ArcelorMittal SA (IW 1000/35), the world's largest steelmaker, plunged into quarterly loss and slashed its stock dividend on Wednesday, blaming a slump in Chinese demand and operating losses in Europe.
Luxembourg-based ArcelorMittal reported a third-quarter net loss of $709 million and said that cutting debt is a priority.
In the third quarter of last year, the group reported a net profit of $659 million.
Chronically weak demand and difficult trading conditions forced the group to revise downward its profit outlook for the second half of this year.
ArcelorMittal also reported an operating loss of $643 million on the production of flat carbon steels in Europe in the first nine months of the year.
The group, caught in controversy stemming from its decision to close two furnaces in northern France, said sales in the third quarter fell by 19% to $19.7 billion.
The furnaces, which have been damped down for 14 months, are being closed because they are uncompetitive in a tough trading climate, partly because they are located too far from ports for transportation, ArcelorMittal has said.
French officials are looking for a buyer, and have received several expressions of interest, including one from the Russian group Severstal, according to the French financial daily Les Echos.
Q3 Results Below Analysts' Estimates
The figures released on Wednesday were far below those expected by analysts polled by Dow Jones Newswires, who had broadly forecast a net loss of $230 million and sales of $20.6 billion.
In a news release, CEO Lakshmi Mittal said the main cause was a slowdown in demand from China that is likely to continue into the fourth quarter.
A fall in the price of iron ore in the third quarter and a weakening of the world economy also led the group to revise down the outlook for profits in the second half.
It now anticipates an operating profit of about $7 billion for all of 2012.
The group has greatly increased its iron ore interests in recent years as part of a vertical development strategy to protect its raw materials inputs.
Meanwhile, steel deliveries by the group fell by 5.7% in the quarter to 19.9 million tons, while output of iron ore rose by 1.3%.
The board recommended a cut in the dividend from next year from 75 cents to 20 cents.
Citi analysts said: "We think the dividend cut and weaker outlook will lead to near-term underperformance and strengthen the view that the company could lose its investment grade status with Moody's," in reference to the international ratings agency.
Excluding future asset sales, ArcelorMittal's net debt was expected to rise to $22 billion at the end of the year, the group said, emphasizing that reducing its debt has become a high priority.
In a conference call, CFO Aditya Mittal said the third and fourth quarters should mark the "low point" in ArcelorMittal's business cycle.
Mittal said the group planned investments of 4.5 billion euros this year, in particular to expand a Canadian mining operation that was on track to be finished in the first half of 2013.