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ArcelorMittal Reports Loss for 1st Quarter 2009
04/30/2009 - ArcelorMittal reported a net loss of €1.1 billion on sales of €15.1 billion for the three months ended March 31, 2009.
ArcelorMittal reported a net loss of €1.1 billion on sales of €15.1 billion for the three months ended March 31, 2009.
The €1.1 billion (€ (0.78) per share) net loss compares to a net loss of €2.6 billion (€ (1.93) per share) in the previous quarter and net income of €2.4 billion (€1.69 per share) in the year-ago first quarter. The €15.1 billion sales reflect a significant decrease as compared to the €22.1 billion sales in the previous quarter (Q408) and €29.8 billion sales in the year-ago first quarter.
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ArcelorMittal confirmed its target to achieve management gains of $2 billion of sustainable SG&A and fixed cost reductions during 2009. As of the end of the first quarter, the company is on track to meet this commitment and has achieved annualized savings of $1.2 billion.
The company obtained commitments in principle this week for a further $0.3 billion from additional banks during a further phase of its Forward Start facilities, subject to certain conditions, which would raise the total refinancing commitments of banks under the Forward Start facilities to $6.3 billion. These facilities mature in 2012.
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In the previous quarter, the company had recorded €4.4 billion of exceptional charges related to write-downs of inventory and raw material supply contracts, and provisions for workforce reduction and litigation; these operating results had also been negatively affected by impairment losses of $588 million. Fourth quarter impairment losses included €74 million of asset impairments at various ArcelorMittal USA sites; €60 million at Gandrange, France; and €54 million at Zumarraga, Spain; along with €264 million for reduction of goodwill.
Total steel shipments of 16.0 million tonnes compare to shipments of 17.1 million tonnes in the previous quarter, and shipments of 29.2 million tonnes in the year-ago first quarter. The sharp decrease in shipments reflects the impact of the global economic crisis.
Depreciation expenses 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 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 as compared to €468 million for the previous quarter, primarily due to a reduction in average net debt and lower interest rates. Net interest expense for the year-ago first quarter amounted to €303 million.
Foreign exchange and other net financing costs amounted to €265 million, as compared to a foreign exchange and other net financing gain of €64 million for the previous quarter, and foreign exchange and other net financing costs of €191 million for the year-ago first quarter. Losses related to the fair value of derivative instruments amounted to €16 million, as compared with losses of €240 million and €242 million for the previous quarter and year-ago first quarter, respectively.
As a result of the operating losses, ArcelorMittal recorded an income tax benefit of €1,088 million, which compares to an income tax benefit of €1,126 million for the previous quarter. The effective tax rate (ETR) was 49.0% as compared with 30.2% for the previous quarter. The income tax expense for the year-ago first quarter was €596 million, with an ETR of 18.6%.
Minority interest was €70 million as compared with minority interest of (€34) million and (€240) million for the previous quarter and year-ago quarter, respectively. The decrease is due to net losses incurred at ArcelorMittal subsidiaries with minority interests.
Comparing segment operations for the current quarter vs. the year-ago first quarter, ArcelorMittal recorded the following results for its Flat Carbon Americas, Flat Carbon Europe, Long Carbon Americas and Europe, Asia Africa and CIS, Stainless Steel, and Steel Solutions and Services Sectors.
Total steel shipments in the Flat Carbon Americas segment were 3.6 million tonnes, as compared with steel shipments of 3.9 million tonnes for the previous quarter. The decrease is attributed to deterioration of the global steel markets and continuation of production cuts into the first quarter of 2009.
Sales also declined to €3.2 billion vs. sales of €4.5 billion for the previous quarter, due to lower volumes and prices (a 25.4% decrease in average steel selling price).
The Flat Carbon Americas segment recorded an operating loss of €0.7 billion vs. an operating loss of €0.4 billion for the previous quarter. Results included exceptional charges of €0.5 billion for both quarters, primarily including write-downs of inventory and related contracts. Fourth quarter 2008 operating results had also been negatively affected by a €74 million asset impairment charge at various locations of ArcelorMittal USA.
Total steel shipments in the Flat Carbon Europe segment were lower at 4.8 million tonnes vs. 6.0 million tonnes for the previous quarter. The decrease is due to the deterioration of global steel markets and continued production cuts into the first quarter of 2009.
