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ArcelorMittal Announces Q3 Results, More Production Cuts

11/06/2008 - ArcelorMittal reports net income of $3.8 billion on sales of $35.2 billion for the third quarter, and net income of $12.3 billion on sales of $102.8 billion for the nine-month period ended September 30, 2008.

ArcelorMittal reported net income of $3.8 billion on sales of $35.2 billion for the third quarter, and net income of $12.3 billion on sales of $102.8 billion for the nine-month period ended September 30, 2008.
 
Third Quarter Results—The $3.8 billion net income represents a 29% increase as compared with the year-ago third quarter. The $35.2 billion sales represent a 38% increase compared with the third quarter of 2007. Third-quarter capital expenditures were $1.8 billion.
 
EBITDA (operating income plus depreciation and impairment expenses) was $8.6 billion, representing a 76% increase compared with the year-ago third quarter. The company noted that EBITDA excludes the accounting effects of the new four-year labor contract that it entered into with its labor employees during the third quarter.
 
For the third quarter, the company returned a total of $2.3 billion to ArcelorMittal shareholders, of which $0.5 billion was paid in cash dividends and $1.8 billion was paid in share buy-backs. The company will maintain total return to base dividend at $1.50 per share for 2009.
 
Market-Based Initiatives—Along with its third-quarter financial results, the company also announced a number of initiatives in response to the current economic environment, including increasing temporary production cuts to accelerate inventory reduction and adaptation of the company’s existing growth plan to reflect market conditions. The company is also targeting increased management gains target from $4 billion to $5 billion through additional selling, general and administrative (SG&A) savings over the next five years, and a $10-billon net debt reduction by end of 2009 to increase financial flexibility.
 
Management Comments—“We have announced today strong results for the quarter with EBITDA of US$8.6 billion,” commented ArcelorMittal Chairman and CEO Lakshmi N. Mittal. “Looking forward, we have also announced necessary and responsible measures to ensure we are well adapted to the current environment. Our focus remains on cost-leadership and service to customers.
 
“The current period of de-stocking requires that we make appropriate production cuts to seek to rebalance supply and demand, and we are also accelerating efforts to pay down debt,” continued Mittal. “ArcelorMittal, with its diversified business model, strong cash-flow and cost leadership position, is well placed to weather the challenging economic environment we currently face.

“We remain optimistic about the industry's medium-term growth prospects, but it is appropriate to pause our growth strategy until we have a more settled economic outlook," concluded Mittal.
 
Outlook—Looking ahead, the company anticipates that fourth quarter EBITDA will be in the range of $2.5 to $3.0 billion based on continued production cuts in response to weaker demand across all segments. The company also expects positive cash flow from operations in the fourth quarter, and said that capital expenditures should be approximately $1.5 billion in the fourth quarter. The company also said it was on track to deliver full-year EBITDA of $24.2 to $24.7 billion, which compares with 2007’s full-year EBITDA of $19.4 billion.
 
ArcelorMittal is the world's largest steel company, with over 326,000 employees in more than 60 countries. The company leads major global steel markets, including automotive, construction, household appliances and packaging, with leading R&D and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks. With an industrial presence in over 20 countries spanning four continents, the company covers key steel markets, from emerging to mature.
 
Through its core values of sustainability, quality and leadership, ArcelorMittal commits to operating in a responsible way with respect to the health, safety and wellbeing of its employees, contractors and the communities in which it operates. It is also committed to the sustainable management of the environment and of finite resources. The company recognizes that it has a significant responsibility to tackle the global climate change challenge; it takes a leading role in the industry's efforts to develop breakthrough steelmaking technologies and is actively researching and developing steel-based technologies and solutions that contribute to combat climate change.
 
In 2007, ArcelorMittal had revenues of $105.2 billion and crude steel production of 116 million tonnes, representing around 10% of world steel output.