Almost any investor who has made the decision to position themselves in favor of the cycle since the Covid crisis began has had to do so through ArcelorMittal , one of its greatest exponents. And you will not have been wrong since all the winds are now blowing in favor of a business whose nature is benefiting, on the one hand, from the recovery of economic activity and with it the demand for these goods and, on the other, from the particular increase of steel prices , which are raising the profit margins of the main world steel companies, as is the case of the firm of Indo-European origin.
All these tailwinds have allowed Arcelor to drastically improve its accounts and balance sheet, to the point that the consensus of analysts collected by FactSet already estimates that it will leave its net debt at 0 next year . Specifically, it expects the net cash position to reach 1,934 million euros, something that has never happened in the history of the company since the merger in 2006.
To put this figure into context, it must be taken into account that just 10 years ago the steelmaker weighed a net debt of more than 17,000 million euros, a figure that more than doubled its EBITDA (profit before taxes, interest, amortizations and depreciations ) of said exercise. Since then and until 2017, its indebtedness has oscillated between 1.5 and 3 times, until it closed at 1.5 times EBITDA in 2020.
Looking ahead to this year, the experts’ forecast points to a debt of 852 million, less than 0 , 1 times the group’s gross profit estimate. “Net debt is at its lowest level since the merger in 2006 and has occurred with a high level of working capital investment and reduced capex, and having invested in buying back shares,” says Iván San Félix, Renta 4 analyst.
In recent years, ArcelorMittal has generally received a good recommendation from the experts. However, more recently this has stood out above the others. In fact , it occupies the first position of the Ibex League of elEconomista , which is nourished by a combination of the Bloomberg and FactSet boards. “We are convinced that market dynamics will be very favorable in the coming years, mainly due to three reasons: the change in policies by China, decarbonisation and investments in infrastructure,” says the Renta 4 expert.
This good moment is also being recognized on the stock market. When the Covid-19 crisis broke out, its securities were trading around 16 euros and at the worst moment they fell below 6.50 euros. Since then, they have not stopped coming back, even exceeding 30 euros, reaching highs not seen since 2012 .
“We believe that a very good time has begun for the sector and we hope that companies know how to take advantage of it, especially ArcelorMittal, which is at the forefront of technology and has advanced the decarbonisation objectives in Europe for 2030”, argues San Félix, who hopes that “in the coming years numerous projects will be approved to improve infrastructures in many countries, which are very intensive in steel and that demand will therefore be strongly boosted.”
Still has a journey
Despite the fact that so far this year it has already recorded around 40% and is trading at levels close to the 2012 highs , analysts maintain their confidence that it will continue to revalue in the coming months.
In this sense, the consensus of experts that Bloomberg collects places its target price for next year above 39 euros per share, which leaves an upward path to its titles of more than 43% from its current levels.