MT Arcelor Mittal New

By Alex MacDonald 

LONDON--Steel giant ArcelorMittal on Friday cut its earnings outlook as it swung to a net loss in the third-quarter due in part to increased competition from steel imports, particularly from China, that are taking a toll on steelmakers globally.

The Luxembourg-based steelmaker, the world's largest by shipments accounting for some 6% of global steel output, reported a net loss of $711 million in the third quarter compared with $22 million net profit in the same period a year earlier.

The figure missed expectations of a $184 million net loss based on a FactSet poll of six analysts largely due to $527 million in impairment charges, including $500 million related to the write-down of inventories following a sharp drop in international steel prices, and $27 million related to restructuring costs in South Africa.

Revenue fell 22% to $15.6 billion due to lower steel and iron ore shipments as well as lower prices for both products as steel demand in all major markets, except Europe contracted.

This prompted the company to suspend its dividend and cut its guidance for full-year earnings before interest, taxes, depreciation and amortization or Ebitda to between $5.2 billion and $5.4 billion from a previous range of $6 billion to $7 billion.

The steelmaker said operating conditions have deteriorated significantly in recent months, both in terms of the international steel prices, driven by unsustainably low export prices from China, and order volumes as customers adopt a "wait and see" mind-set in case steel prices fall further.

Chinese steelmakers are shipping their steel abroad at a record pace with exports reaching a monthly high in September. The Chinese steelmakers are exporting their product abroad in larger waves due to anemic domestic demand at home. The U.S. and Europe Union have been particularly hard hit by the subsequent influx of cheap steel imports. The U.S. and EU have responded by launching trade cases to protect their local steelmakers.

Jefferies estimates that the U.S. has launched steel trade cases representing 34% of its total steel imports in the year to date, while the EU has launched steel trade cases for just 15% of its total steel imports.

"There are...important issues for governments to address, specifically relating to unfair trade. We are encouraged by various examples of trade action being initiated in response to dumping, but the process needs to be faster in order to be fully effective," said ArcelorMittal's Chief Executive Lakshmi Mittal.

Looking ahead, Mr. Mittal said: "Whilst we expect market conditions to remain challenging in 2016, we have a number of important programs under way across the business which will structurally improve Ebitda.

The company plans to reduce next year's cash requirements by about $1 billion from this year by cutting its capital expenditure, lowering interest and tax expenses and suspending its dividend.

It also expects to lower its net debt to $15.8 billion by the year end from $16.8 billion at end-September and noted that it expects to remain free cash-flow positive this year.

Write to Alex MacDonald at alex.macdonald@wsj.com

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(END) Dow Jones Newswires

November 06, 2015 02:05 ET (07:05 GMT)

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