ArcelorMittal trips on Europe into $3.7 bn loss
The world's top steel producer ArcelorMittal stumbled into the red last year with a net loss of $3.72 billion (2.75 billion euros) largely due to costs related to Europe, but said its shuttering of plants was sufficient to support a rebound this year.
ArcelorMittal has had a difficult couple of months, with plant closures in Belgium and France sparking at times violent clashes and the company booking a multi-billion charge to revalue its assets.
But ArcelorMittal shares jumped 2.57 percent to 12.75 euros in morning trading on a Paris market up 0.29 percent after the company said that the restructuring effort had been completed and improvement was on the way.
Operating profit measured by earnings before interest, tax and other charges (EBITDA) fell by 30 percent to $7.1 billion in 2012, close to analyst expectations.
“2012 was a very difficult year for the steel industry, particularly in Europe where demand for steel fell a further 8.8 percent,” chief executive Lakshmi Mittal said in a statement.
The net loss was caused by a $4.3 billion accounting charge the company announced in December to write down the value of its assets in Europe, where demand for steel has fallen by nearly a third since the global economic crisis set in.
The Luxembourg-registered company also took another $1.3 billion in restructuring charges.
ArcelorMittal, which also has interests in iron-ore mines, had posted a net profit of $2.3 billion in 2011.
Sales fell by 10.4 percent to $84.2 billion in 2012, with shipments of steel down 2.3 percent to 83.8 million tonnes.
Shipments of iron ore rose by 5.4 percent to 54.4 million tonnes, however, with more than half shipped at market prices.
The company said it expected steel sales to improve this year, climbing by 2-3 percent, with iron ore sales at market prices to rise by 20 percent.
ArcelorMittal said this should help it increase operating profit in 2013.
“Although we expect the challenges to continue in 2013, largely due to the fragility of the European economy, we have recently seen some more positive indicators,” said Mittal.
These, along with the steps the company has taken to focus on its most competitive assets and reduce its net debt “are expected to support an improvement in the profitability of our steel business this year”, he added.
The company’s chief financial officer, Aditya Mittal, told a conference call that they were new seeing improvements in shipments in all markets compared to the previous quarter, including in Europe.
He said that they expected European steel consumption to drop by 1.0 percent this year after contracting by 9.0 percent in 2012.
“So we are seeing a relative stabilisation that is occurring in Europe,” said Aditya Mittal.
— “Comfortable” with current capacity —
He also signalled that ArcelorMittal’s difficult downsizing in Europe had run its course.
“The essential components of the asset optimisation have now been announced,” said the chief financial officer.
“So that does imply that fundamentally the level of restructuring we have done is appropriate,” he added.
The announcement last month that it is shutting down six cold-processing facilities in Belgium sparked exchanges of paving stones and tear gas between workers and police over the loss of 1,300 jobs.
In France, ArcelorMittal faced threats last year of nationalisation of one facility over the fate of two blast furnaces.
After heated talks with the French government the blast furnaces are likely never to be reopened but the company promised to invest 180 million euros into the Florange facility and not cut any jobs.
Aditya Mittal said the closures bring down the number of the company’s blast furnaces in Europe to 21, of which 16 are operating.
“We are comfortable” with this level of capacity, said Aditya Mittal.
The company also said that its net debt fell by $1.4 billion over the fourth quarter owing to improved cash flow to stand at $21.8 billion at the end of the year.
ArcelorMittal is aiming to raise $3.5 billion in stock and subordinated notes to reduce its massive debt, which ratings agencies have warned threatens to break bank loan agreements.