ArcelorMittal sees small steel demand rise, shares slip on margin concerns

By Philip Blenkinsop

BRUSSELS (Reuters) - ArcelorMittal, the world's largest steelmaker, forecast on Thursday a moderate expansion in global steel demand in 2019 after a healthy market drove its 2018 earnings to their highest in a decade.

But its shares slid 3 percent, as analysts said a fall in steel prices and tighter margins had yet to feed into figures for the company that is battling global overcapacity and is facing the risk of an economic slowdown

The company said it expected demand to grow by 0.5 to 1 percent this year after rising 2.8 percent in 2018.

"Although this is a more moderate level than 2018, market fundamentals do remain positive," Chief Financial Officer Aditya Mittal told a news conference.

Excluding China - where ArcelorMittal has a minimal presence - global growth would be 2-3 percent, compared with 2.1 percent in 2018, he said.

China though has a major impact on the industry as the world's biggest producer and consumer of steel, as well as being a large exporter. U.S. steel tariffs have had done little to change that.

ArcelorMittal shares fell after an initial rise and were trading down 3.2 percent at 20.59 euros at 1030 GMT. But they were still up about 14 percent in the year to date.

Carsten Riek, analyst at UBS, said ArcelorMittal's forecast was limited to steel volumes and said a large steel price drop and margin squeeze had yet to be reflected in its accounts.

"The headlines were a buyback and a dividend increase," he said. "But it's probably not enough to offset the risk in the first and second quarter."

The company, which skipped shareholder payouts in 2015 and 2016, doubled its proposed dividend to $0.20 per share, more than the average $0.12 forecast in a Reuters poll. It also announced a share buyback of up to $113.4 million.

ArcelorMittal said the most rapidly expanding market would be Brazil, with 3.5-4.5 percent growth this year from 7.3 percent in 2018. Steel demand growth in ArcelorMittal's main markets - 0.5-1.0 percent in Europe and 0.5-1.5 percent in the United States - would also be lower this year than last.

The company said it expected steel shipments to increase, boosted by operational improvements after plant disruptions in Asia and Mexico last year. Capital expenditure would rise to $4.3 billion from $3.3 billion in 2018.

ArcelorMittal is investing in projects in Mexico and Brazil, and has bought Votorantim in Brazil and Italy's Ilva, Europe's largest capacity steel plant.

The company is also close to completing the acquisition of Essar Steel, a deal that would see it entering the high-growth Indian market.

Net debt at the end of 2018 was at $10.2 billion, slightly up from the $10.1 billion at the end of 2017. ArcelorMittal, which returned to an investment grade rating last year, is seeking to reduce debt to below $6 billion.

The company reported fourth-quarter core profit (EBITDA) of $1.95 billion, a 9 percent decline from a year earlier as prices declined. That was broadly in line with the company-compiled consensus of $1.96 billion from a group of about 20 brokers.

For the full year the figure was $10.27 billion.

(Reporting by Philip Blenkinsop; Editing by Gopakumar Warrier and Edmund Blair)