MT Arcelor Mittal New

By Alex MacDonald 

LONDON-- ArcelorMittal, the world's largest steelmaker, said Friday it will issue $3 billion worth of shares to strengthen its balance sheet as it grapples with a world-wide steel glut which contributed to a near $7 billion fourth-quarter net loss.

The Mittal family, the steel group's controlling shareholder, will subscribe to its entitlement of the share issue, or about $1.1 billion. Lakshmi Mittal is ArcelorMittal's chairman and chief executive. At the end of last year, the family owned 39.4% of the company's shares.

The company will also sell it 35% stake in Spain's automotive metals component firm Gestamp for about $1 billion by the end of June as part of the cash-raising program to pay down debt.

ArcelorMittal said it wants to reduce net debt to less than $12 billion from $15.7 billion at the end of December.

"This capital raise, combined with the sale of our minority shareholding in Gestamp, will...help ensure that the business is resilient in any market environment and puts ArcelorMittal in a position of strength from which to further improve performance," said Mr. Mittal.

The urgency of ArcelorMittal's debt-reduction plan was underscored by the company's latest results, released Friday a week earlier than scheduled, in which its net loss ballooned to $6.7 billion in the three months to end-December from $955 million the same quarter a year before.

Fourth-quarter revenue sank 25% to $14 billion on a 7% decline in steel shipments, as falling prices of iron ore and steel hammered ArcelorMittal's performance.

ArcelorMittal said impairment charges of $4.8 billion largely related to its iron-ore operations led to a full-year loss of $7.9 billion.

ArcelorMittal shares have fallen 58% over the past year. Falling steel prices in its regional markets and excess steel supply from China, the world's largest steel producer, have exerted intense pressure on its business. China has exported record amounts of the metal to Europe and other markets amid shrinking demand at home.

Tata Steel Ltd. of India, in announcing plans to cut a further 1,050 jobs from its U.K. operations last month, joined the chorus of steelmakers urging governments to do more to stem the tide of inexpensive steel from China.

Slack demand and falling prices has led other mining and metals companies--ArcelorMittal mines iron ore and coal itself--to ask shareholders for cash to shore up their finances as investors worry about their ability to finance their borrowings amid the slump in commodity producers' revenues.

French specialty steelmaker Vallourec SA announced this week plans to raise EUR1 billion ($1.1 billion) from bonds and shares amid drastic cutbacks in its business. Glencore PLC, the world's third largest diversified miner, issued $2.5 billion in shares last September as part of plan to reduce net debt by more than $10 billion.

Mr. Mittal said the steel group faces continued tough trading conditions.

"[This year] will be another difficult year for our industries," said Mr. Mittal. "It is clear that China has a challenge to restructure its steel industry...Until this situation is fully addressed the effective and swift implementation of trade defense instruments will be critical," he said.

In the fourth quarter, ArcelorMittal said earnings before interest, taxes, depreciation and amortization fell 39% to $1.1 billion, in line market expectations according to analysts polled by data provider FactSet.

Looking ahead, ArcelorMittal said it expects to generate more than $4.5 billion in Ebtida this year following a 28% drop to $5.2 billion last year.

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

(END) Dow Jones Newswires

February 05, 2016 02:48 ET (07:48 GMT)

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