Sales were also lower at €4.6 billion vs. sales of €7.0 billion for the previous quarter, due to both lower volumes and prices (a 12.3% decrease in average steel selling price).
The Flat Carbon Europe segment recorded an operating loss of €0.2 billion vs. an operating loss of €1.4 billion for the previous quarter. Current results included exceptional charges of €0.3 billion primarily related to write-downs of inventory, vs. exceptional charges of €1.8 billion related to write-downs of inventory and raw material supply contracts, and provisions for workforce reductions in the previous quarter. The previous quarter’s operating loss had also been affected by a €194 million reduction of goodwill.
Total steel shipments in the Long Carbon Americas and Europe segment were lower at 4.4 million tonnes vs. 4.6 million tonnes for the previous quarter. The decrease is due to deterioration of global steel markets and continued production cuts into the first quarter of 2009.
Sales were also lower at €3.8 billion vs. €5.2 billion for the previous quarter, due to lower volumes and prices (a 21.8% decrease in average steel selling price).
The Long Carbon Americas and Europe segment recorded an operating loss of €0.2 billion vs. an operating loss of €0.4 billion for the previous quarter. Current results included €0.2 billion of exceptional charges primarily related to write-downs of inventory, vs. €0.6 billion of exceptional charges in the previous quarter, which were related to write downs of inventory and raw material supply contracts, and provisions for workforce reductions. Results for the previous quarter had also been affected by €187 million of impairment expenses (consisting primarily of asset impairments of €60 million for Gandrange (France), and €54 million for Zumarraga (Spain), respectively) and €70 million reduction of goodwill.
Total steel shipments in the Asia Africa and CIS (AACIS) segment were higher at 2.8 million tonnes vs. 2.2 million tonnes for the previous quarter. Sales were lower at €1.7 billion vs. €2.1 billion for the previous quarter due to lower prices (a 24.5% decrease in average steel selling price) despite the increase in shipments.
The AACISsegment recorded an operating loss of €18 million vs. an operating loss of €159 million for the previous quarter. Current results included €0.1 billion of exceptional charges primarily related to write-downs of inventory vs. €0.3 billion of exceptional charges in the previous quarter for inventory write downs and provisions for workforce reductions.
Total steel shipments in the Stainless Steel segment were lower at 315,000 tonnes vs. steel shipments of 365,000 tonnes for the previous quarter. The decrease is attributed to deterioration of global steel markets and continued production cuts into the first quarter of 2009.
Sales also decreased to €1.0 billion vs. €1.3 billion for the previous quarter, due to both lower volumes and prices (a 13.5% decrease in average steel selling price)
The Stainless Steel segment recorded an operating loss of €169 million vs. an operating loss of €247 million for the previous quarter. Current results included €98 million of exceptional charges primarily related to inventory write-downs, vs. €208 million of exceptional charges in the previous quarter for inventory write downs and provisions for workforce reductions.
Total steel shipments in the Steel Solutions and Services segment were marginally higher at 3.9 million tonnes vs. steel shipments of 3.7 million tonnes for the previous quarter. Sales were lower at €3.4 billion vs. sales of €4.3 billion for the previous quarter, primarily due to lower prices (a 24.9% decrease in average steel selling price).
The Steel Solutions and Services segment recorded an operating loss of €170 million vs. an operating loss of €580 million for previous quarter. Current results included €105 million of exceptional charges for inventory write-downs vs. €717 million exceptional charges in the previous quarter for inventory write-downs and provisions for workforce reductions and litigation.
“Strong measures have been taken to reduce our cost considerably and liquidity remains healthy with an extended debt maturity profile,” commented Lakshmi N. Mittal, Chairman and CEO, ArcelorMittal. “Although market conditions remain challenging, a technical recovery is inevitable and ArcelorMittal will benefit from this.”
Regarding the second quarter 2009, Mittal noted that the company expects EBITDA to range from $1.2 to 1.5 billion.
ArcelorMittal is the world's largest steel company, with operations 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 the 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. Recognizing that it has a significant responsibility to tackle the global climate change challenge, ArcelorMittal 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 2008, ArcelorMittal had revenues of $124.9 billion and crude steel production of 103.3 million tonnes, representing approximately 10% of world steel output.
