Moody's on Dec. 7 revised the outlook on ArcelorMittal's ratings to positive from stable while affirming the steel giant's Ba1 credit rating.
It attributed the move to "ArcelorMittal's strengthening credit profile on the back of improved market conditions, successful efforts to reduce debt and expectations that its free cash flow will turn positive in 2017-18," said Gianmarco Migliavacca, Moody's vice president and senior credit officer.
The rating agency expects positive free cash flow of about US$1.1 billion in 2017, assuming a large working capital inflow in the fourth quarter, partly offset by substantial outflows in previous quarters, and free cash flow of more than US$2 billion in 2018 to 2019.
Assuming stable market demand and ongoing measures at the steelmaker to reduce costs and improve productivity, Moody's expects a further improvement in ArcelorMittal's adjusted EBITDA in 2018 to 2019 toward a range of US$8.6 billion to US$9 billion, from US$8.5 billion estimated for 2017 and US$6.2 billion seen in 2016.
It also reflects Moody's expectation that free cash flow will become materially positive in the fourth quarter of this year and 2018, even after assuming a modest negative initial impact on its finances and cash flow after the acquisition of Ilva International SpA.
ArcelorMittal's planned acquisition of Ilva faces new challenges as Italy's Puglia and Taranto regions filed an appeal in court against the government's approval for the buyers' environmental plan as part of the deal.
