As steel prices melt, Arcelormittal loss up 7-fold to $7.9 bn in 2015
Billionaire Lakshmi Mittal-led Arcelormittal has said it will raise $3 billion from investors and sell $1 billion stake in Spanish auto-part maker Gestamp, to reduce debt after the losses widened 7-fold in 2015 to $7.9 billion. The world’s largest steelmaker outlined a plan to reduce its $15.7 billion net debt by nearly a quarter. Mittal, who owns about 37 per cent of Arcelormittal, will maintain his stake and will sign up to its entitlement of the share issue, worth about $1.1 billion.
Continuing to suffer from the Chinese industry’s overcapacity that has driven down world prices, the company reported net sales declining to $63.58 billion in 2015 against $72.28 billion in 2014. Net loss reported $7.9 billion was mostly because of $4.8 billion write-downs on the iron ore mining business and a $1.3 billion charge on inventory due to the global steel price plunge. A year earlier the group made a loss of $1.1 billion.
The firm reported a widening of its net loss to $6.69 billion in the December quarter against a net loss of $955 million in the year-ago period as it faced a “very difficult” 2015, which witnessed iron ore and steel prices slide further.
The Luxembourg-headquartered company’s revenue fell by 25 per cent to $13.98 billion in the October-december quarter of 2015, from $18.72 billion in the same quarter of 2014 fiscal. The firm follows January-december as its fiscal year. On the impairment charges, the firm said: “FY 2015 net loss of $7.9 billion including $4.8 billion of impairments (primarily due to mining impairments). “And $1.4 billion of exceptional charges (primarily related to the write-down of inventory following the rapid decline of international steel prices).” Breaking down the impairment charges, Arcelormittal said the mining segment hit of $3.4 billion consists of $0.9 billion with respect to goodwill.
Besides, $2.5 billion related to fixed assets mainly due to a downward revision of cash flow projections relating to expected persistence of a lower raw material price outlook at Arcelormittal Liberia ($1.4 billion), Las Truchas Mexico ($0.2 billion), Arcelormittal Serra Azul in Brazil ($0.2 billion) and Arcelormittal Princeton coal mining operations in the US ($0.7 billion).
While, steel segments’ hit of $1.4 billion consists of fixed asset impairment charges of $0.2 billion on intended sale of the Long Carbon facilities in the US (Arcelormittal La Place, Steelton and Vinton within the NAFTA segment). It also includes $0.4 billion primarily in connection with idling for an indefinite time of the Arcelormittal Sestao plant in Spain (Europe segment) and $0.8 billion related to NAFTA: Deployment of asset optimisation programs at Indiana Harbor East and West in the US ($0.3 billion). That apart, Arcelormittal currently idled Point Lisas in Trinidad and Tobago took a hit of $0.2 billion, and the Saldanha plant in South Africa ($0.3 billion), as a result of its revised competitive outlook, the firm said.