Steel giant Arcelor Mittal reports 1 billion dollar loss

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Apr 2009

ArcelorMittal, the world’s largest and most global steel company, today announced results for the three months ended March 31, 2009. ArcelorMittal recorded a net loss for the three months ended March 31, 2009 of $1.1 billion, or $(0.78) per share, as compared with net loss of $2.6 billion , or $(1.93) per share, for the three months ended December 31, 2008, and net income of $2.4 billion or $1.69 per share, for the three months ended March 31, 2008.
Sales for the three months ended March 31, 2009 were $15.1 billion, a sharp decrease from sales of $22.1 billion for the three months ended December 31, 2008 and $29.8 billion for the three months ended March 31, 2008. The main reason for the decline continues to be the extreme weakness in demand for steel products in the first quarter of 2009 as a result of the global economic crisis, along with a steep fall in prices, leading to drastic curtailment of production.
ArcelorMittal recorded an operating loss for the three months ended March 31, 2009 of $1.5 billion, as compared with operating loss of $3.5 billion for the three months ended December 31, 2008 and operating income of $3.6 billion for the three months ended March 31, 2008. The loss in the first quarter of 2009 resulted from exceptional charges amounting to $1.2 billion primarily related to write-downs of inventory. During the fourth quarter of 2008, the Company had recorded exceptional charges amounting to $4.4 billion related to write-downs of inventory and raw material supply contracts, and provisions for workforce reduction and litigation. Fourth quarter of 2008 operating results had also been negatively affected by impairment losses of $588 million, including impairments of $325 million consisting primarily of asset impairments of $74 million (at various ArcelorMittal USA sites), $60 million (Gandrange, France) and $54 million (Zumarraga, Spain) and reduction of goodwill of $264 million12.
Total steel shipments for the three months ended March 31, 2009 were 16.0 million metric tonnes as compared with steel shipments of 17.1 million metric tonnes for the three months ended December 31, 2008 and 29.2 million metric tonnes for the three months ended March 31, 2008. As noted above, the sharp decrease year-on-year resulted from reduced steel production in response to falling demand amid the global economic crisis.
Depreciation expenses for the three months ended March 31, 2009 were $1.1 billion as compared with depreciation expenses of $1.2 billion and $1.1 billion for the three months ended December 31, 2008 and March 31, 2008, respectively.
Losses from equity method investments and other income for the three months ended March 31, 2009 were $153 million, as compared to income of $386 million and $329 million for the three months ended December 31, 2008 and March 31, 2008, respectively.
Net interest expense (including interest expense and interest income), decreased to $304 million for the three months ended March 31, 2009 as compared to $468 million for the three months ended December 31, 2008, primarily due to a reduction in average net debt and lower interest rates. (See “Liquidity and Capital Resources” below). Net interest expense for the three months ended March 31, 2008 amounted to $303 million. Foreign exchange and other net financing costs13 for the three months ended March 31, 2009 amounted to $265 million, as compared to a foreign exchange and other net financing gain of $64 million for the three months ended December 31, 2008. Foreign exchange and other net financing costs for the three months ended March 31, 2008 amounted to $191 million. Losses related to the fair value of derivative instruments for the three months ended March 31, 2009 amounted to $16 million, as compared with losses of $240 million and $242 million for the three months ended December 31, 2008 and March 31, 2008, respectively.
As a result of the operating losses, ArcelorMittal recorded an income tax benefit of $1,088 million for the three months ended March 31, 2009, as compared to an income tax benefit of $1,126 million for the three months ended December 31, 2008. The effective tax rate (ETR) for the three months ended March 31, 2009 was 49.0% as compared with 30.2% for the three months ended December 31, 2008. The income tax expense for the three months ended March 31, 2008 was $596 million, with an ETR of 18.6%.
Minority interest for the three months ended March 31, 2009 was $70 million as compared with minority interest of ($34) million and ($240) million for the three months ended December 31, 2008 and March 31, 2008, respectively. The decrease is due to net losses incurred at ArcelorMittal subsidiaries with minority interests.
Stainless Steel
Total steel shipments in the Stainless Steel segment were lower at 315,000 metric tonnes for the three months ended March 31, 2009 as compared with steel shipments of 365,000 metric tonnes for the three months ended December 31, 2008. The decrease is due to the deterioration of global steel markets and the continuation of production cuts into the first quarter of 2009.
Sales also decreased to $1.0 billion for the three months ended March 31, 2009 as compared with $1.3 billion for the three months ended December 31, 2008, due to both lower volumes and prices (a 13.5% decrease in average steel selling price)
The segment recorded an operating loss of $169 million for the three months ended March 31, 2009 as compared with an operating loss of $247 million for the three months ended December 31, 2008. The operating loss in the first quarter of 2009 included exceptional charges of $98 million primarily related to write-downs of inventory (the operating loss in the fourth quarter of 2008 included exceptional charges of $208 million related to write downs of inventory and provisions for workforce reductions). Excluding the impact of these exceptional charges, operating loss was $71 million for the three months ended March 31, 2009 as compared with operating loss of $39 million for the three months ended December 31, 2008, due to lower volumes and margins.
Steel Solutions and Services
Total steel shipments in the Steel Solutions and Services segment16 were marginally higher at 3.9 million metric tonnes in the three months ended March 31, 2009 as compared with steel shipments of 3.7 million metric tonnes for the three months ended December 31, 2008.
Sales in the Steel Solutions and Services segment were lower at $3.4 billion for the three months ended March 31, 2009 as compared with sales of $4.3 billion for the three months ended December 31, 2008, primarily due to lower prices (a 24.9% decrease in average steel selling price).
The segment recorded an operating loss of $170 million for the three months ended March 31, 2009 as compared with an operating loss of $580 million for three months ended December 31, 2008. The operating loss in the first quarter of 2009 included exceptional charges of $105 million primarily related to write-downs of inventory (the operating loss in the fourth quarter of 2008 included exceptional charges of $717 million related to write-downs of inventory and provisions for workforce reductions and litigation).  Excluding the impact of these exceptional charges, operating loss in the first quarter of 2009 was $65 million for the three months ended March 31, 2009 as compared with operating income of $137 million for the three months ended December 31, 2008, due primarily to lower prices.
Commenting, Mr. Lakshmi N. Mittal, Chairman and CEO, ArcelorMittal, said:
“Strong measures have been taken to reduce our cost considerably and liquidity remains healthy with an extended debt maturity profile. Although market conditions remain challenging, a technical recovery is inevitable and ArcelorMittal will benefit from this.

Source: ArcelorMittal