Arcelor Mittal (MT) Cutting Steel Production by 30% in Q4

Yesterday was an ugly day for earning reports - spent quite a long time reading through companies reports from sectors across the spectrum, and it was one of the worst days I can ever remember. Bad news and pulled guidance everywhere. As we said in the spring the back half of 2008 earnings estimates was a complete myth - fourth quarter 2008 had been modeled by analysts as having 60% growth over fourth quarter 2007. But that's when "2nd half recovery 2008" folks were tooting their horns by the day on CNBC and a reason 'we should be buying hand over fist'. Notice these people never show up and say "I was wrong with what I predicted in the spring" - they just keep trotting up there with the same dog and pony show. Anyhow, visibility is so poor not only are estimates being slashed, I am seeing guidance completely pulled in sectors you don't normally see. Even for a relative bear like me, it is quite staggering to read all these data points in every sector.

One name I want to highlight is Arcelor Mittal (MT) which is the world's largest steel maker - obviously one of these bell weathers on the global (lack of) growth story. I'm not so much interested in numbers but the industry views. This whole pantheon of stocks can only be a very short term trade for now; no investing can be done here - Jacobs Engineering (JEC) had a great quarter Tuesday - rallied, drew people in with hope - then sold off 15% yesterday for example.

• Shares of ArcelorMittal fell as much as 19% Wednesday after the world's largest steelmaker said it would drastically slash production in the fourth quarter and reported a smaller-than-expected 29% increase in third-quarter profit.
• Net profit for the three months to Sept. 30 climbed to $3.8 billion, or $2.79 a share, from $2.96 billion, or $2.10 a share, earned in the year-earlier quarter. Consensus forecasts were for earnings of $4.01 a share, according to Deutsche Bank.
• The company said it would cut production globally by 30% in the fourth quarter, or twice the rate it previously forecast, as prices decline amid slumping economic growth. The cuts imply a utilization rate of just 65%.
• ArcelorMittal also warned it expects to post an operating profit of $2.5 billion to $3 billion in the fourth quarter. It had previously set a target of at least $4.5 billion, when it said operating profit in the second half would top that of the first half.
• Analysts drew pessimistic conclusions for the results and the steps announced. "Market conditions are deteriorating, with lower demand in the carbon steel segment due to de-stocking and an ongoing bleak outlook for the stainless steel segment," UniCredit analysts said.
• CEO Mittal said in a conference call with journalists that he still believes in the emerging-market story, despite the current slowdown, and expects the situation to improve by the second quarter of 2009. (I think that's too early) China, one of the bulwarks of steel demand growth, has seen demand weaken since August but the government is loosening its monetary policy and recently announced plans to invest $300 billion in its rail network, Mittal added. It "confirms our optimism" about the emerging markets, Mittal said. (in the U.S. we invest $300 billion so Americans can shop... at Walmart... for Chinese goods - this is the difference in our policies - but sounds like the next stimulus plan will actually go to something that will stay in the country - infrastructure. Progress!)
  
• He admitted, however, that the company's expansion plans in India are running into some delays and that their size would be reviewed once the necessary approvals have been obtained. In Europe, investment projects are also being postponed, although the head of that division said no decision has been made on closing particular plants.
• "Everyone has misjudged the impact of the financial crisis. We were running at almost full capacity" before the financial crisis began to take its toll on the global economy, he said. "The financial crisis has really shocked everyone (including) our customers," he added.

No position

Notice the chart? It should have a very familiar look to it....