ArcelorMittal Swings To Loss

LONDON-- Steel titan ArcelorMittal Friday said it swung to a net loss in the first quarter due to lower steel shipments and prices, but maintained its full-year earnings guidance on expectations that steel and iron ore sales will pick up during the year.

ArcelorMittal, the world's largest steelmaker by volume, said net profit attributable to shareholders swung to a net loss of $345 million in the first three months of the year compared with a net profit of $92 million in the same quarter a year before.

Sales dropped 13% on the year to $19.75 billion.

The company's keenly watched earnings before interest, taxes, depreciation and amortization, or Ebitda, fell 26% on the year to $1.57 billion, as steel shipments dropped 5.7% on the year to 20.95 million metric tons.

The Ebitda figure, however, was ahead of analysts' expectations of $1.32 billion based on a company consensus forecast of 22 analysts.

The Luxembourg-based steelmaker reiterated its guidance for 2013 Ebitda to rise above $7.1 billion in 2013, assuming that iron ore prices and the margin of steel prices over raw material costs are similar to 2012 levels.

This year's Ebitda is forecast to rise on expectations of a 2% increase in steel shipments and 20% increase in marketable iron ore shipments during the year as well as significant cost savings, the company said. ArcelorMittal said it expects Ebitda to rise in the second quarter compared with the first quarter.

"Economic conditions remain challenging, but our performance in the quarter reflects the results of the management action we have taken to confront the effects of the financial crisis," said ArcelorMittal's Chief Executive Lakshmi Mittal. "We have significantly reduced our net debt, and the steps we have taken to focus production on our more competitive assets are beginning to yield results."

The steelmaker has idled production capacity, cut its dividend, sold billions of dollars in assets and raised $4.3 billion via a rights issue in order to pay down debt after the world's largest credit ratings agencies downgraded the company's debt to junk status.

Steelmakers around the world are facing profit-margin squeezes due to weak steel demand stemming from slower-than-expected Chinese economic growth and still frail demand from U.S. and European economies.

Global steel demand is set to grow 3% to 3.5% after rising 2% last year, but European demand is still forecast to shrink at a pace of 1% after contracting 9% last year, the company said previously.

The steelmaker, which produces more steel than its next two closest rivals put together, said it plans to draw more management savings from operational efficiencies, energy savings, and fixed cost savings after delivering $4.8 billion in cost savings from a management gains program announced in 2008 and completed last year.

Net debt fell to $18 billion at the end of March compared with $21.8 billion at the end of December. The company reaffirmed that it's on track to reduce its net debt to $17 billion by the end of the second half.

ArcelorMittal's shares closed Thursday up 3.1% at EUR9.84 a share, resulting in a market capitalization of EUR15.37 billion ($20.18 billion). The company's shares are down 24.4% since the beginning of the year.

-Write to Alex MacDonald at [e-mail]

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