbank analyst Ingo Schachel said.

ArcelorMittal said global steel consumption, including the impact of inventory changes, would grow in 2019 by 0.5-1.0%, towards the lower end of its previous guidance of 0.5-1.5%.

Reporting a net loss of $539 million for the third quarter - a second straight quarter in the red - it said it now expected a reduction in U.S. steel demand due to a weak auto sector and a slowdown in demand for machinery. Non-residential construction was healthy, however.

It also said the contraction in steel demand in Europe would be worse than expected due to a sluggish auto sector and slowing construction. ArcelorMittal has already idled a series of steel plants in Europe.

The company did upgrade its forecasts for the former Soviet Union and China, the world's largest producer and consumer of steel. But ArcelorMittal ships almost half its steel to European customers, around a quarter to the United States and has negligible business in China.

The company, which produces around 5% of global steel, said it now expected its own shipments to be stable this year, having previously forecast a year-on-year increase.

Chief Executive Lakshmi Mittal said in a statement that ArcelorMittal had anticipated a tough market as low prices and high raw materials costs squeezed margins.

The company's net debt, a key metric for markets, increased by $0.5 billion to $10.7 billion. It has a target to pull it below $7 billion.

The company said it would release at least $1.4 billion of working capital in the fourth quarter to enable it to reduce net debt further. Cash needs and capital expenditure would be lower than previously expected. (Reporting by Philip Blenkinsop; Editing by Dale Hudson and Kim Coghill)

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