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ArcelorMittal Reports 4th Quarter, Full Year Results
02/12/2009 - ArcelorMittal reports a net loss of $2.6 billion on sales of $22.1 billion for the fourth quarter and net income of $9.4 billion on sales of $124.9 billion for the year ended December 31, 2008.
ArcelorMittal recorded a net loss of $2.6 billion on sales of $22.1 billion for the fourth quarter and net income of $9.4 billion on sales of $124.9 billion for the year ended December 31, 2008.
Full Year Results—The $9.4 billion net income reflects a 9% decrease as compared to the previous year, while the $124.9 billion sales compare to sales of $105.2 billion in the previous year. EBITDA of $24.5 billion reflects a 26% increase as compared to EBITDA of $19.4 billion in the previous year. Shipments of 101.7 million tonnes reflect a 7% decrease compared to shipments of 109.7 million tonnes in the previous year.
“ArcelorMittal’s generally excellent performance in 2008 was overshadowed by the considerable slowdown in the world economy in the last quarter of the year,” commented ArcelorMittal Chairman and CEO Lakshmi N. Mittal. “Our scale, strength and market leadership, however, allowed us to swiftly and decisively implement a number of operational and financial measures to adapt to the changing environment. These measures have already started to yield results.
“The reduction of net debt is particularly pleasing, enabled by our ability to continue to generate strong free cash flow,” added Mittal. “Whilst the operating climate is likely to remain challenging for the first quarter, we are starting to see some signs of improvement.”
Fourth Quarter Results—The $2.6 billion ($1.93 per share) net loss compares with net income of $3.8 billion ($2.79 per share) for the previous quarter (ended September 30, 2008) and net income of $2.4 billion ($1.72 per share) for the three months ended December 31, 2007.
Sales of $22.1 billion reflect a sharp decrease from sales of $35.2 billion for previous quarter and sales of $28.0 billion for the year-ago fourth quarter. The company said the decline resulted from a collapse in demand for steel products and a sharp fall in prices due to the global economic crisis. ArcelorMittal responded to the situation with substantial production cuts starting in September 2008 and increasing through the fourth quarter.
ArcelorMittal recorded an operating loss of $3.5 billion, which compares to operating income of $5.5 billion for the previous quarter and operating income of $3.3 billion for the year-ago quarter. Current results reflect exceptional charges of $4.4 billion due to write-downs of inventory and raw material supply contracts, and provisions for workforce reductions and litigation.
Total steel shipments were 17.1 million tonnes as compared with steel shipments of 25.6 million tonnes for the previous quarter and 28.0 million tonnes for the year-ago quarter, the sharp decrease again reflecting the recent collapse in demand.
Depreciation costs were $1.2 billion as compared with depreciation costs of $1.4 billion for the previous quarter and costs of $1.1 billion for the year-ago quarter.
Impairment losses amounted to $588 million, which compares to $60 million for the three months ended September 30, 2008. Impairment losses included 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 a $26411 million reduction of goodwill.
Income of $386 million from equity method investments and other income remained flat as compared with the previous quarter, but reflected an increase as compared to $273 million for the year-ago fourth quarter.
Foreign exchange and other financing income amounted to $236 million, as compared to a foreign exchange and other financing loss of $287 million for the previous quarter. Net interest expense (including bank fees, interest on loans and interest on pensions) increased to $640 million as compared to $529 million for the previous quarter, due to higher interest cost of $54 million on pension obligations, and lower income on cash balances. Losses related to the fair value of derivative instruments amounted to $240 million, as compared with $107 million of losses for the previous quarter, primarily due to losses on forward contracts on freight.
ArcelorMittal recorded a $1,126 million income tax benefit for the fourth quarter, primarily as a result of operating losses. For the previous quarter, the company had recorded an income tax expense of $695 million. The effective tax rate for the fourth quarter was 30.2% as compared with 14.1% for the previous quarter. The higher rate is primarily due to a change in the geographical mix of ArcelorMittal’s results. The income tax expense for the year-ago fourth quarter was $345 million, with an effective tax rate of 11.4%.
Minority interest was $34 million as compared with $414 million for the previous quarter. The decrease is due to lower income from ArcelorMittal South Africa and ArcelorMittal Ostrava. Minority interest for the year-ago fourth quarter was $237 million.
