ArcelorMittal's Essar Steel Buyout Receives Final Clearance

ArcelorMittal (NYSE:MT) recently announced that the Indian supreme court has unconditionally approved ArcelorMittal India Private Limited’s (AMIPL) resolution plan for Essar Steel India Limited. Notably, the court’s approval of the resolution plan was the final step required in Essar Steel’s corporate insolvency process.

The company now expects the transaction to complete before the end of 2019. Following the completion of the transaction, ArcelorMittal and its partner — Nippon Steel Corporation — will jointly own and operate Essar Steel.

ArcelorMittal believes that Essar Steel provides it an opportunity to enter the high-growth Indian steel market. Moreover, Essar Steel is expected to add significant strategic value to the group’s business.

Shares of ArcelorMittal have moved up 1% in the past six months against the industry’s 1.1% decline.

On the basis of year-to-date growth and the current economic outlook, ArcelorMittal revised expectations for global apparent steel consumption (ASC) growth for 2019. It now sees global ASC to increase in the range of 0.5-1% compared with 0.5-1.5% growth expected earlier.

In the United States, the company expects ASC to contract by 0.5-1% compared with prior range of flat to 1% growth. Healthy growth in non-residential construction demand is likely to be offset by ongoing weakness in automotive demand and a slowdown in machinery demand.

In Europe, ongoing automotive demand weakness and slowing construction is expected to dent ASC growth. These factors are expected to contract ASC by up to 3% compared with prior view of 1-2% decline.

In Brazil, ASC is expected to rise 0.5-1%, down from 1.5-2.5% growth expected earlier. In China, the company expects overall ASC to grow 1.5% to 2%, up from 0.5% to 1.5% expected earlier. Real estate demand is expected to drive the upside.

The company now expects to witness stable steel shipments in 2019 on a year-over-year basis. Capital expenditure guidance for the year has been trimmed to $3.5 billion for 2019 compared with $3.8 billion expected earlier.

Zacks Rank & Stocks to Consider

ArcelorMittal currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd (TSX:KL) , Franco-Nevada Corporation (TSX:FNV) and Agnico Eagle Mines Limited (NYSE:AEM) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland Lake Gold has an expected earnings growth rate of 96.3% for the current year. The company’s shares have surged 154.4% in the past year.

Franco-Nevada has projected earnings growth rate of 44.9% for 2019. The company’s shares have rallied 46.8% in a year.

Agnico Eagle has an estimated earnings growth rate of 168.6% for the current year. Its shares have moved up 65.4% in the past year.

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