As steel prices melt, Arcelormit­tal loss up 7-fold to $7.9 bn in 2015

Resource Digest - - CONTENT -

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.

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