By Christopher Alessi

 

FRANKFURT--Steelmaker ArcelorMittal SA said Friday it swung to a profit in the fourth quarter of 2016, while outlining an increase in capital expenditure for the current year.

Net profit for the period ended Dec. 31 was $403 million, compared with a loss of $6.69 billion during the same period a year earlier. Operating income was also positive, at $800 million, relative to an operating loss of $5.3 billion year-on-year.

The company returned to profitability mainly because of a lack of exceptional charges stemming from a decline in international steel prices, which caused losses in 2015.

The world's largest steel maker said it expects to increase capital expenditure in 2017 to $2.9 billion from $2.4 billion last year, a result of recovering steel markets. The company said it expects global apparent steel consumption to continue to expand in 2017, growing by between 0.5% and 1.5%.

ArcelorMittal early last year was forced to tap shareholders with a $3.1 billion rights issue to shore up its balance sheet after the slump in steel prices in 2015. That move, along with improved market conditions last year, helped it reduce its net debt to $11.06 billion at the end of 2016 from $15.68 billion in 2015.

Chief Financial Officer Aditya Mittal on a conference call with reporters Friday lauded the progress, but cautioned that markets "remain volatile" largely as a result of Chinese overcapacity.

China has flooded the world market with an excess of less expensive steel and aluminium, helping to trigger an ongoing consolidation in the European steel industry.

Luxembourg-based ArcelorMittal said last year that it planned to team up with Italy's privately held Marcegaglia SpA to take over the ailing Ilva steel plant in Italy, which is Europe's largest single steel plant and a producer of flat-steel products. The deal, if it goes ahead, would solidify ArcelorMittal's number one position in the European flat-steel market, ahead of Germany's Thyssenkrupp AG.

ArcelorMittal's fourth quarter sales rose 1% to $14.1 billion, as a result of higher steel shipment volumes, higher average steel selling prices and higher iron-ore reference prices. But those gains were offset by lower market-priced iron-ore shipments, the company said.

 

Write to Christopher Alessi at christopher.alessi@wsj.com

 

(END) Dow Jones Newswires

February 10, 2017 03:39 ET (08:39 GMT)

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