Ispat International Reports 1st Quarter Results
05/07/2004 -
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Ispat International
Reports
1st Quarter Results
May 7, 2004 — Ispat International NV reported a net income of $102 million on sales of $1,755 million for the first quarter of 2004.
Subsidiary
Gross Margins |
|||
Q1
'04 |
Q1
'03 |
||
| Ispat Inland | 17.4 |
14.1 |
|
| Ispat Mexicana | 15.5 |
13.0 |
|
| Ispat Sidbec | 13.1 |
11.0 |
|
| Ispat Caribbean | 22.3 |
19.9 |
|
| Ispat Europe Group | 6.8 |
10.0 |
|
Net income of $102 million (85 cents per share) compares to net income of $51 million (41 cents per share) for the first quarter of 2003. Results include the benefit of a $23-million after-tax gain of $23 million at Ispat Inland resulting from a reassessment of property taxes for the years 2002 and 2003. Excluding this benefit, the first quarter net income would have been $79 million or 65 cents per share.
Consolidated sales and operating income, $1.8 billion and $158 million, respectively, compare to $1.3 billion and $75 million, respectively, for the first quarter of 2003. Total steel shipments increased by 10% to 4.2 million tons. The increase in shipments combined with a 16% increase in average selling prices including appreciation of the Euro and the Canadian $ resulted in a 32% increase in net sales to $1,678 million.
Net sales at Ispat Inland increased by 21% due to an increase in average price per ton by 7% across most product lines, base price increases, favorable mix due to higher sales of cold rolled and coated products and implementation of surcharges to cover increase in input costs on certain shipments. Overall shipments increased by 13% due to stronger demand and increased production resulting from the reline of Blast Furnace No.7. Ispat Inland's cost per ton increased by 8%, excluding a one-time reversal of provision for property taxes. Ispat Mexicana's net sales were higher by 39% due to increase in average selling prices by 24% and a 12% increase in shipments. The demand for slabs remained strong in all major markets. Ispat Mexicana's cost per ton increased by 21%. Ispat Sidbec's net sales increased by 30% primarily due to a 28% increase in average selling prices in US$ (12% in Canadian $) and 3% increase in shipments due to the improving demand in all market segments. Ispat Sidbec's cost per ton increased by 25% in US$ (11% in Canadian $) due to steep increase in scrap prices. Net sales at Caribbean Ispat increased 10% due to increased demand and improved prices. Steel sales increased by 9% due to a 21% increase in selling prices and 9% decline in shipments. DRI sales increased by 12% due to an increase in average selling prices by 17%, offset by a reduction of shipment by 4%. These sales were largely to affiliates. Cost per ton at Caribbean Ispat increased by 19%, mainly due to an increase in the cost of iron ore. Net sales at Ispat Europe increased by 39% in US$ dollars (19% in Euros) due to improving demand for long products in Europe. Shipments increased by 12%; however, transaction prices remained flat due to earlier commitments. Ispat Europe's cost per ton increased by 21% in US$ (4% in Euros), primarily due to increase in prices of scrap. |
Cost of sales increased by 29% to $1,502 million. This increase is due to an increase in input costs as well as appreciation of the Euro and Canadian $, which translates into higher US$ costs. Overall, cost per ton in US$ increased by 12% primarily due to higher prices of most of the inputs, including scrap, iron ore, natural gas, alloys and higher transportation costs. These increases in input costs are driven by the continued strong global demand.
Management believes that gross profit (net sales less cost of sales, excluding depreciation) and gross profit margin provide useful management information. Gross profit increased to $253 million, an increase of 57% over the first quarter of 2003. Gross margin for the first quarter was 14% compared to 12% in the same period in 2003. The increase is due to higher levels of activities (both production and shipment). In addition, the current quarter gross profit benefited from a pre-tax gain of $35 million from a release of property taxes provision for earlier years.
Debt at the end of the first quarter was $2.3 billion. Capital expenditure for the first quarter of 2004 was $21 million. At March 31, 2004 the company's consolidated cash, cash equivalents and short term investments totaled $104 million. The company also had approximately $383 million available to it under various un-drawn lines of credit and bank credit arrangements.
Outlook—Overall, the company expects to benefit from the strong market conditions for its products, and looks forward with confidence to a better quarter.
Ispat International NV is one of the largest and most global steel producers, with major steelmaking operations in the United States, Canada, Mexico, Trinidad, Germany and France. The company produces a broad range of flat and long products sold mainly in the North American Free Trade Agreement (Nafta) participating countries and the European Union (EU) countries. Ispat International NV is a member of the LNM Group.