Segment Results—ArcelorMittal also provided the following analysis of segment operations as compared to the previous quarter (ended September 30, 2008).
ArcelorMittal’s Flat Carbon Americas segment reported total steel shipments of 3.9 million tonnes—nearly halved as compared with steel shipments of 6.9 million tonnes for the previous quarter, reflecting the sharp deterioration of global steel markets in the fourth quarter.
Sales also declined to $4.5 billion as compared with sales of $8.5 billion for the previous quarter, reflecting both lower volumes and lower prices (an 8.7% decrease in average steel selling price).
The segment recorded an operating loss of $0.4 billion for the fourth quarter, representing a sharp decline from operating income of $0.6 billion for the previous quarter. The operating loss included exceptional charges of $0.5 billion related to write-downs of inventory and raw material supply contracts. In the previous quarter, the segment recorded a non-recurring charge of $1.5 billion in connection with a new labor agreement. Excluding the impact of these exceptional charges, operating income was $0.1 billion for the current quarter as compared with operating income of $2.2 billion previous quarter, primarily due to lower average selling prices and lower steel shipment volumes. The fourth quarter operating result was also negatively affected by a $74 million asset impairment charge at various locations of ArcelorMittal USA.
This segment no longer includes the results of ArcelorMittal Montreal and the tubular products business of ArcelorMittal Dofasco, which were transferred to Long Carbon Americas and Europe as of January 1, 2008.
ArcelorMittal’s Flat Carbon Europe segment reported lower total steel shipments of 6.0 million tonnes as compared with shipments of 8.2 million tonnes for the previous quarter, reflecting the sharp deterioration of global steel markets in the fourth quarter.
Sales were also lower at $7.0 billion as compared with sales of $10.1 billion for the previous quarter, due to both lower volumes and lower prices (a 15.0% decrease in average steel selling price).
The segment recorded an operating loss of $1.4 billion, representing a sharp decline from operating income of $1.3 billion for the previous quarter. The operating loss included exceptional charges of $1.8 billion related to write-downs of inventory and raw material supply contracts, and provisions for workforce reductions. Excluding the impact of these exceptional charges, operating income was $0.4 billion for the fourth quarter as compared with $1.3 billion for the previous quarter, due to lower average selling prices and lower shipment volumes. The fourth quarter operating loss was also affected by a reduction of goodwill.
ArcelorMittal’s Flat Carbon Europe segment now reflects the results of ArcelorMittal Annaba flat and Skopje, which were previously reported in the AACIS segment. In addition, the entire operations of Galati are now reported within Flat Carbon Europe.
ArcelorMittal’s Long Carbon Americas and Europe segment reported lower total steel shipments were lower at 4.6 million metric tonnes for the three months ended December 31, 2008 as compared with 6.7 million metric tonnes for the three months ended September 30, 2008, in line with the sharp deterioration of global steel markets in the fourth quarter.
Sales were also lower at $5.2 billion as compared with sales of $9.5 billion for the previous quarter, due to lower volumes and lower prices (a 20.7% decrease in average steel selling price).
The segment recorded an operating loss of $0.4 billion for the fourth quarter, representing a sharp decline from operating income of $1.8 billion for the previous quarter. The operating loss included exceptional charges of $0.6 billion related to write-downs of inventory and raw material supply contracts, and provisions for workforce reductions. In the third quarter, the segment recorded a non-recurring charge of $0.2 billion related to a new labor agreement. Excluding the impact of these exceptional charges, operating income was $0.3 billion for the fourth quarter, as compared to $1.9 billion for the previous quarter, reflecting lower average steel selling prices and lower shipment volumes. The operating loss for the current quarter was also increased by $187 million of impairment expenses (consisting primarily of asset impairments of $60 million for Gandrange (France), and $54 million for Zumarraga, Spain, respectively), as well as reduction of goodwill.
ArcelorMittal’s Long Carbon Americas and Europe segment includes the operations of ArcelorMittal Annaba long, Sonasid, Zenica, and the global tubular products business previously reported in the AACIS segment, as well as ArcelorMittal Montreal, which was previously reported in the Flat Carbon Americas segment. The wire drawing businesses have been transferred to the company’s Steel Solutions and Services segment.
