Friday 1 August 2014

Morning Mumble: Retrospective Guidance Cuts (ArcelorMittal) Iron Ore &...Holidays

Good Morning, last night’s antics were a pleasure its not often losing money comes with such hilarity. We had an evening at the casino last night and to give you an idea of my ability to lose I shall cover the entire evening with...everyone won save for I! It got to a point you were assured of winning by betting against me! A pleasure though...and don't forget your passports folks otherwise it’s a return taxi trip for the passport!

On to the wonders of the market, this is my last blog for two weeks (ish), the name will be changing in that time as well so please mark the other one (above). I'm taking some pride in the fact the unique visitors (excluding bots & search engines) is up to a level I didn't think would happen (you all must be desperate!). This is despite the promise of the LGO litigation coverage, for which I shall keep mention until it happens!

Its surprising the ArcelorMittal (MT) have only just reduced their guidance on profits by near $1b and I suspect with write-downs it'll be a lot lower; the market were late to realise it would be worse than forecast earnings (no joke and very poor analytical skills by the buy fraternity!); the dividend huggers may want to reappraise this company quickly! ArcelorMittal reports second quarter 2014 and half year 2014 results (read the pain) albeit they did pay a good % of debt down they're targeting $15B in debt....

MT have an assumption for Iron Ore of $105/t for the full year 2014 (from $120/t previously) implying a second-half average of $100/t. Yes, with rose tinted spectacles one can see $105 being full year, but when Chinese prices near $96-$97 (the latter 3 month delivery), I'm unsure how they come to balance their guidance even allowing for 2/3rd's of MT's business being European focused. With the oversupply (increasing production) coming from the majors, ArcelorMittal guidance may prove too high even allowing for the revisions. With their guidance including capex costs $/t for Liberia not being below $100/t this is not going to assist (with Capex increasing there as well). MT are forecasting apparent steel consumption (ASC) growth in Europe of 2014 of 3-4%, US 5% and China 3-3.5%. The only figure I currently agree with is China's , but will post-holidays review this. (expect the majors to follow suit with revisions in due course / depreciation in share prices.

Often parties put too much interest in Director share purchases, unless they’re noteworthy consider a) if a director doesn’t pay fair market price there’s a risk b) if they’re options are massively in the money (at the award or after significant delcines in the SP) consider there’s a risk c) if they’re free options that director would not have any motivation to achieve (certainly true of AIM save for a few exceptions). However today we have the Anglo American Mr Peter Whitcutt, a PDMR, has today sold 73,419 ordinary shares at a price of £16.205 per share. £1,189,754.90 is a significant signal to the market. I’m unsure of the current price but lets see if the market pays attention as well.

We welcome Savannah Petroleum SAVP First Day of Dealings on AIM, for which there needs to be clarity on the licenses as per my previous post…one to watch currently.


Afren continuing its climb, so have elected to take all profits on spreadbets (being the larger holding) and let equity/cfd ride.

Atb Fraser

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