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ArcelorMittal Q1 Loss Pinned On Europe's Lack of Demand

May 10, 2013
Sales fell by 13% on a 12-month basis to $19.8 billion.

PARIS -- Top global steelmaker ArcelorMittal (IW 1000/35) reported a first-quarter loss on Friday due mainly to problems in Europe where the company said crisis-driven austerity was blunting demand for steel.

But the company surprised analysts by standing by its targets for operating profit and for reducing debt this year, sending the share price soaring 6.4% on a Paris market up by 0.80 percent.

The group reported a first-quarter net loss of $345 million from a net profit of $92.0 million 12 months ago.

Sales fell by 13% on a 12-month basis to $19.8 billion and earnings before interest, tax, depreciation and amortization slumped by 26% to $1.57 billion.

However, the comparison with performance in the last quarter of last year is more favorable. In that quarter the group reported a loss of $3.8 billion.

The results in the first quarter suffered from a continuing crisis for the steel sector in Europe.

Chief executive Lakshmi Mittal had said that he expected demand for steel in Europe to fall by 0.5%-1.5% this year, and that the indicators for the first quarter had been worse than for the first quarter of last year.

The results in the first quarter suffered from a continuing crisis for the steel sector in Europe.

He said that  in the first quarter the trend pointed to a fall of 20.0%-30% in demand for steel by the main French carmakers, the PSA Peugeot group and Renault.

Mittal said that the quarter had been marked by difficult economic conditions. But he said that the underlying EBITDA operating profit in the second quarter should be higher than in the first quarter.

Mittal stood by the target of an EBITDA figure of $7.1 billion for the whole of this year, on the basis that the cost of iron ore, margins on steel prices and raw materials costs remained in 2013 at the same levels as in 2012.

In the first quarter, the group made progress towards its target of reducing net debt to $17.0 billion in the first half of the year, by reducing it by $3.8 billion to $18.0 billion. Mittal said that in the first quarter the group had reduced its net debt sharply and that action taken to concentrate production on the most competitive assets was beginning to bear fruit. At the end of March, the group had cash available of $18.0 billion.

ArcelorMittal has been engaged in a high-profile industrial dispute in France over the controversial closure of blast furnaces.

Mittal called for a reduction of the cost of energy and of labour in Europe in order to raise the competitive position of European production facilities.

On Wednesday Mittal's son Aditya Mittal, who is chief financial officer at ArcelorMittal, said the biggest problem in continental Europe was demand. With car sales actually rising in Britain but falling in the eurozone, Aditya said "it was clear austerity was hurting demand," most notably in the southern Europe.

But the group said it expected the outlook in Europe to improve by the end of the year and said it was counting on demand in emerging economies to support its results.

ArcelorMittal employs about 98,000 people in Europe of whom 20,000 work in France.

The company has launched a new round of cost cutting to save about $3.0 billion by 2015.

At the beginning of February, the group made a commitment to EU Industry Commissioner Antonio Tajani not to restructure further in Europe before the EU presents an action plan for the steel sector which is expected in the next few months.

-Antonio Rodriguez, AFP

Copyright Agence France-Presse, 2013

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