ArcelorMittal’s Asia Africa and CIS (“AACIS”) segment reported lower total steel shipments of 2.2 million tonnes as compared with shipments of 3.3 million tonnes for the previous quarter, reflecting the sharp deterioration of global steel markets in the fourth quarter.
Sales were also lower at $2.1 billion as compared with sales of $4.2 billion for the previous quarter, due to both lower volumes and prices (a 40.4% decrease in average steel selling price).
The segment recorded an operating loss of $0.2 billion, representing a sharp decline from operating income of $1.5 billion for the previous quarter. The operating loss included exceptional charges of $0.3 billion related to write-downs of inventory and provisions for workforce reductions. Excluding the impact of these exceptional charges, operating income was $0.1 billion for the current quarter, reflecting lower average steel selling prices and lower shipment volumes.
ArcelorMittal’s Asia Africa and CIS segment now excludes the operations of ArcelorMittal Annaba, Sonasid, Zenica, Skopje and the tubular products businesses that were transferred other company segments.
ArcelorMittal’s Stainless Steel segment reported lower total steel shipments of 365,000 tonnes as compared with steel shipments of 487,000 tonnes for the previous quarter, reflecting again the sharp deterioration of global steel markets in the fourth quarter.
Sales also decreased to $1.3 billion as compared with sales of $2.1 billion for the previous quarter, due to both lower volumes and lower prices (a 17.7% decrease in average steel selling price).
The segment recorded an operating loss of $247 million, representing a sharp decline from operating income of $156 million for the previous quarter. The operating loss 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 $39 million for the fourth quarter as compared with operating income of $156 million for the previous quarter, reflecting lower volumes and lower margins.
ArcelorMittal’s Steel Solutions and Services segment reported lower total steel shipments of 3.7 million tonnes as compared with steel shipments of 4.3 million tonnes for the previous quarter.
Sales were also lower at $4.3 billion as compared with sales of $6.1 billion for the previous quarter, due to both lower volumes and lower prices (an 18.7% decrease in average steel selling price).
The segment recorded an operating loss of $580 million for the fourth quarter, representing a sharp decline from operating income of $343 million for previous quarter. The operating loss includes 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 income was $137 million for the fourth quarter as compared with operating income of $343 million for the previous quarter, due primarily to lower volumes and input price increases.
ArcelorMittal’s Steel Solutions and Services segment now reflects results from the operations of ArcelorMittal wire drawing activities, which were previously reported within the Long Carbon Americas and Europe segment.
ArcelorMittal’s recent developments include its January 31, 2009, acquisition of 60% of DSTC FZCO, a newly incorporated company located in the Dubai free zone that will acquire the main business of Dubai Steel Trading Company LLC, a steel distributor in the United Arab Emirates (UAE). The purchase price was $64.5 million.
On January 15, 2009, the company’s shares began to trade under the symbol MT on a single order book on the NYSE Euronext European markets (Paris, Amsterdam and Brussels). ArcelorMittal will remain a member of key NYSE-Euronext indices, in particular the CAC40 and the AEX.
On December 16, 2008, the French Competition Authority (Conseil de la Concurrence) imposed a €301.78 million ($407 million) fine on French subsidiaries of ArcelorMittal active in steel distribution. The fine is the result of an investigation started in 2004 into historical anticompetitive practices in the steel distribution sector in France that allegedly date back to 1999. The company has made appropriate provisions for the fine, and has also filed an appeal regarding the amount of the fine.
The company entered into binding agreements on December 15, 2008, to reduce its interest in Dillinger Hütte Saarstahl AG (DHS) from 51.25% to 33.40% through the sale of shares to Struktur-Holding-Stahl GmbH and DHS.
On December 15, 2008, Mr. Lakshmi N. Mittal and the Group Management Board of ArcelorMittal met with the Secretariat of the European Works Council to discuss the effects of the financial and economic crisis on the economy and the steel industry. ArcelorMittal and the European Works Council agreed to strengthen social dialogue at the national and local levels in relation to ArcelorMittal’s voluntary separation programs and other local productivity plans.
On August 4, 2008, the company announced that it had signed an agreement to acquire the Koppers’ Monessen Coke Plant from Koppers Inc. Located in Monessen, Pa., the coke plant had produced 320,000 tonnes of metallurgical coke in 2007. The transaction was completed on October 1, 2008 with a total payment of $170 million.
