Capital injection
Mittal to pump $1bn into steel maker as profits fall
ARCELORMITTAL plans to raise $3bn (£2bn) from investors and sell a $1bn stake in the Spanish car-parts maker Gestamp after slumping to a huge loss.
The world’s biggest steelmaker reported that full-year turnover dropped 20pc to $63.6bn, with a full-year net loss of $8bn after taking $4.8bn in writedowns.
The company has been hit by declining prices as China pushes steel on to the world market at record levels to counter its slowing economy. Prices for iron ore from ArcelorMittal mines have also fallen as demand for ore from steelmakers drops and supplies from exporters expand.
Lakshmi Mittal, the company’s chief executive, who owns about 37pc of the business, has committed to maintaining his stake, with his family putting $1.1bn into the fundraising.
“This capital raise, combined with the sale of our minority shareholding in Gestamp, will accelerate the company’s debt-reduction plan,” Mr Mittal said. “This will help ensure that the business is resilient in any market environment and puts ArcelorMittal in a position of strength from which to further improve performance.”
Shares in ArcelorMittal, which made the steel used in Wembley Stadium and the One World Trade Center tower, have fallen 60pc in New York over the past year. The group is also listed in Amsterdam and Paris.
Goldman Sachs International, BofA Merrill Lynch and Credit Agricole are joint global co-ordinators for the share sale and will underwrite the portion not taken up by the Mittal family, subject to conditions. The share sale, which should be completed in the first half, will cut debt to less than $12bn.
Mr Mittal said that although demand in core markets in 2015 remained strong, “prices deteriorated significantly during the year as a result of excess capacity in China”.
Looking ahead, ArcelorMittal said earnings before interest, tax, depreciation and amortisation would be “in excess of ” $4.5bn in 2016, down from $5.2bn last year.
The Luxembourg-based company has scrapped its dividend, cut expansion plans and shut plants as it seeks to pay down net debt of $15.7bn.
In addition, it will trim capital spending by $300m to about $2.4bn this year and reduce interest payments by $200m. It also unveiled a plan to make more than $85 profit per tonne of steel produced and eventually deliver $2bn of free cash flow a year.
ArcelorMittal twice reduced its profit forecast last year as China’s exports undercut steel prices in Europe and the US, its biggest markets.
On Thursday, fellow steel giant Tata blamed the dumping of state-subsidised Chinese steel for a fall to a quarterly loss, with the company’s UK businesses hit particularly hard.
Last month Tata announced plans for more than 1,000 job losses, focused on its giant Port Talbot plant, adding to the 1,200 positions set to go at its Scunthorpe and Scottish sites.