ArcelorMittal South Africa Warns Second Quarter Earnings Will Be Lower

ArcelorMittal South Africa Ltd. (ACL.JO) Thursday reported a rise in net profit for the first quarter of the year, but warned the second quarter will be lower due to weak domestic steel demand and lower prices forecast for its products.

"Earnings for the second quarter 2012 are expected to be substantially lower than the previous quarter," the steelmaker said. Lower domestic demand, lower steel prices, higher costs (such as electricity and transport) and lower sales of commercial coke due to the usual shutdown by the ferrochrome industry during the winter months, will all combine to pull earnings down, ArcelorMittal South Africa said.

ArcelorMittal South Africa, an arm of steelmaker ArcelorMittal (MT), reported Thursday net profit for the first quarter ended March 31 rose to 279 million rand, from ZAR184 million the year before.

The company also reported a gain in headline earnings, a common measure of profit in South Africa that strips out a number of one-time items, to ZAR283 million from ZAR195 million in the first quarter of 2011. Revenue also rose to ZAR9.142 billion from ZAR7.777 billion.

The steelmaker had been suffering from losses in the previous months but more output stability at its operations and restocking demand helped to boost first quarter earnings. Quarter-on-quarter steel sales rose by 30% to 1.3 million metric tons.

Steel demand in South Africa during the first months of 2012 was due to restocking and ArcelorMittal South Africa said "as yet, there are no tangible signs of a sustained recovery in underlying demand."

While steel demand got a boost in the first quarter, the company said revenue from the coke and chemicals business decreased by 16% following a 27% decline in commercial coke volumes, on the quarter.

-By Devon Maylie, Dow Jones Newswires; [phone]; [e-mail]

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