ArcelorMittal Loss Worse Than Expected
November 06 2015 - 3:10AM
Dow Jones News
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 02:55 ET (07:55 GMT)
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