Companies

ArcelorMittal reports $1.9-billion loss in December quarter on lower sales

Our Bureau Mumbai | Updated on February 06, 2020 Published on February 06, 2020

Essar Steel performing well, offers brownfield potential, says Lakshmi Mittal

ArcelorMittal, the world’s largest steel company, reported a net loss of $1.9 billion for the fourth quarter ended December 2019, against a net profit of $1.2 billion in the same period last year, on the back of a challenging business environment across countries where it has production facilities.

ArcelorMittal follows a January to December fiscal year.

Sales in the quarter under review was down 15 per cent at $15.5 billion ($18.3 billion) due to 16 per cent lower average steel selling prices, and a 2 per cent fall in steel shipments, the company said on Thursday. Depreciation was higher at $802 million ($723 million).

As of December-end, the company had cash and cash equivalents of $5 billion, against $3.6 billion at the end of the September quarter.

Gross debt increases

Gross debt increased to $14.3 billion in the December 2019 quarter, against $12.6 billion in the same quarter last year. Net debt decreased by $1.3 billion to $9.3 billion, against $10.7 billion in the September quarter, primarily due to the sale of a 50 per cent stake in its shipping business ($0.4 billion), offset in part by the payment on the Essar Steel India acquisition and Indian rupee hedge.

The company had liquidity of $10.5 billion, consisting of cash and cash equivalents of $5 billion and $5.5 billion of available credit lines.

Since market conditions have frustrated the efforts to increase volumes, the group has identified a further $1 billion of cost improvement plans in 2020 as it targets to improve its EBITDA by $3 billion this year, said the company

About one-third of these incremental savings will be from fixed cost reductions, including logistic savings and the closure of a unit in South Africa. The remaining two-thirds of the improvements are targeted through variable costs improvements including purchasing gains, yield, fuel rate and energy consumption improvements, mainly in the US and Europe, it said.

Tough year, says Mittal

Lakshmi N Mittal, ArcelorMittal Chairman and CEO, said 2019 was a very tough year, which is reflected in a significant drop in profitability. However, he said, cash generation remained strong, helping to reduce the net debt to the lowest ever level.

The company expects to make further deleveraging progress this year. Having now completed the acquisition of Essar Steel India in partnership with Nippon Steel, the company has also secured a new opportunity for the group in the fast-growing Indian market, said Mittal. The asset is performing well and offers considerable brownfield potential aligned with the country’s ambition to triple crude steel production over the next 10 years, he added.

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Published on February 06, 2020
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