MT - ArcelorMittall

[moore_capital54]

Currently trading at about 1/2 Book Value, or 8.4x Forward P/E.

 

It is the world's largest Steel Producer owned (40%) by a family that has created tremendous value over the last decade. I am a buyer here @ 22.50~

[Ravi]

Isn't the biggest risk for these kind of stocks is china slow down? I am not sure whether china will slow down or not but when I heard the numbers like 70% of total world output goes to china, then if there is a slow down, there will be quite a bit of pricing pressure similar to what is happening to Cemex. I don't have any indepth insights into this

[Ravi]

 

Headwinds

--------------

1. China Slow down

2. Increased production by thyssen and other steel companies in US

3. Even in emerging markets like India, the auto production has reduced quite a bit

 

A little bit more info at Arcelor mittal

 

China consumes somewhere in between 30million to 50 million tonnes per month

Excluding china, developing countries consume around 10 to 25 mill tonnes per month

Developed countries somewhere in between 25-40 million tonnes per month

 

Raw material prices are $40 to $100 million per tonne for Iron ore, coke and scrap

Steel prices are some where in between $500-$1200/t in last 5yrs and currently around 700-900 $/tonne

Profitability improved from 73/t to 150/t from Q2'09 to Q2'11

 

Arcellor Mittal has 8% of the world's steel capacity.  It also supplies 20% of auto steel

Highly vertically integrated and high operating leverage

80% of the price is short term basis

Arcellor believes the public spending in china substitutes for private slow down

Mittal family owns 41%

Fragmented industry

operating margins was from ~4.5% to 27.5%

financial leverage 2.13

Debt/Equity - 0.39

P/B is lowest in the last 10 years equivalent to 2008

 

 

[Eric50]

"Buy at the point of maximum pessimism"... I'm not sure China's worries are at their worst but at $14.7 MT is pretty cheap...

[ItsAValueTrap]

Anybody have insight on how the steel market works?

 

Who is the lowest-cost producer?  (Posco???, which Warren owns?)

Which steel producer is the best managed?

 

*I guess it's hard for me to get excited about steel because I see the real estate bubble in China bursting (their RE is far more overvalued than Toronto, Vancouver) and because I can simply buy Altius Minerals.  Of course the steel market is a little different than the iron ore market.

[Shawn]

Honestly I don't think POSCO is the lowest cost producer. I think MT might be tho and I think MT is also the better managed company as well.

 

MT has:

 

- Decent Balance Sheet, one of their aims over the long term is to bring down debt levels significantly which they've done a good job of in the short term

- High ROE (not in recent times for obvious reasons tho)

- they are extremely flexible, Lakshmi was the first I believe to utilize small mills to create a more faster and efficient production on an international level (the innovator for this was Nucor) for a company of it's size.

- I think MT for it's size has the lowest operational costs

- and you can get it at a ridiculously low price

 

I used to have shares in it (bought at 34.50 sold out at $48-49) but I wish I held on to it even when it dropped. I'd buy shares in it again but right now I just feel there are even better bargains around the world. There is a wide margin of safety with MT.

[wachtwoord]

MT has recently reported earnings http://seekingalpha.com/article/1433481-arcelormittal-reports-q1-loss-but-maintains-full-year-projections

 

The largest steelmaker in the world trading at ~40% book value while deleveraging. However they are still quite leveraged, are reporting losses (at least for accounting puposes, FCF is still positive) and are tied to the silly European employment unions (I am European ;)).

 

Morningstar still reckons it has a narrow moat, appoints it five stars and had a 26 Euro fair value estimate in November.

 

Does anyone have an opinion about this stock and what would be the most accurate way to value it?

[alwaysinvert]

Honestly I don't think POSCO is the lowest cost producer. I think MT might be tho and I think MT is also the better managed company as well.

 

MT has:

 

- Decent Balance Sheet, one of their aims over the long term is to bring down debt levels significantly which they've done a good job of in the short term

- High ROE (not in recent times for obvious reasons tho)

- they are extremely flexible, Lakshmi was the first I believe to utilize small mills to create a more faster and efficient production on an international level (the innovator for this was Nucor) for a company of it's size.

- I think MT for it's size has the lowest operational costs

- and you can get it at a ridiculously low price

 

I used to have shares in it (bought at 34.50 sold out at $48-49) but I wish I held on to it even when it dropped. I'd buy shares in it again but right now I just feel there are even better bargains around the world. There is a wide margin of safety with MT.

What makes you think that?

[anony208]

Anybody invested in this one at this time?